In the course of my work at Infosys, I have the privilege of engaging in interesting conversations with CXOs and other senior leaders. During a recent interaction, the CXO of a leading professional services (PS) organization said, “We sell both ice creams and umbrellas!”
The underlying sentiment, often echoed by insiders from the PS industry, is that PS firms are expected to do well irrespective of how the broader economy is doing. This confidence is rooted in the fact that the firms’ clients (businesses and individuals) need advice and services during periods of rapid growth as well as during slowdowns.
Clients need even more advice and help in a world where so much is changing so quickly. Technological innovations, new business models, tightening regulations, and growing emphasis on ESG make pre-pandemic ways of working and value propositions less relevant. Structural shifts in our society’s and workforce demographics mean that PS firms can stay relevant only by creating new value propositions aligned to a workforce that has different priorities and aspirations.
Six forces shaping the PS industry
I can think of six major forces that will continue to shape the evolutionary path of the PS industry over the next few years:
- Student enrolment in fields such as accounting and law has slowed down. The trend is impacting the supply of freshly-qualified talent that is so critical to replenish the bottom of the pyramid.
- Middle and senior-level staff are leaving firms to take up positions in enterprises across industries. The drain is leading to gaps at the top that are not easy to fill.
- The boundaries between traditionally distinct fields such as accounting, fintech, law, business consulting and technology delivery continue to blur.
- The traditionally “high touch” service delivery model is being disrupted by hybrid/remote working arrangements and more pervasive digitalization.
- Rapid strides in natural language processing, generative AI models and explainable AI will reliably automate some activities undertaken by PS firms in the course of their client work.
- Fresh entrants to the workforce have different priorities, values and motivations and hence, need new ways to stay engaged with their employers.
Worrying labor trends
The US Bureau of Labor Statistics estimates that between 2021 and 2031, there will, on average, be 136,400 annual openings for accountants in the US. (source: [1]). With many youngsters gravitating towards degrees in business management or STEM disciplines, fewer students are opting for accounting. This has already begun to affect the supply of qualified who can fill entry-level positions at accounting firms.
Law firms face a similar scenario. The demand for lawyers in the US is projected to grow by 4% per annum during the period 2019-2029 (source: [2]). However, while there was a 2% increase in law school enrolment in 2021 over 2020 (source: [3]), there has been a declining trend over the past decade. (source: [4]). A CommBank Accounting Market Pulse and Legal Market Pulse report published in May 2022 states that 93% of accounting and law firms reported difficulty in finding quality staff. (source: [5]).
Accounting and legal professionals take at least five years after they qualify and start working to acquire the capability, confidence, and business savvy to manage clients independently and grow those relationships sustainably. In recent years, the speed and frequency with which regulations and guidelines have evolved in response to innovations and their expected/unanticipated implications (e.g., crypto assets, AI, IoT, payment platforms from outside the banking universe etc.) mean that professionals need to specialize even more. Acquiring additional certifications needs more time. Firms need a mix of generalists and specialists to deliver appropriate advice/services to clients. However, there is a shortage of the right talent! And unless PS firms act, the situation will only worsen.
PS firms can convert this adversity into opportunity
Focusing on five important areas will help PS firms attract and retain the right talent, a prerequisite in their transformation journeys ahead.
Boost the supply of talent
Steps must be taken at the industry level to fix the larger talent supply issue. These will inevitably involve academic institutions and could include educating high school/college students about the field. Practitioners must deliver guest lectures on how the profession is changing. PS firms should fund more scholarships and chairs at a larger number of universities, a step that will increase the supply of specialist talent and help address DEI gaps. Encouraging diversity and inclusion is itself a good strategy to boost the talent quotient for PS firms. To be fair, the larger firms already do a lot of this. Mid-tier and smaller firms, too, should consider doing so to boost talent supply.
Firms could also explore how recently-retired professionals and others who left the industry (e.g., to become caregivers) can add heft to client teams by working as mentors/coaches or subject matter experts remotely or part-time.
Rejig employee experience to drive superior client experience
In an increasingly “phygital” world, PS firms need to take a holistic approach to philosophies, policies, and processes around recruitment, training, service delivery career growth and technology adoption to drive employee engagement, client experience and value realization. This is important because new ways of thinking and doing are needed to understand client needs, build trust, work as a cohesive team and consistently deliver to expectations.
