June 27, 2022

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Accounting in an age of uncertainty

The new CEO of Top 15 Firm Moss Adams, Eric Miles, shares his thoughts on the major challenges and opportunities facing accounting firms and the profession as a whole.

Transcription:

Dan Hood: (00:03)

Welcome to On the Air with Accounting Today. I’m editor in chief Dan Hood. West Coast powerhouse and Top 15 Firm Moss Adams recently installed Eric Miles as its new chairman and CEO, and we’re happy to have him with us today to discuss the biggest issues and opportunities that he’s seeing facing the accounting profession and accounting firms, as well as his plans for his own firm. Eric, thanks for joining us.

Eric Miles: (00:20)

Thanks for having me. It’s it’s a pleasure.

Dan Hood: (00:22)

Excellent. Well, let’s tackle the biggest question first. What do you think are the biggest issues facing the accounting profession as a whole?

Eric Miles: (00:29)

Wow, that could be a very long list, but I think there’s two areas that we internally talk about quite a bit again, facing the entire profession and, you know, ultimately Moss Adams. First — and it’s probably no surprise — is just access to talent. We all know there are fewer accounting managers. We know there’s more competition with industry than ever before. What’s interesting is that decrease in the number of, professionals is out of sync with the growing need for, for the profession, and we think the pandemic — no surprise — exacerbated this issue. We think of supply chain. It’s a bull whip effect where small changes are rippling to become large ones. The second issue we talk about and it kind of encompasses the first is this idea of just uncertainty itself throughout my career. I’ve heard leaders talk about, you know, the pace of changes, increasing uncertainty, whether that’s technology, globalization. And again, I think the pandemic has made that become front and center in many ways. The pandemic itself caused uncertainty, the economy that we’re in right now, the boom bust the impact of inflation, the changes that we’re seeing in globalization, acceleration of technology. Again, demographic changes and talent. These all have had a huge impact on our clients and thus the industry it’s, uh, something that needs to be managed more than ever before.

Dan Hood: (01:52)

Cause yeah, it does seem as if everything’s changing all changing and uncertain all at once. Exactly. Yeah. It’s not like it’s one thing. Okay. This is weird, but, but everything else is normal so we can focus on this. Everything’s weird. Everything’s uncertain. So you

Eric Miles: (02:02)

Hear about when people talk about moving to a virtual environment, five years of change is compressed into a year or two. And I think that’s true across a lot of different dimensions. It’s five years of change compressed into two, which again, I think the silver lining to that is you have much heightened, uh, awareness of how change occurs and that as an organization, you need to be really good at handling that change.

Dan Hood: (02:26)

Right. Well, and it certainly seems as if a state of change is going to be the permanent state, right. We’re gonna settle into a fixed state of always being changing, which means that, that, that sort of muscle of being able to handle change is gonna be more important than, uh, than it’s ever been.

Eric Miles: (02:38)

Exactly. Yep.

Dan Hood: (02:40)

All right. Um, I wanna ask a funnel follow up on, you talked about the staffing thing, cause I never heard it, uh, phrase that way in the sense of it. It right, given the huge demand for staff, right? Mm-hmm but at the same time, the number of people entering the profession, uh, at various ways is, is diminishing and you would expect it to be some kind of feed loop back loop where by the enormous demand would pull in more supply. Uh, and yet it doesn’t seem to be happening almost the opposite seems to be happening, which is, uh, a big issue. And particularly for firms. And I, I, my second question that I wanna talk to you about is the big issues facing accounting firms. And obviously there’s gonna be some overlap, but, uh, uh, what do you think of those? What do you think specifically for accounting firms? What are the big issues and maybe a little bit about the big opportunities as well?

Eric Miles: (03:18)

Yeah, I mean the, the, again, the, if the big issues affecting the profession, they’re the same ones affecting the firms. The question is what do firms do about it? So again, talent is there enough, uh, talent for growth, but also the skill sets, what we provide to our clients is, is changing faster than ever. The location of, of where our, our talent resides, the type of work they do. Uh, you know, this idea of path to partner is maybe a little bit antiquated. Do they want to gig economy? Is there a different value proposition that could be provided, certainly a challenge, uh, for accounting firms. And then again, uncertainty, we just talked about it, firms that are aware of change and agile enough to really address it will thrive. Others who don’t will have a problem. Um, but you know, every challenge is an opportunity.

