The Great Resignation and the Finance Function

Barbara Palmegiani:

I don't know if you've heard this, but they're referring to the 2020s, this decade, as the decade of disruption. And so it's just a matter of time before here we go again.

Narrator:

Welcome to Accounting for the Future, a BDO Canada podcast for financial leaders to navigate, change, and achieve business growth. We'll uncover the challenges financial leaders may not have dealt with yesterday, but will definitely have to manage for the future.

Armand Capisciolto:

Hello and welcome to Accounting for the Future. I'm your host, Armand Capisciolto, BDO Canada's National Accounting Standards partner and leader of Accounting Advisory Services. On today's episode, I'm joined by Barb Palmegiani. Barb's a partner with BDO Canada and leads our national CFO and Controllership Services group. She's also a learning and development expert and thought leader about the future of the finance function. Since 1998, she has been an author, session leader, and facilitator for CPA Ontario, where she continues to lead executive professional development programs for senior financial leaders in both industry and public accounting. Barb, welcome to Accounting for the Future.

Barbara Palmegiani:

Thank you so much. So happy to be here.

Armand Capisciolto:

And Barb, with a name like Capisciolto, I'm pretty sure I butchered your last name, and I shouldn't, given our names are of similar ethnic backgrounds. I apologize for that.

Barbara Palmegiani:

You're good, you're good.

Armand Capisciolto:

So, Barb, I'm very excited about our discussion today on the Great Resignation and the impact of the finance function. But before we get into that, let's talk about the state of the finance function before the Great Resignation.

Barbara Palmegiani:

Yeah, of course. I'd say it was about 2016, and in the professional development programs for CPAs that I teach, I've been focusing them on "re-skilling" or "up-skilling" for the future. It was definitely becoming clear to me, probably about six years ago now, that the educated knowledge worker jobs could soon become threatened, and that would be through the accelerating advances of evolving technologies, like RPA, AI. And that doesn't just apply to accounting and finance, it goes for many professions, like journalism and law as well. So as a profession, we should continue to take more of a positive outlook on how the rise of automation can impact us going forward. And the key to this is ensuring machines ... We see them as an augmentation to our finance roles, and not just viewing machines as competitive interlopers, if you will.

So, what I do is encourage all CPAs to become much more focused on taking charge of "re-skilling" or "up-skilling" themselves with what we call future fit skills. So, for example, these include skills that enable us to see technology as more of a partner or a collaborator. We can each start proactively developing our own personal future fit plan as we become more and more aware of how machines and technology is going to impact our profession.

Armand Capisciolto:

I really like that, looking at it as an augmentation, looking at the machines, look at the technology. It's something that makes us better, not as something that's going to take our jobs away. And so, when we talk about this future fit plan ... I've started Pilates recently. Is that what you're talking about? What do you mean by this future fit plan?

Barbara Palmegiani:

Yes, exactly. Good one. Talking about that future fit plan means really becoming a little bit more self-aware about clarifying our own purposes. So, in other words, as we think about the things that are most meaningful to us, not just in our work, but to your point, Armand, in our lives. So based on, there's a lot of research, and one in particular that is of note was by the London School of Economics, and they produced some statistical evidence of the link between purpose and motivation. So, the goal of leading purpose-driven workshops in the work that I do with CPA Ontario is to try and inspire an improvement in CPA's intrinsic motivation to go that extra mile in their current roles. And in doing that today, it'll definitely help ensure themselves a sustainable career in the future. So, there's no formula in the future of do one plus two plus three, and you are guaranteed to be employable in years from now. But what we can be doing is understanding that the way we do things today is status quo, and status quo is no longer an option, with respect to being ready to work in tomorrow's finance function.

Armand Capisciolto:

Again, so interesting some of the words you use there. You talked about purpose, and you talked about sustainability. One of our other topics that we're talking about, one of our previous episodes was about sustainability. And when we talk about sustainability, we talk about profit with purpose. You're talking about even motivating ourselves individually, our own kind of individual profit or motivation.

Barbara Palmegiani:

Exactly.

Armand Capisciolto:

And having that purpose. It's really interesting how these things connect.

Barbara Palmegiani:

So, it's almost like saying, practice what we preach, what do in our professional lives, let's apply it to our own career development as well.

Armand Capisciolto:

Yeah, great. No, that's excellent. So, let's talk about the finance function. We talk about our own development, but the finance function ... If we were looking at it in the past, present, future, what did it look like? What did it look like before? What's it look like now? What's it going to look like?

