Diversity in Public Accounting: We're Shaking Up Audit Firms Across the Country
June 02 2020 • 7 min read
Despite popular assumptions about the “face of finance,” inclusion practices and diversity in public accounting have become increasingly central to many firms’ core values. Firms that have committed to diversity are viewed more favorably in the consumer landscape. Plus, they also get the qualitative and quantitative in-office benefits of a diverse workforce.
However, even firms may encounter challenges when it comes to hiring a diverse workforce. Systemic inequality in the university and recruiting systems are top contributors. So how are firms overcoming these challenges? One first step is to outsource diversity to Makosi.
As you read on you’ll find:
- A push for diversity: the modern state of diversity in public accounting
- The benefits of a diverse workforce
- Hurdles to diversity and inclusion hiring practices
- The Makosi solution: diversity by the numbers and what our clients have to say
Diversity is more complex than it might seem
To many, diversity may seem like an HR department buzzword. But what does it look like in action? It’s a question worth diving into. Especially since, according to a 2007 survey by the Society for Human Resource Management, “[o]nly 30 percent of human resources professionals say that their company even has an official definition of diversity.”
Traditionally, diversity has referred to legally protected identity markers like race and gender. Today, diversity experts are expanding their definition to include a variety of identity markers. These include age, nationality, ethnicity, religion, gender identity, sexual orientation, and even weight. According to Eric Peterson, who works on diversity issues for SHRM, “Really, it’s any way any group of people can differ significantly from another group of people — appearance, sexual orientation, veteran status, your level in the organization. It has moved far beyond the legally protected categories that we’ve always looked at.”
But the goal of diversity awareness shouldn’t just be to check the most boxes. According to a report by NPR, “experts say the ultimate aim of any diversity program should be to create a culture that produces and rewards the best work from every employee.” For this article, we’ll focus primarily on nationality and ethnicity (though you can read about the benefits of age diversity here).
The push for diversity in public accounting: CEOs are moving the needle in the right direction
The US Census projects that minority populations will comprise more than half the US population by 2045. Still, the finance industry remains overwhelmingly white and male, particularly in positions of power. This dissonance could be why, according to the AICPA, accounting firms are leading the charge in supporting a more diverse business environment.
A crucial piece of this effort is the CEO Action for Diversity & Inclusion initiative, launched by PwC. So far, over 900 CEOs have committed to advancing diversity and inclusion within the workplace. That means collectively taking actionable, measurable steps to close diversity gaps, address unconscious bias, and play a meaningful role in this critical social issue.
Furthermore, the American Institute of CPAs has been committed to diversity for years. This commitment began 50 years ago with a resolution stating that accounting leaders supported a diverse workforce. Since then, there have been reports, internships, scholarships, and other efforts all targeting that goal. And it seems to be working.
Other benefits of diversity in public accounting
While organizations are likely aware of legal compliance requirements and laws that enforce diversity practices, most recognize that promoting diversity is the right thing to do on a moral level.
And according to the AICPA, “clients, referral sources, and other business contacts are all becoming committed to greater diversity. And they seek it in the organizations they do business with.”
But a diverse workforce won’t just be better at attracting business. Top talent is attracted to companies with diverse workforces. Your potential employees want to know that you’ll treat them fairly, regardless of ethnicity, gender, or race. And they’re more likely to stay. Berrett-Koehler Publishers found that “organizations that report a diverse staff and inclusive workplace also tend to be better at keeping people from leaving for other jobs.”
And your diverse team will be better at getting work done. Studies have shown that workplace diversity boosts productivity, contributes to more innovative and creative workplaces, allows you to work with a more diverse client base, and creates a more balanced office culture.
Diverse workforces are more productive
A recent study by the Boston Consulting Group discovered that diversity increases companies’ bottom line. According to the study, “increasing the diversity of leadership teams leads to more and better innovation and improved financial performance.” Observing 1,700 companies across eight countries—with various industries and company sizes—researchers found that companies with diverse management teams have as much as 19% higher revenue. They contribute this increased revenue to greater innovation.
Diverse workforces are more innovative
Homogenous groups of people—people with similar education, experiences, and worldviews—tend towards a phenomenon called “group think.” Group think makes it difficult for teams to see alternatives to initial proposed plans of action, reducing creativity and innovation. It can also lead to the intentional (or unintentional) policing of “dissenters.” By stifling those with views that differ from the group’s, group think kills creativity.