Eric Miles: (04:05)

So I think again, those two areas create just a ton of opportunity. So again, the talent, you know, it’s an opportunity as you’re aware of it, it’s an opportunity for firms to, uh, upscale cha reskill, the workforce, develop new capabilities that creates more value for our clients. Um, and the, the business model itself, I mentioned upper out or path to partner. Again, we have to have a much more creativity and, and, you know, these changes were occurring pre pandemic, but again, it was compressed and there’s far more awareness of what’s the value proposition a firm brings to, to the talent. And I do think that feed back loop will work. Dan, um, it’s just takes some time. And I, you know, a lot of firms I talk to are really talking about that the, the people value proposition and then ultimately, you know, we have an opportunity to improve the overall engagement and satisfaction with a career in public accounting.

Eric Miles: (04:59)

So again, a career, not a path to something else, not punching your ticket and moving on, but spending your career in a firm that’s, that should be our goal. And then, you know, the second opportunity is uncertainty. And again, I, I could go on and on here cause I really think uncertainty in and of itself by definition, uh, just creates limited limitless opportunity, but you have to be looking for it. You have to have the mindset to see it. And, uh, you have to have the ability to set a path and execute on it. Um, so in practice, what does that mean? I think we’re gonna see more and more new service opportunities, whether that’s ESG or pricing strategy to deal with inflation, emerging industries, you know, crypto dev, centralized, finance, new technologies, you know, the metaphors, for example. So, so all new business models. So I could just keep going. Yeah. But the idea that uncertainty, uh, is a challenge, but it also creates so many opportunities and they’re emerging faster than ever before. To me, that’s super exciting.

Dan Hood: (05:59)

It, I, I, I constantly, , I’m constantly reminded of this because, uh, the accounting profession, right? You talk about all the challenges bring tremendous opportunities, right? If you meet the challenges, even halfway, if you find a way to leverage ’em there, there are enormous opportunities within them. And there are coming from publishing. I would say like our challenges don’t have a lot of upside. Our challenges have only downside. If we meet the challenges we get to continue to exist, we don’t, we don’t get to thrive in advance. Whereas for accounting accountants, as you say, there’s, there’s so many opportunities, but they do require finding them, identifying them and having the, the, the nimbleness and agility, as you said to, uh, to, to take advantage of them. And I’m always fascinated because there’s so many opportunities and how firms go about, uh, picking opportunities. Uh, maybe we talk a little about your, your plans given, uh, given all these opportunities, maybe, uh, what are your plans for MOS Adams? What, uh, what opportunities do you hope to the firm can take advantage of?

Eric Miles: (06:47)

Yeah, well, I have to start with MOS. Adams is on a, just a great path. We’re 109 years old. Uh, many of the things we’ve done pre pandemic during the pandemic are, are still a hundred percent valid. So I don’t see at least in the short term, any radical change to our strategy, but again, those two opportunities, talent and uncertainty are certainly true for MOS. Atoms. You know, we, when we talk about them, we view them as highly interconnected. A lot of our time, we talk about this idea of the, and I don’t know if you’ve ever talked about it before this idea of the service profit chain. That’s this idea that in a service business, a professional service firm, the, the engagement, the satisfaction, the development of people directly impacts the value we bring to our clients. So in with that mindset, the performance, the agility, the, the profitability of a firm are just outcomes of doing the right thing in terms of our people.

Eric Miles: (07:45)

So that’s really where we focus a lot when it comes to both talent and uncertainty, uh, you know, we’re based, uh, headquartered in the Pacific Northwest. And we talk a lot about what Microsoft calls a culture of learn it, alls versus know it, alls we wanna be, LearniT alls a culture that embraces this growth mindset. So all of those changes we’re talking about can be viewed as a threat and you get defensive, or they can just be viewed, uh, in an exciting way for all the opportunity and to experiment around them. And so developing a culture that values people and values change is core to who we want to be. So, you know, I think a culture that has a, a growth mindset, not only survives uncertainty, it, it thrives in it.