Barbara Palmegiani:

For sure. So, I always characterize talking about the past finance function with concepts like recording, supporting, collaborating, and contributing. So, these were really our mandates as a finance function, as finance professionals, mostly reporting historical financial information and focusing on stewardship responsibilities. And these include, of course, all our fiduciary responsibilities to our stakeholders. So that really characterizes what we thought of and focused on in the finance function in the past.

In the present, we've added on initiatives like challenging and influencing and more recently predicting, utilizing financial information, but more characteristic of what we refer to as a strategic business partner. So, balancing that stewardship hat with that strategic business partner hat. We've been talking about this now for the last little while in the finance function, and specifically in the controller program, we focus on that balancing act, and this involves working closely with operations as an example, improving the value contribution of, in particular, the FP&A function to our organization. That's where I feel the biggest opportunity exists.

Armand Capisciolto:

Really quick pause. Not all our listeners speak in acronym, like we do. FP&A, just for the uninformed ...

Barbara Palmegiani:

Financial planning and analysis. So big opportunities to all the CPAs out there. When you think about the present finance function as it exists, I can tell you for sure that significant majority of the controllers and CFOs that I interact with acknowledge that they can do a better job in planning, financial planning, the budget process, forecasting. We're really trying to move towards more dynamic and more fluid planning for the business. There's a lot going on in the finance function already, and that's the present. Now later on, if we look to the future, we're doubling down on focusing on more forward-looking financial information. So, with the tools that we're on the cusp of developing, finance has to master big data, analytics, alongside AI, and specifically layer on predictive analytics to that financial planning and analysis work we do today. Now all of this is going to be augmented, of course, with the tools, but there are up-skilling things that we can be doing today to pivot ourselves from looking in the rearview mirror, as we say, to looking through the windshield.

Armand Capisciolto:

So, as we all know, the last two years ... Been significant disruption due to the pandemic, but it sounds like there was a lot of disruption, a lot of change happening in the finance function prior to Covid.

Barbara Palmegiani:

Oh, I think it was 2019, I actually came across a great book and I borrowed the title and talked a lot about it with the controllers and CFOs, and it was called The Squiggly Career. And I think it applies really well to the finance function, because what it does is describe the impact of the disruptors that we were already dealing with pre-pandemic, so automation, and another big disruptor that we all acknowledged pre-pandemic was the multi-generational workforce. And so those two large disruptors were already having an impact on how we did things in the finance function. So, The Squiggly Career says how professionals should be sculpting out their careers to match their interests and to focus on up-skilling or re-skilling themselves. In other words, take a project, take a role that is going to enhance your skillset, enable your skillset to be a little more broad.

So that involves definitely taking some risks, taking on new challenges and going into new territory. But those moves will absolutely set you up well for the future of finance. We can't look at our career anymore as just a career ladder that has that very clearly defined title going up the ladder, and that indicates experience. We have to be making sure as CPAs ourselves that we're putting ourselves in roles and in situations where we'll gather up that toolbox of skillsets, if you will. So, I always equate it to a plumber or an electrician. We're like a trade. And the bigger your toolbox, the more tools you're going to have to take out, whatever the situation you'll be facing in the future.

Armand Capisciolto:

So, with all this change going on, and as someone who I guess would be defined as mid-career, over 45, I guess that's a good thing.

Barbara Palmegiani:

I didn't know that. It's not like I can tell.

Armand Capisciolto:

How are CPAs reacting to all this change?

Barbara Palmegiani:

Yeah, it's really important to talk about this, Armand. It's that age range from about 45- to 60-year-olds. And it's been proven that they are actually the most overlooked employee bracket. And so, I would say for about the past six years, mid-career individuals have made up a consistently high percentage of what's referred to as that long-term unemployed. And so, hiring managers have considered those who are 45 and above, like you and I, to actually be the worst cohort in terms of application readiness. So, there's this stereotype around their fitness and their previous experience. And one of the surveys that I read talked about their top concerns about hiring in a mid-career person is their readiness to try new technologies, their perceived, I'm going to say, inability to learn new skills, and potentially, and it's true in some cases, their difficulty in working with other generations, somebody that's very different from themselves.