AI-based “robot lawyers” may soon argue cases in court. “Robot accountants” already do much of the quarter-end or year-end closing and automated tax filing work. Such intelligent automation will reduce firms’ dependence on human talent, except in areas such as reviewing the work of AI programs. This can reduce the tedium of repetitive work that junior staff typically do in accounting/tax/law firms. By paying more attention to what internal talent seeks, firms can ensure that clients get better services and solutions, thus creating a virtuous cycle.
Keeping staff more engaged
Engaged employees are more likely to deliver client delight consistently. They will also be more loyal and willing to take accountability. Therefore, how PS firms engage and motivate their people is another key action area.
Hybrid and distributed work models means all team members may never be in the same physical office at one time. How can PS firms ensure clear communication and mutual trust between team members? New ways are needed to delegate, set goals, monitor, evaluate performance, and provide feedback. Communication protocols need to be tweaked to preserve effectiveness, given the greater choice of channels.
AI tools are enabling a paradigm shift in what activities employees spend time on. The right tools can help with industry research and the creation of first-cut proposals and presentations. ChatGPT, for example, can already produce a decent output; the next version will be even more powerful. This shift allows employees to spend more time thinking about actual client issues and potential solutions. Even junior staff will feel a part of the process of delivering value to clients. This will boost employee morale and accountability, thus enabling firms to add more tangible value to clients and themselves.
Reimagining career growth
Firms must relook at the tradition of slotting employees forever into a specific “practice area”. Allowing the right people to move to other functional/practice areas will provide the valuable cross-functional expertise and experience firms need to analyze and address complex client situations. Such flexibility also makes it easier for firms to accommodate talent across locations and career levels. Individuals can achieve better work-life balance, while reduced travel can save the firm money.
Commit to purposes that matter
These days, fresh graduates tend to be more mindful and passionate about ESG issues. Therefore, the demonstrated commitment by PS firms to the causes they espouse (green initiatives, diversity, inclusion, equity, corporate social responsibility programs etc.) can help attract talent.
By embracing such causes and voluntarily holding themselves to higher standards, PS firms will credibly signal that their purpose is aligned with what matters to a key stakeholder constituency- younger employees. In turn, this will make it easier for PS firms to attract talent that will be more willing to exhibit the level of commitment the firm needs.
Closing thoughts
Twenty years ago, I, as a rookie, did not fully comprehend the depth of a statement made by Infosys founder Mr N R Narayana Murthy. He said, “Every evening, our company’s assets walk out of the company’s campuses, and we must ensure that they are motivated and enthusiastic to return tomorrow morning.” Although we now live in a hybrid world where not all employees need to come to the office daily, Mr Murthy’s wisdom is still relevant.
People are the most strategic resources for any business- and especially for PS firms. Those PS firms that build and sustain cohesive teams will ahead and stay there. This task will become increasingly hard because the skills needed to deliver to client expectations are changing. Smart people are important, but just as critical is ensuring they remain productively engaged with the organization and its clients.
[1] https://fortune.com/2022/11/10/accountant-shortage-struggling-hire-cpa/
[2] https://www.clio.com/blog/lawyer-statistics/
[3] https://www.law.com/2021/12/15/law-school-enrollment-is-way-up-but-will-the-job-market-ever-be-able-to-match-it/?slreturn=20230021203001
[4] https://www.lawschooltransparency.com/trends/enrollment/all
[5] https://beatonglobal.com/six-professional-services-trends-to-watch-in-2023-part-one/
Infosys is a global leader in next-generation digital services and consulting. Over 300,000 of our people work to amplify human potential and create the next opportunity for people, businesses and communities. With over four decades of experience in managing the systems and workings of global enterprises, we expertly steer clients, in more than 50 countries, as they navigate their digital transformation powered by the cloud. We enable them with an AI-powered core, empower the business with agile digital at scale and drive continuous improvement with always-on learning through the transfer of digital skills, expertise, and ideas from our innovation ecosystem. We are deeply committed to being a well-governed, environmentally sustainable organization where diverse talent thrives in an inclusive workplace.