Dan Hood: (08:28)

Right, right. I love that. No, learn it alls versus no, itall, that’s great. Yeah. As a professional know it all, I, I, I, uh, object to the qualification of noit alls, is it somehow lesser, but, but it’s a great, uh, it’s a meet mean idea. Um, and I had heard, I had never heard the, the phrasing used for the, uh, what, so the profit service

Eric Miles: (08:46)

Service, profit chain. Yeah. It’s service, profit

Dan Hood: (08:48)

Chain. That’s a great name for it.

Eric Miles: (08:49)

Probably 40 years old, but, uh, I really think it speaks to our moment,

Dan Hood: (08:53)

Right? Yeah. Well, there’s no question. The firms are definitely starting to realize many have already realized, but more and more firms are realizing that, uh, the staff are crucial, right? They’re your, they’re your intellectual property. And if they’re

Eric Miles: (09:02)

Asking, and we’ve always said that, but I, you think about the biggest lever you can pull and you could name an issue. I think that the focus on people, the development of people is the answer. It is the biggest lever for a multitude of issues. Again, the pandemic has given us that clarity that we’ve probably had, but not to this degree.

Dan Hood: (09:22)

Right. Well, it certainly spurred people on a little bit. It’s uh, um, but let me ask you this, when you, when we say people, and this is maybe we talk about the pipeline of, of people coming into the profession and particularly getting their CPA license and how there are issues there. Do you see a broader when we say people a broader group of people, for instance, I mean, do you imagine CPA firms in general, or maybe miles Adams in particular looking beyond the sort of traditional pool of, of accounting grad, you know, accounting graduates and CPA candidates and saying, Hey, what, who else can we work with?

Eric Miles: (09:51)

Sure. Before I an, I guess I’ll answer that to an absolute affirmative, but let me say CPA firms have a unique position in our economy, this idea of trust the brand. So as a lot of firms, including MOS Adams build out this portfolio of services, we can’t lose sight of what makes us special. So we will always need CPAs. We need to make sure we don’t do anything to put that, uh, brand of trust at risk. Uh, but yeah, I think the smart firms will say, all right, we, we are not an audit firm or a tax firm or a consulting firm. We’re a professional service firm and we have clients and they have needs, and they really don’t care whether your audit tax consultant, they just want their needs met, and those needs are getting broader and broader and more complex than ever before. So yeah, we should be looking to adjacent talent pools for sure. And we are

Dan Hood: (10:44)

Excellent. Um, I wanna, I have a great bunch more questions I wanna ask you particularly about sort of, we’ve talked about change. Uh, uh, we’ve more, we’re seeing more change now than we before seems experience over course, the, for Adams, with Eric Miles of MOS Adams, we were talking about, uh, the opportunities, the challenges they’re facing in profession. We talked about change in uncertainty as big issues. Uh, and I, I, I wanted to get your sense of from you over the course of the career, what are the biggest changes you’ve seen in accounting? And maybe I, I guess it probably would make sense maybe to talk a little bit about your career, you know, how you started, how you came to MOS Adams, et cetera, cetera, how you rose up, uh, to your current position.

Eric Miles: (11:29)

Sure. Uh, I do that real quick. Uh, so I’ve been with the firm, my entire career. I started, uh, directly out of school, uh, in our audit practice. I did that for four or five years. Uh, then I, I thought I was, I know it all. I was a noit all. And I, uh, went and got my MBA. Wasn’t planning to come back, came back into our consulting division 17 years ago, uh, and just been enjoying that ride, uh, building on our consulting capabilities. So, but what’s interesting in my career MOS Adams, when I started and today is a middle market focus firm. Sure. We do work with large organizations, but really designed to serve that core middle market. And so our segment hasn’t changed. We haven’t said we’re gonna move up market, right. But the needs of those clients I’ve seen changed drastically. They’re far more complex, sophisticated.