And so, we're coming through the other side of the pandemic now, and I honestly believe there's a correlation between all the combined disruptions that are taking place pre-pandemic that we've talked about, and this moment of knowledge worker empowerment. So, whether it was their own choice or whether it was a chosen path, more of these mid-career individuals are becoming their own bosses. And this includes the mid-career, but it's also including, interestingly, a lot more early-stage CPAs and mid-career CPAs as well. So, it's like a perfect storm. Employers are finding themselves in probably the most competitive market we've ever seen. And it's being described, as everybody has heard, as the war for talent, a skills shortage, a significant challenge for leaders for sure, across not just finance, but most functions in an organization.

Armand Capisciolto:

I would like to say at over 45, I'm learning how to host a podcast. So, I am trying new things.

Barbara Palmegiani:

You techie, you. For sure, for sure.

Armand Capisciolto:

Yes. And you have all this going on and then the past two years dealing with the pandemic, dealing with working remotely, and it's the debate, right? We're all having that debate right now of return to office, continue remote, hybrid. How has this whole remote environment impacted finance departments?

Barbara Palmegiani:

Yeah, I would say flexibility and remote work have almost become the poster child for these types of trends. And definitely priorities have shifted over the last two years. We can't stay with our pre-pandemic principles, or in other words, what worked in the past. And it's really interesting to have this conversation because so much of this information is being written about right now and is publicly available, but it's almost like saying that people want the autonomy, they want to be able to continue to work remotely in many cases, but by the same token, they also want more connectedness. And I really believe that anybody who's listening out there who is managing and leading a team, you can really think a little bit about how often you interact with your team and how you do that. So, in other words, if the only time you interact with your team is when you need something or they're calling you because they need something, that becomes transactional, and that doesn't lend itself well to that connectedness, that meaningful relationship-building that we all know that everybody's craving right now.

So, we've just got to find ways of increasing the connectedness, and at the same time, working remotely. And those two things don't have to actually be mutually exclusive. So simple things like reaching out and having meetings that are more than just when you need something or when someone needs something from you. And so, it comes back to that empathy. I think if you were an empathetic leader, if you were able to put yourself in somebody else's shoes before the pandemic, I think you've actually thrived as a leader during the pandemic. And I think for those of you who are off the charts results-oriented, if you will, and everything's about output, just slowing that down a bit and balancing your relationships and your communication with your team so that it's beyond just "Here's what I need from you, what do you need from me?"

And I have to say, Armand, just as an aside, I've worked with you for a few months now. We've all been working remotely. I've seen you interact with your team. You are absolutely one of those empathetic leaders. I see the relationship you have with your team and you're walking the talk, if I may say.

Armand Capisciolto:

It's funny, managing a remote team, it's interesting. I always try to, at the start of any discussion, to not talk about work. Usually, it's about what we're watching on Netflix or what we're ordering for dinner or making for dinner. And it's amazing how you get to know people and build that relationship beyond the transactional level, because like you said, the transactional level, that's when people don't stick around, which leads us to the Great Resignation that we're dealing with. So how big of an issue has this been for people in the finance function? Like this is your group, you talk to CFOs quite regularly, what are they saying? Are they experiencing this in the finance departments? Are they experiencing this?

Barbara Palmegiani:

For sure. I mean, I have to say that when we are together in a learning and development environment, we talk very, very openly about not only what's working, so it's not a group of CFOs coming together and trying to impress each other about how smart they are and how successful they are. It's more of a focus on what's working, yes, but what's not working. And that's where the real learning opportunities and the networking opportunities of the CFO community really benefits us, because I always say, Armand, the CFO role is a very lonely place and it's a lonely chair to be sitting in. And when I say that to a group of CFOs, when we're sort of kicking off a session, there's collectively this huge sigh and you see everybody's shoulders go up and down because they're living it, and you can't really be unloading on your team.

You can't be unloading to your CEO; you can't be unloading to your peer group. They're all heavily relying on you. And so yes, CFOs need a community and a network of others that are sitting in the same chair. And this is where we come together and talk a lot about the burnout, more recently, and acknowledging the fact that many CFOs and their controllers have absolutely played an important financial leadership role during the pandemic. And that has put them under even more pressure over the last two years than would normally exist. Some of the stories that they share are about helping their company survive. And now more recently, revive. And in other cases, the pressure on the CFO was about helping their company thrive because they may be working in an industry that has significantly benefited during the pandemic, and they want to be taking advantage of that. But in both scenarios, finance leaders have been in the spotlight. So, there's a lot of discussion about burnout and sharing ideas around what we're each doing to manage that.