In contrast, diversity leads to a more energized exchange of ideas, promoting greater creativity in problem-solving. Employees from different backgrounds will naturally bring a variety of worldviews and solutions to the table. And diversity experts believe that these heterogeneous groups give your business a competitive edge by contributing more creative ideas to the mix.
Diversity in public accounting makes teams more agile
Think about how your workforce helps build connections with your target clientele. Perhaps you focus on hiring bilingual workers to serve your community better. Or you look for recruits with international experience. Whatever your needs, research shows that diverse teams are better equipped for new business opportunities.
According to research published by the Harvard Business Review, “having an employee with the same ethnic background as a client can increase the possibility that the team will better understand that client’s needs by up to 152%.” Thus, by increasing diversity, a firm can better respond to the needs of a diverse customer base.
In fact, according to a recent article in the CPA Journal:
- Companies with diverse leadership teams have reported innovation-based revenue 19 percentage points higher than companies with below-average leadership diversity
- Ethnically diverse companies are 35% more likely to have financial returns above industry medians.
- Companies with inclusive cultures are eight times more likely to achieve better business outcomes.
Considering these qualitative and quantitative benefits, firms should be scrambling to bolster diversity at every level. So what’s the problem?
Hurdles to achieving the industry’s diversity goals
Unfortunately, accounting and finance have a bad rep when it comes to attracting and retaining a young, diverse talent pool. A recent report by the Howard University School of Business elaborates:
“Despite decades of intensive efforts, the accounting profession has not reached its diversity goals. One reason is the misperceptions about accounting as a career. Studies suggest that young people, including underrepresented minorities, hold the profession in relatively low regard, do not understand what accountants do, and do not appreciate the career opportunities the profession offers.”
To fill that talent pipeline, the industry needs to make a concerted effort to make audit and accounting a “sexier” endeavor.
Even when minority and immigrant students do find their way into the accounting profession, they often lack the resources and connections necessary to acquire internships and entry-level experience. As a result, the AICPA’s most recent graduate report (2019) showed that while 44% of all Bachelors enrollments are non-white, only 42% of all Bachelors and Masters graduates are non-white. Comparatively, 56% of Bachelors enrollees are white, and 58% of all BA and MA graduates are white.
And the rate of participation among black accountants drops at each career step. According to the 2017 American Institute of CPAs demographic trends report black accountants make up:
- 9% of students enrolling into accounting Bachelor’s programs
- 4% of new hires by firms
- 1% of firm-employed CPAs
Finally, it’s important to remember that the industry is working hard to overcome a historical legacy of outright discrimination, cultural issues, and lingering bias. There’s a lack of mentorship programs and programs that support underrepresented minorities in both high school and university settings.
The issue of retention
According to Walter Smith, CEO and president of NABA, the real work in 2019 is the retention and promotion of black accountants. Steven Harris, a St. Louis accountant who chairs NABA’s board of directors, echoes this point. “Minority professionals are heavily recruited. But if they don’t feel welcomed or see people who look like them, they are likely to go elsewhere,” he said.
Makosi’s international workforce raisesthe bar on diversity in public accounting
At Makosi, we’ve been committed to diversity since the beginning. We recruit our international talent pool from seven countries and counting. The majority of our 2019 candidates came from South Africa, Zimbabwe, the Philippines. And while only 9% of the US workforce’s 1.9 Million accountants are black, 24% of our candidates are black, 31% Indian, and 5% Filipino.
But the benefits of our diverse on-demand workforce extend far beyond their nationality or ethnic identity. At Makosi, we recruit candidates with a multitude of life experiences. Many have overcome extreme poverty and difficulty, all to pursue their education and achieve a career in finance. Their time with Makosi is not just a year of entry-level experience. It’s a life-changing step along their career route.
Compare this lifelong dedication to the junior auditors who are “doing their time” to sit for their CPA. The difference between someone checking a box and someone fulfilling their life’s purpose will be night and day. This mindset—and their experience and education—make our candidates a powerhouse addition to your team.
So, not only will working with Makosi help your firm maintain legal compliance with regards to diversity and inclusion. It also gives you the edge when it comes to productivity, innovation, and workforce agility.
As firms continue to navigate a fast-changing business environment, they’ll rely on their workforce’s creativity and adaptability. Clients, too, will need new solutions to overcome challenges and capitalize on opportunities. By focusing on workplace diversity at every level—from junior auditors to partners—firms are more likely to have the innovation, agility, and creativity needed to succeed. And Makosi is here to support those endeavors with our international, on-demand talent. Contact us today to see how we can help support your diversity goals.