Today is International Management Accounting Day – an annual observance created by the organization of which I am CEO, IMA (Institute of Management Accountants), to honor the vital role played by management accountants in business. This year we are celebrating this observance amidst two macro trends with widespread implications for the profession. These two trends are 1.) a talent crisis in accounting and finance (according to Robert Half finance and accounting is one of the five highest-ranked industries facing shortages of skilled workers and problems filling crucial roles) and 2.) implementation of diversity, equity and inclusion (DE&I) strategies as a way to combat the talent crisis (according to a recent survey by Willis Towers Watson “70% of employers are placing a broader emphasis on DE&I strategies as a recruitment and retention tool”).
CFOs who are concerned with their organizations’ ability to be resilient and competitive should be taking a close look at their DE&I strategy. Research by McKinsey has found companies that prioritize DE&I and have a diverse set of leaders in senior leadership roles outperform their peers (McKinsey’s research tracked 1,000 large companies’ progress in DE&I from 2014 to 2020, identifying diversity winners). McKinsey stressed the need for “…adopting systematic, business-led approaches to inclusion and diversity.”
The message is resonating with CFOs and according to Deloitte’s second quarter 2021 North American CFO Signals™ survey, “72% of CFOs say that their company now has a formal diversity, equity and inclusion (DEI) program, an increase from the 67% who responded similarly in the first-quarter 2019 survey.” Beyond mere rhetoric, the Deloitte survey asked these CFOs if their company had or planned to have a defined budget for DE&I in the next year, and 60% of them indicated they did.
This is encouraging, but it still means 40% of organizations are without a formal budget for DE&I. CFOs have a significant role to play in advocating for investment in DE&I and making the business case for it to senior leadership. Lack of formal DE&I programs present risk for CFOs and the organizations in which they work because DE&I programs help ensure key demographic groups (that comprise sizable populations in the U.S. and elsewhere like women and people of color) have the support they need to succeed in finance and accounting roles. On this International Management Accounting Day, I think it is important to emphasize how critical DE&I programs are to the success of organizations as well as finance and accounting teams.
For example, a recent report on DE&I in the finance and accounting profession by IMA, CalCPA (California Society of CPAs) and IFAC (International Federation of Accountants), which surveyed more than 8,500 finance and accounting professionals globally, found some startling statistics: fewer than 60% of respondents of all genders found the profession to be either equitable or inclusive and 42% of female respondents have left a company due to a perceived lack of equitable treatment or inclusion.
This report builds on previous U.S. specific research which found “men comprise 86% of the CFOs of Fortune 500 and S&P 500 companies and 77% of partners in accounting or finance functions at U.S. CPA firms and that more than 90% of the profession’s executive leadership are non-Hispanic white.” Statistics like these speak to systemic lack of advancement in the profession by women, people of color and LBGTQIA populations, people who would otherwise be leading digital transformation initiatives, implementation of sustainable business management and other key initiatives that contribute to organizations’ overall competitiveness.
So, what is the task for CFOs around DE&I? Here are three recommendations that finance leaders can take:
1. Advocate for formal DE&I programs with dedicated budgets: A recent op-ed published by Emory Business school makes the case for moving DE&I from a P&L statement to the balance sheet. The op-ed author, an Emory School MBA graduate, notes, “the paradigm shift of moving DE&I from the P&L statement to the balance sheet sets the context for leaders to understand that diversity, equity and inclusion are not a destination. These are ongoing needs. Creating DE&I is an action, and the minute you think you’re done and stop your DE&I efforts, you’ve fallen behind.”
2. Make the connection between DE&I and stakeholder value: Deloitte’s recent CFO Signals Survey cited a Wall Street Journal analysis of diversity in the S&P 500. Their analysis showed “the 20 most diverse companies in the S&P 500 have an annual stock return of 10% over five years, compared to the 4.2% achieved by their least diverse counterparts.” The tangible returns of DE&I are well-documented and CFOs should be able to articulate the value of DE&I in terms of stakeholder value.
3. Recognize how DE&I aids in retention and attraction of diverse job candidates: When DE&I principles are embedded in organizational culture, it is apparent to potential hires. Donald Thompson, co-founder of the DE&I training and certification agency The Diversity Movement, shared his thoughts on this topic in an American Marketing Association article writing, “Potential hires of color will research where a company stands on the principles of DEI. But even if an organization is still in the early stages of increasing representation in its staff, inviting a new hire of color into the company-wide conversation on the topic can entice talent to stay for the long haul.” DE&I programs help broaden the job candidate pool for key roles and provide organizations with an important retention tool once top talent is identified and hired.
As we honor management accountants today, I believe our profession has a distinct and urgent call-to-action in addressing the talent crisis as we seek to increase our relevance in a fast-moving, disruptive environment. Every management accountant has a role to play in creating a more diverse, equitable and inclusive environment. Intentional, collective action is needed to affect greater change and CFOs can become champions of DE&I. The business case for DE&I has never been stronger and the need has never been greater. The talent crisis we currently face requires a more critical assessment of DE&I deficiencies and implementation of formal, well-funded DE&I programs that produce measurable results. On this International Management Accounting Day, let us ensure everyone with the requisite skills and talent to occupy important accounting and finance positions feels welcomed and valued.