And I would say second to that, what comes next is a lot of discussion about the anxiety of going back to work in an office. Many CFOs and controllers have been working remotely and it's incredible that we all did this for so many years and now the last two years we're thinking, how can I go back to that? And yet, as a leader, they can't really speak openly about that, if that's the direction that the organization is taking. They have to lead their staff and employees, whether it's a hybrid or whether it's back to work full-time. But they themselves are feeling the same things as their staff are feeling, of course.

Armand Capisciolto:

So, you're seeing a large number of CFOs resign from their full-time roles and moving into these types of roles?

Barbara Palmegiani:

I would say, again, because of this perfect storm that we've been talking about, anecdotally, in my opinion, there is a record number of them that are either leaving or thinking about doing so. And most of them, in leaving, if the ones who have left, like I say, they're not stopping to work. They're not leaving and doing nothing. They're doing all kinds of things, either still within the finance profession or working for themselves. We just had an example recently where somebody left the finance profession, actually two examples, and they opened up small businesses. So, CPAs make great small business owners, right?

Armand Capisciolto:

Interesting. Interesting. So going to switch gears a little bit, because as you know, I'm involved in audits, and as a firm, one of our core services is audits. So, when I hear about finance leaders, CFOs resigning and turnover in the finance department, it concerns me. Typically, when we see a large amount of turnover in the finance department, those aren't fun audits to deal with that year because of all the things that could happen and the risks that can arise related to it. So, do you see risks arising for organizations that are going through these resignations?

Barbara Palmegiani:

I do. I think many companies are now in, I'll say, dangerous cycles in some cases. So, for example, as the number of vacant roles in an organization increases, remaining employees are expected to pick up the slack, adding to their workload. And in turn, this is adding to the already existing state of burnout that I was referring to earlier, or dissatisfaction with remote work. And this is what is motivating some staff to leave. Or another risk is they may stay, but given their exhaustion, this scenario can lead to them cutting corners, things like internal controls, or worse, rationalizing, defrauding their employer as compensation for the added stress. And I would say even another risk scenario, as I think about it, is when companies focus too much on the speed of getting a new hire to sign. And I've seen that very recently, to get on board as quickly as possible with this war on talent. And they're expediting the hiring process, and of course this can be very risky. They're not necessarily doing all of their due diligence that they once would've done, and therefore they're sacrificing security or quality of a candidate for speed.

And so, we've seen hiring teams be tempted to cut corners on conducting a proper background check, reference check, if you will, and potential candidates are gaining a competitive advantage where hiring someone who can start work immediately all of a sudden has become the most attractive candidate.

Armand Capisciolto:

Yeah, I think we're all experiencing staff shortages, and that's a hard one. That's a hard thing to look past. The person who can start soon is very appealing when they might not be the right person, though, right, and it's hard to manage that. So, with all these risks, that's just one of the risks, when you talk to clients and you talk to leaders of companies, how are they managing these risks? What are your recommendations for how they should manage these risks that are arising because of resignations?

Barbara Palmegiani:

Well, I'm dealing with this on a daily basis with multiple companies a day. And in 2022, our services has played a key role in the CFO and controllership practice. So, we're providing much more of an interim solution, so many more interim solutions with interim resources. And our value proposition with that is being able to do it on a timely basis. We're able to place these CFOs and controllers and other types of project leaders with a financial background, and the fit and the competence that they bring to the client's finance function is our job to diagnose that, to diagnose that fit and put the right person in. The thing is, with our team, these are people that are used to hitting the ground running. They go in and out of companies on a fractional basis regularly. So, they have those skillsets, they can provide a significant positive impact in short order. And I can say that it's extremely rewarding to me if I am dealing with a CEO or a business owner or an executive director, and I've been working with them when they've been under quite a bit of stress, whether it's a CFO that's left because of a emergency medical leave, or I'm also seeing CFOs resigning with no notice. This is the first time in my career that I have ever heard of a CFO resigning and not giving notice.

Armand Capisciolto:

Obviously, one way to manage this is to avoid turnover, to avoid resignation.

Barbara Palmegiani:

Root cause.

Armand Capisciolto:

Like preventative medicine, right? What is that preventative medicine? When you're talking to CFOs, to boards of directors, to executive directors, what do you say? How do you retain your finance staff?

