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In the past, America's view of economic growth was based on the underlying assumption that there will be more people available for jobs tomorrow than there are today. This is no longer true. If you are in a position of hiring tax professionals, your reality will be a growing manpower shortage.

While we have faced shortages driven by economic growth, the problem will significantly increase beginning next year due to a decrease in prior birth rates. Using historical average figures for both worker participation and economic growth rate, the demographics indicate that by the year 2005 there will be 15% more jobs than workers. There is no remedy for this staggering problem. Even if the birth rate could be dramatically increased, the impact would not affect the labor shortage until after 2015. That being said, there are specific factors we believe will further compound the impact on the tax profession.

First is the continuing move toward specialization and segmentation within tax departments. This is a by-product of the increasing complexity of the US and International tax law resulting in the narrowing of the available labor pool. This segmentation creates an imbalance between supply and demand and actually makes cross-training more difficult, and at the most critical levels, impractical. All of us have recently recognized this problem when attempting to recruit for International or Multi-State tax positions and we are just at the beginning of our demographic trend.

Secondly, the leadership within the tax profession has been highly successful in influencing upper management in corporate America to recognize the value of including tax on the front-end of transactions. Therefore, tax departments are required to hire people with strong business and communication skills along with solid technical capabilities. This also considerably narrows the available pool of talent and further exasperates recruiting efforts.

Third, the politicizing of the federal tax code and its potential simplification has and will continue to deter young financial professionals from specializing in tax. While those of us discount the reality of this occurring, a sophomore or junior in college will question why he/she should take the risk when a less politically targeted profession is available.

Lastly, the tax profession is unfortunately insulated from the benefits that immigration can easily offer other professions. Unlike technical fields such as engineering, computer programming or even medicine, the tax profession is unable to immigrate its way out of this problem due to the lack of standardization between competing global tax jurisdictions.

To put the current problem in perspective, be aware of the fact that less than 25% of post college age workers have completed college degrees. The national unemployment rate for workers with completed college degrees is 1.9%. Furthermore, in the major metropolitan communities the unemployment rate for this group is below 1%. These numbers will continue to deteriorate as the labor shortage grows into the next century.

This picture leads us to the only solution anyone has when a problem seems overwhelming. Break it down into manageable goals and attack each with a plan. You will then be back in control, rather than just reacting to the problem. There are two areas that must be addressed: the retention of current employees and the recruitment of new employees.

Let's first look at retention. Not all turnover is bad, but it is always costly. Your challenge will be to develop a process to determine whether it is better for an employee to stay or leave, both from your perspective as well as from the employee's.

The first step is to understand the motivating factors behind why most people leave one career opportunity to go to another. Other than personal motivation (relocating for personal reasons, resigning to stay at home to care for dependents, etc.), there are five main areas which motivate candidates to change jobs:

• Challenging work day to day
• Sense of career progression
• Committed mentor
• Proper balance between personal and career goals
• Compensation in line with market.

The next step is actually a "process" where the organization creates an environment in which the employee is comfortable communicating their feelings concerning each of the five motivating factors. Below is a list of actions within this process:

• During the hiring process identify the needs and key wants of each employee concerning their career and be sure that you can meet these expectations.
• Assign a mentor to keep track as these needs/wants develop or change through the years.
• Direct supervisor (who should never be the mentor) should meet quarterly to listen to the employee's perspective on all five motivating factors.
• When issues of serious conflict arise in any of the five motivating areas, it is essential for the company to determine if a solution is possible…such as adjusting compensation, flex hours, promotion, job content change, etc.
• Both supervisor and mentor should give timely feedback to ensure that the agreed-upon areas continue to be addressed.
• If your organization is unable to meet the needs and key wants of the employee while still assuring that the organization's needs and wants are met, it is likely time to part ways.

Recruiting is the second half of the equation. Effective recruiting is a process built on four areas which must be equally effective. They are:

1) Identification of Candidate:

• Recruiting must be an on-going process. It will no longer be a "just in time" activity.
• Recruiting will be relationship based. This means developing relationships with individuals who will be future candidates such as a first year law school student, a freshman in an undergraduate accounting program or a targeted experienced candidate. There will be several years of contact with this person before they potentially become an employee. You will be developing a brand image as to what it means to be a member of your tax department.
• Develop a pool of elite vendors who are committed to assisting you in the recruiting process such as retainer search firms for high level positions and hourly research groups and Internet based firms for mid and light level recruiting.
• Promote an ongoing relationship with all graduate tax programs, organizations which offer continuing education, trade associations and local tax clubs or roundtables. Encourage tax department personnel to actively participate and to promote the quality of your department.
• Develop employee referral program awards that provide a steady stream of prospective candidates. Try surveying your tax department personnel as to what would motivate them to proactively recruit on your behalf.

2) Matching Process:

• Identify which of the motivators (discussed in the retention section) drives the candidate and then address, through the interview process, how the company will address this need.
• We can no longer expect to find the exact skill set we desire and will have to be more realistic in relation to the available labor pool. In the future, a broader candidate profile will have to be an option in many cases. As an example, if you need a 3 to 5 year attorney to do international tax transactional planning, you may need to consider attorneys with a solid Sub Chapter C background who you can train in the international area. This obviously will require the development of tax training programs utilizing internal and external resources.

3) Selling the company and the opportunity:

There will be instances when you cannot stretch on your requirements for a specific position…you must have a certain skill set that is in high demand/low supply. If this is the case, your burden to sell your company, department and the position is even more crucial. This can be accomplished in a number of ways:

• Bring key individuals such as the CEO, CFO or VP of Marketing into the recruiting process to help present a broad consensus of upper management's attitude toward tax.
• Assign one person to be the primary point person throughout the interview process to assure continuity and consistency.
• The candidate's family must be considered in the interview process. Include the spouse in a dinner or lunch meeting. If relocation is necessary, probe for family's needs and assist in information gathering;
• Align yourself with the best relocation consultants available. Avoid real estate agents that tend to push candidates toward the most expensive homes.
• On a more long-term basis, develop a corporate image which promotes a quality work environment that results in your organization being viewed as a "preferred employer."

4) Transition Period: After the candidate accepts the offer, a process must be in place to assist the individual with a smooth transition:

• Offer a strong orientation program with an assigned coach.
• Ongoing mentoring program for the employee's entire career.

Besides what each organization must do to minimize the impact of the impending labor shortage, our professional trade associations must play a key role as well. TEI and others must focus efforts on promoting the tax profession to our youngest and brightest in order to cultivate relationships with aspiring professionals.

Although we have not addressed all the relevant issues, hopefully we have your attention. We encourage the tax profession to provide a forum to further explore solutions to this dilemma.

This article originally appeared in the May / June 1999 issue of the TEI Magazine, "The Tax Executive". It was authored by Tony Santiago and Eve Abrams of TaxSearch Incorporated.