Eric Miles: (12:19)

They move much faster than they did at the beginning of my career. And so what I see as a consequence of that is our professionals have had to get much more specialized, much narrower, much deeper in their specialization, and that’s great, but it comes at a cost of broader business awareness. And our clients need that as well, to be an advisor to a mid-market client, you need to have both the depth and the breadth of awareness, um, otherwise, and I use this analogy a lot. If you don’t, you’re a hammer, everything looks like a nail, and you’re not really solving the, the issues that our, our clients truly have.

Dan Hood: (12:56)

So that’s, I mean, it’s an interesting thing to pursuing the, keeping up with the needs of clients, cuz it does seem to be a little bit, uh, we talked to a lot of accounting firms, just more true of smaller firms than I than I imagine it is at Mo Adams, but particularly for smaller firms, there’s a tendency to let the clients lead. Like the clients dictate what we need. And, and again, I think this is less true of larger firms and more true of smaller firms, but it does seem a sense of, oh, well the client needs this. I better figure out how to do it. Do you have a sense of that? Is that a, is there a, uh, you know, is there areas where you’d like to get ahead of your clients or are there as where you’re trying to do that?

Eric Miles: (13:29)

Uh, well, I’m not even sure that’s not true for larger firms as well. Again, this, this is the outcome of specialization. So you may be proactive in an issue spotting for your client in your, in your area of specialization. But you know, we, we talk about VUCA, you know, this idea that problems today are volatile and certain complex and ambiguous and by definition, probably a narrow specialization, isn’t gonna help your client see those types of issues. So I think it’s a different skillset altogether. Um, it isn’t, you need this. It is being able to do a diagnostic interview, ask the right questions. I also think, and many firms do this industry. Specialization helps a lot getting close to helping your clients see around corners. If you don’t know their industry better than they do. And we should because we see multiple organizations across an industry. If, if we don’t utilize that to their benefit, we’re really doing them a disservice. So yes, you have to not only be responsive, you have to be proactive and it’s by engaging in the right types of questions.

Dan Hood: (14:32)

Let me ask you, and I, I realize this wasn’t this, wasn’t the question I thought to ask, uh, before, but cuz we’re kind of talking about it, leading some elements of it. There is obviously, uh, a lot of people talk about the need for accountants to move, uh, away from compliance services towards more advisory based services where it’s less about the, less about, you know, closing the books and, and filling out the tax return and more about anticipating their needs and advising them. And so on. Do you have a, a, a thoughts about that balance between compliance and advisory?

Eric Miles: (15:00)

I think it’s a yes. And not a either or like I said before, the, the compliance aspect of it is the core of our brand, our trust, you know, we should not discount the value of that at all, but it also gives you great insight. Looking backward tells you a lot about the future. So when we build out, um, non-audit capabilities, non-tax capabilities, they need to be highly related to, to the, the needs that we’re, we have the right to serve. Um, you know, we could become consulting firms that do stuff that has very little to do with, uh, our core tax and audit. You could do that, but I think your, your, again, doing your client a disservice, your, your role in compliance helps you see things or should help you see things, your clients are not anticipating. And then you bring in these capabilities.

Dan Hood: (15:51)

All right. Well, let’s, uh, I, I, I think, uh, pepper through all this conversation, just been some sense of what’s coming, coming ahead. Uh, but what do you think of the biggest changes as you look forward over the next five, 10 years, or whatever, whatever chime horizon works for you, uh, what do you think are gonna be some of the biggest changes happening, whether it’s at the firm level it’s career, individual career level, or even the profession level, or maybe all three.

Eric Miles: (16:10)

Yeah, but there’s probably two areas and we touched on at least one of them, that idea of deep specialization, that’s not gonna go anywhere. And I think it’s just gonna increase, but it’s table stakes. So organizations, whether you’re midmarket, even if you’re a, an emerging small business, the, the nature of the issues you face are gonna get more complex, more volatile, more, uh, ambiguous and uncertain. So that’s not going away, but the need for a broader business awareness around those issues is, is gonna grow. And so firms that can rise above their individual disciplines, not become expert in all things, individuals, but a broader business awareness and knowing how to bring in other capabilities, other experts, that’s gonna be more and more valuable over time. You know, the, the other area that I see again, not gonna be a surprise is make a comment on technology, you know, throughout my career.