Barbara Palmegiani:

Yeah, this comes back into all the leadership work and more recently, I think it was MIT, they did a management review and they really simplified what this main driver is more recently, and they call it a toxic corporate culture, is the strongest predictor of turnover these days. I think it was 10 times more powerful than people leaving for compensation reasons or for comp reasons. So, they define toxicity characteristics as disrespect, unethical behaviors, so that tone at the top and that top-down behavior that everybody's observing, and the failure to promote diversity, equity, and inclusion. So, this research finds companies with a healthy culture experiencing lower than average turnover. And that study was done very recently, the last half of 2021, which is considered the beginning of the Great Resignation.

So, I'd say that as we think about leaders in organizations really trying to understand what they can do from a retention perspective, it's about creating meaningful relationships with their team. As you said, Armand, being close enough to them on a social level to understand really what makes them tick. And you got to be able to do this not necessarily in person. So, these interactions are not necessarily in person, and yet we're trying to create more meaningful relationships. And I think we're just at the cusp of this almost being considered a new skillset. So, moving from that transactional, yes, everybody wants the financial perks and nobody's going to say no to a thank-you bonus, but those things are transactional, and they want those too. But really, they're looking to have their employers and their managers, and their leaders invest more in them and their employee experience.

Armand Capisciolto:

Okay. So, one last thing I wanted to ask you about today, because I know one of the things that your group does at BDO is work with CFOs on transforming the finance department. And when we think about all the things we just talked about, the different types of CFOs, remote work, which is likely turning into hybrid work, the Great Resignation-related turnover, which probably isn't slowing down anytime soon. What do CFOs do? Do they go on a transformation journey right now? Is that what you're advising them on doing? Or is it different from organization to organization?

Barbara Palmegiani:

Yeah, I mean, the other side of this practice is services for CFOs. So, CFOs are our main clients. And after the last two years of the pandemic wreaking havoc, as I said earlier, prior to the pandemic, these businesses were already feeling pressures of a shifting working world. And so, as you and I are sitting here today, businesses are rebuilding, and yes, transformation is, it starts with the ability to think differently. And that becomes critical going forward. As I said earlier, status quo not being an option, today's CFO has a growing portfolio of responsibilities. And so, our services to CFOs practice is really about bringing them the right experts at the right time in a cost-effective way. And the biggest barrier to CFOs having these resources that are widely available is actually they have to get out of their own way.

So not feel that they themselves have to possess all the answers to every problem, and I speak from experience. As a longtime CFO myself, we came up in a time where you felt that the buck stopped with you, and you had to be able to figure everything out. And then that's just no longer possible given the breadth of skills that today's CFO requires. And so, if you think about what we mean by organizational transformation, in the past that was often more about cost, so cost minimization or maybe cost optimization. And so naturally that fit in the CFO's domain, but that term "transformation" is being used very frequently, and I think the true meaning has actually been lost. So, the way we talk about transformation to CFOs is that it's not just about implementing more and more technology or an internal focus, it really is about reimagining the entire business model.

And it's about resilience, building in resilience to the organization to be able to, I don't know if you've heard this, but they're referring to the 2020s, this decade, as the decade of disruption. And so, it's just a matter of time before here we go again. And so that agility, that fluidity that needs to be baked into business models, that fits really well in the CFO's domain to lead. And so, we could be talking about, yes, digital transformation, but we can also be talking about ESG as an example. So of course, BDO can help with all of that. We work closely with CFOs, and we are looking to augment their finance teams to become more agile.

Armand Capisciolto:

I think you just want this conversation to go on and on because you mentioned ESG, so you know I can get talking on that topic.

Barbara Palmegiani:

I do know that.

Armand Capisciolto:

But I won't today. I won't today, but we do have a couple other episodes that do cover it. So, Barb, so much to consider, so much to think about. We've just kind of scratched the surface here and we have been talking for a while, so if people wanted to get ahold of you, I assume bdo.ca, they can get your contact information, get your contact information on LinkedIn as well. With regards to the training you do through CPA Ontario, if someone was interested in taking that training, how do they register for that or find out more information about that?

Barbara Palmegiani:

Yeah, really simple. You just go on the cpaontario.ca website. There is a professional development or PD portal, and when you get into the portal, just search controller or search CFO, as the case may be, and you'll see the programs pop up.

Armand Capisciolto:

Okay. Well, Barb, thank you very much. Myself and our audience, we appreciate the time and expertise. I'd also like to thank you, our listeners, for tuning in today. I'm Armand Capisciolto and this has been BDO's Accounting for the Future. Please let us know if you found this topic interesting and useful and remember to subscribe if you liked it. We'll see you next time.