Fiduciary Is Fun!
(a.k.a. I heart taxes)
(a.k.a. I heart taxes)
I learned the above over 30 years ago. I can almost remember the exact time and location. The revelation hit me like a load of bricks as I had never thought about it before, and then when I did, was shocked to realize how correct it is in business. So simple, and yet so complicated.
We can only move business forward with one (or a combination) of 3 things – people, processes, and technology. Want to make more widgets to sell? Then hire more people to make them, improve your manufacturing processes, or develop new technology to make more of them. That’s it. There’s nothing else to consider.
As we approach the end of the year and you look into 2020 with the hope of “doing more”, what one of the 3 levers are you going to pull? Technology is a game changer but often times take time to build and implement. Processes are often overlooked and can really move the needle, but process improvement initiatives are not always intuitive. For many companies, the go-to lever is “people.”
So what are our people options? Well, can we work our existing employees harder? Maybe. Afterall, 40-hour work weeks are for sissies, right? But let’s assume that working existing employees harder isn’t option. Then what? We need to add employees and/or replace less productive ones. Again, pretty simple on paper.
However, hiring new employees in 2020 may not be as easy as you would like. According to the new CNBC Global CFO Council Survey, 30% of global CFOs expect to be hiring more people in 2020. And Daniel Zhao, Senior Economist and Data Scientist at GlassDoor, while looking at the trends and available talent pool has said “hiring is going to be more difficult in 2020 than it is now.” Just what you need to hear as a business owner, right?
So as we close out 2019 and you finalize your 2020 plans, what are you going to do? If part of the answer is to hire more employees you already know that this is going to be difficult as wages begin to rise and the competition for talent intensifies.
I would suggest that one thing you can and should be doing is looking at your benefit programs and promoting them to the max. Are your benefit programs aligned to attract the talent you seek? Do you need to make changes to your 401k program to ensure competitiveness and desirability? Has your current advisor had this discussion with you yet?
If you would like to explore ways to improve your company’s profile to new talent in 2020, give me a call. I would love to roll up my sleeves with you and explore what we can do together.
Pete Welsh a/k/a 401kGuy
I was meeting with a prospect last week and we were discussing his business and the current challenges of finding good talent. The business requires a number of technology savvy folks, although the actual business is not a “tech business” per se. Indianapolis has in recent years become a bit of tech hub as SalesForce has expanded here and is now one of the larger employers in the area. Suffice to say that if you are a young technology person, the idea of working for SalesForce or any one of the many start-up tech companies has a slightly greater appeal than working with my prospect.
We discussed ways in which we could address my prospect’s challenges, and one of the options that he has used in the past, and continues to use now, includes signing bonuses for the right talent. These bonuses are not six figure bonuses, of course, but they are generally several thousand dollars. He feels he needs to continue to strategically use these bonuses to compete against the more tech centric competition in town. However, one of the problems with these bonuses has been that employees that do come on board often don’t stay very long. Many move on after a year or two, which is obviously frustrating. Is there a better way, he asked? Well of course there is!
I mentioned to him that he could continue to keep signing bonuses part of his offering for key employees but instead of paying them out in cash, he could put them into the retirement plan and make them subject to a 5 or 6 year vesting schedule. He was surprised to hear that he could do that as he thought this might be discriminatory when in fact it is perfectly legit. Moreover, by putting these bonuses into the plan and making them subject to a vesting schedule, he and the employee avoid paying taxes on these contributions. He can even make the bonuses more generous because if the employees leave before fully vested, he can repurpose those forfeited dollars for other employees.
Was my prospect happy about this idea? Naturally he was. Is he a client yet? Not quite, but things are looking positive. If you are an employer looking to partner with an advisor who can think outside the box to help you with a business problem, give me a call. I would love to have a discussion!