Eric Miles: (17:05)

I, I just from day one, talking about the impact of technology, uh, how it’s gonna change the profession. And, you know, in most things, it’s around technology. It’s easy to overstate the short term and also easy to understate the long term. So I think we we’ll see over the next 10 years, pretty radical changes, uh, around the use of technology. And I’ll just make one more comment. Both of these issues require a, learn it all culture, a growth mindset. So again, firms that embrace that, um, are okay, experimenting, learning, new things, not being the expert will thrive. And, and, you know, MOS Adams, we believe the core of that. Going back all the way to the beginning, to our discussion with the people value proposition is a really strong coaching culture. If you stay close to people, if you develop people, whether it’s new technology, uh, new business issues that we have to advise our clients on all of those have the root cause or root solution of, uh, a strong coaching coach culture,

Dan Hood: (18:07)

Right? Constantly monitoring people’s skills and whether their skill sets are matching what the needs are and whether they’re getting the training, they need the education they need.

Eric Miles: (18:14)

Yeah. And helping them unlock, they unlock their own potential, not, not the firm. We help them to identify what their passions are, what their deans are and take it to the next level.

Dan Hood: (18:26)

Gotcha. I wanna, uh, just, uh, one extra question here, cuz we’ve talked about, uh, looking at opportunities, looking at challenges and figuring out the right, right. Uh, right. Approaches to them. But how do you figure out what, what are the, what are the opportunities you need to take as opposed to the opportunities to say, okay, let’s great opportunity, but it’s not for us. Uh, or it doesn’t quite fit us or this is a great technology, but it’s not quite right for us or it doesn’t matter for us cuz it’s not our field. I, people are talking about the metaverse a lot lately and I’m sort of looking at a lot of firms and saying, well, do you really need to be in the metaverse right now? Does your clients in the metaverse how do you know, uh, how do you go about, uh, you know, sort of assessing either future challenges or future opportunities and figuring out which ones are the right ones for your

Eric Miles: (19:04)

Firm. Yeah. Well, if you try to do it in isolation, uh, if you look inward and have a conversation, that’s a mistake and the, the answer is right in front of you, which is your, your clients. If you’re really close to your clients, aware of the industry, talking about these issues, Hey, what is your plan for the metaverses what’s the metaverse okay. Well that’s probably not, uh, that’s probably not an immediate need right for us. So I think we talk about being this idea of client centric, again, not rocket science, but it has so many VA uh, valuable aspects. The closer you are to your clients, the more time you spend with them, not about again, that deep specialization, but broad business issues. You can see the trends coming. They’re they’re, they’re not the pandemic aside. They’re not usually a surprise. There are indications of what’s coming over the horizon. And again, that comes through being very sensitive to the market, helping your clients see around corners. And when you see that you’ll see clear trends and that drives our investment strategy.

Dan Hood: (20:03)

Gotcha. Excellent. All right. Uh, I think we’re just about running up against time, but I, I wanna say any final, any final ideas things people should be watching for from MOS Adams or things you wanna leave people with?

Eric Miles: (20:13)

Well, I, I would just say, uh, you know, the firm’s 109 years old, uh, I’m the fourth CEO in, I think, 40 years. So it’s just a huge honor to be stepping into the role as CEO and, and chairman, uh, been with the firm, my entire career. So I’m very proud of MOS Adams. I’m just really excited to lead the firm into these new challenges into these uncertainties. I think that’s a lot of fun MOS Adams will thrive in uncertain world. So I, I, I also wanna say thank you for having me here today. It’s been a real pleasure and it’s a really great question. So I appreciate

Dan Hood: (20:45)

It. Hey, well, thanks for joining. I think a lot of people are gonna get a lot out of it. There’s a lot of, lot of interesting thinking going on, uh, obviously at MOS Adams about, uh, the future and how, uh, how firms can thrive in it. So we’ll, we will be paying attention. Excellent. Eric Miles, MOS, Adams, thanks so much for joining us and thank you all for listening. This episode of on the air was produced by accounting today with audio production, by Kellie Malone. Rate or review us on your favorite podcast platform and see the rest of our content on accountingtoday.com. Thanks again to our guest. And thank you for listening.


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