Pete Welsh a/k/a 401kGuy
Here is what would seem like a simple question – What kind of college graduates do CPA firms hire? When I came out of college the answer was pretty simple – accounting graduates. Duh. Well, according to a new report (“Trends”) from the American Institute of Certified Public Accounts (“AICPA”), 31% of the new graduates in 2018 that public accounting firms hired were non-accounting majors. Almost 1 out of every 3 new hires was not an “accountant.” Does this surprise you?
These numbers are actually causing many in the CPA profession to reevaluate things, including the actual CPA exam itself – what it should look like, who can take it, etc. As a CPA, I have found these changes to our profession interesting. CPAs have always been on the leading edge of business changes as consultants and advisors to clients. However, as Barry Melancon, CPA President of the AICPA said of the Trends Report, “Increased demand for technology skills is shifting the accounting firm hiring model.” With more and more of the accounting profession becoming automated and technology focused, the old fashioned debit and credit skills are becoming less valuable on their own.
I suppose all of this makes sense when you think about it, but what has this shift required of accounting firms and their hiring practices? It’s caused them to think differently in many areas. The traditional career paths are changing. Incentive structures are changing. Work habits of these new non-accounting graduates are different. How is your business model changing and have you considered what these changes mean to your recruitment and staffing model?
All business models change. In fact, if the CPA profession can change as fast as it is doing, I am quite sure that almost every other business is changing as I type this. Are you a leader in your organization, and are you thinking about how your next new hire could be different from your last? Do you post positions simply to fill the same role of the prior person? Or are you thinking strategically about how your business is changing and adjusting accordingly?
I would suggest that a growing business needs to constantly be considering what it will look like and need 2 to 3 steps out. Part of that analysis should include your benefits program including your retirement plan(s). This could be both your qualified plan – 401k – and non-qualified plans. Just because you haven’t done something in the past is no reason not to consider it in the future.
If you want to have a discussion around the next generation of retirement plan and planning for your organization, please give me a call. I would love to talk to you about the unexpected.
Pete Welsh a/k/a 401kGuy
Employment/Unemployment is double edged, correct? Too much unemployment is bad for everyone; on that I presume we can all agree. But is too much employment bad as well? It’s not bad in the same way, of course, but I will put forth that it isn’t all good either.
I was with a client of mine last week and because of the nature of their business, they hire a meaningful number of seasonal workers at the end of summer and into the fall. The positions are relatively high paying for the work involved, and in the past they have never really had any issues filling the spots. This year they believe things will be different.
There is certainly a lot of data out there supporting my client’s concerns. The Unemployment Rate, according to the Department of Labor currently sits at 3.7%, and there were 7.3 million job openings on the last business day of June this year. That’s a lot of unfilled jobs! And all these opening can be distracting. CareerBuilder says that 32% of US employees plan to get a new job in 2019. According to the same research 29% of employees say they regularly search for new jobs and 78% say they are open to trying something new if the opportunity arises. I think it is fair to say that approximately 1/3rd of an employer’s work force is ready to jump ship on any particular day. What does this say about our work environments!
Moreover, what do all these surveys suggest to my client who needs some workers…and needs them now! Well, we spent some time talking about that. The recruitment conversations are usually focused on full-time employees. What type of packages can we put together for Full Time Employees? However, sometimes it is just as important to spend some time to think about what can be done for those part time employees. Clearly, we are not talking about 401k programs and health programs in the traditional sense, but can we do something to stand out from the crowd?
Well of course we can! There are any number of options available to part time employees outside the traditional employer sponsored benefits programs. Many of these incentives are in the form of cash in one way or another, but not all of them. One item that we discussed involved leveraging the health program to bring in a nurse practitioner and wellness coach to work with these seasonal workers. The conversation was very dynamic as we involved the health insurance broker into the conversation who had several ideas.
The point of this post? In a tight labor market we need to be thinking outside the box to attract and retain (for whatever length of time is needed) the right employees. Are you working with an advisor willing to help you? If not, give me a call. I would love to visit on your challenges.
Pete Welsh a/k/a 401kGuy