PICPA - Diversity Makes for a Stronger Accounting Profession


Diversity Makes for a Stronger Accounting Profession

Spring 2011

By Julius C. Green, CPA, JD, and Meenu (Minakshi) Khanna, CPA

The world of accounting has changed much over the past several decades, but it remains virtually frozen in time for large numbers of minority CPAs. Certainly, a number of organizations, including some of the world’s largest accounting firms, have adopted diversity programs that have resulted in an impressive uptick for women’s initiatives and a general air of inclusion. However, the actual number of ethnic minorities in the accounting profession remains embarrassingly low.

This article explores some of the challenges and opportunities that come with the efforts to create greater diversity. We hope to foster dialogue among, and action by, Pennsylvania accounting firms.  Before exploring some of the challenges and opportunities, we need to define “diversity” for the purposes of this article. A broad definition adopted by some organizations often encompasses multiculturalism, gender, sexual orientation, and so on – inclusion in the broadest sense. In 2009, PICPA established a Diversity Committee to focus on increasing “ethnic diversity.” Specifically, its mandate is to “increase ethnic diversity within the Pennsylvania CPA profession and the Pennsylvania Institute of Certified Public Accountants.” This article, similarly, focuses on ethnic diversity.

What Drives Diversity?

Groups such as the National Association of Black Accountants (NABA) and the Association of Latino Professionals in Finance and Accounting (ALPFA), among others, have made efforts to improve the representation of ethnic minorities in the profession across the country. Unfortunately, their sincere efforts have yielded limited results, and many still wonder how to achieve measurable and sustained improvements in the number of minority accountants hired and retained.

There are countless reasons as to why measurable results have been elusive, and this article can only address some of those considerations. 

Many argue that the short supply of minority accounting graduates is a substantial reason for the lack of diversity in the profession. Others point to the lack of a burning platform; that is, a substantial driver, that would encourage more organizations to address the issues in a meaningful way. For example, the impetus for cultural and social change historically has been driven by one of three primary sources: 

* Government mandates – Federal, state, and local policies and practices that encourage greater minority participation.  

* Social mandates – A widespread, principled belief within a culture that a wrong needs to be corrected because it is “the right thing to do.” 

* Business mandates – An imperative that if change does not occur the company will not be as successful as it could be or it could fail. 

To achieve sustained and meaningful progress on this matter in the accounting profession, some element of all three approaches may be required. However, the starting point and motivation for a business to begin and maintain a focus on ethnic diversity will have to come from real business needs.

The Business Realities that Drive Diversity

Significant and sustainable diversity efforts will come about largely through business mandates. Some of the drivers that could be a positive force for diversity are listed below.

Demographic change – All minorities combined will be the majority in the United States by 2042.1 Across the nation, the number of minorities continues to rise and the white population continues to decline, according to U.S. census estimates released June 2010. Minorities now make up about 35 percent of the population, an increase of 5 percent from 2000. Nationally, 46 percent of children under the age of 15 are minorities, compared with 40 percent in the year 2000.2 The best and brightest among these populations are going to be attracted to firms that value and embrace diversity.

Minority business owners – The number of minorities that are business owners or occupy top roles in the Pennsylvania business community continues to grow. The types of businesses run the gamut: from restaurant, gas station, and convenience store owners, to engineers, doctors, hotel owners, and so on. Organizations looking to do business with those companies need to ask, “Do we have the know how, the understanding, and the in-house human capital to be able to fully understand the culture, needs, and sensitivities of our minority clients?” 

More minority board members – Many organizations are beginning to reflect greater diversity in their employees, management teams, and board members. Audit and finance committees, which largely determine the accounting and consulting firms that will be hired by their organizations, are beginning to be filled with more minority representation. As a result, the ability to win engagements may hinge on having a well-rounded, diverse team and organization. In particular, governmental and nonprofit clients are beginning to probe the corporate culture of their vendors. 

Recently, when an audit team from ParenteBeard LLC pitched for audit and tax work for the West Point Association of Graduates, the audit committee asked prospective firms about their organization’s focus on diversity. Carl Moccia, CPA, vice president and CFO of West Point Association of Graduates, said, “We interviewed a number of very good, capable firms to perform audit and tax services for our organization. They could each deliver on our needs from a technical standpoint. One of the key factors, however, in the selection … was their response to a question very important to West Point: ‘What is your organization doing to embrace a culture of diversity?’” 

Diversity is important to West Point for many reasons. One of these reasons is the message it sends to the cadets. This is explained with clarity by Herman Bulls, vice chair of the board and chair of the audit and compliance committee: “At West Point, we are preparing the leaders who will provide for the protection of our nation in the years to come. Part of the leadership experience is understanding how to get the best performance from all people. Part of that process is understanding the value of diversity. ... We need to walk the talk as we prepare the next generation of leaders for our nation.” 

Other prominent organizations also believe it is important for them and their business partners to have a heightened awareness of diversity. To that end, they are beginning to require their vendors to also see its value. As those organizations look at factors that distinguish one accounting services provider from another, one of those key factors is likely to be which organization best reflects its values with regard to diversity. 

The new-millennium workforce – Younger staff, both current and prospective, will have grown up in much more of a multicultural environment than their parents’ generation. Many of those students will be attracted to an organization that embraces diversity. Also, recognition and acceptance of diversity is important to minorities who are currently a part of an organization. It is an amazingly good feeling for a minority person to see other minorities around them. They don’t necessarily need to be of the same minority group. It is important because it reinforces that their organization accepts and values people of diverse ethnicities, backgrounds, and experiences. 

There are a number of examples of like-minded organizations in Pennsylvania. One such organization located in South Central Pennsylvania is Fulton Financial Corp. (FFC). The holding company for seven banks across five states has a strong diversity statement. It reads, “The company is committed to, and will continue to abide by, the policies and procedures which support a multiethnic workplace. To realize this commitment, the company depends on and benefits from the diversity employees bring to the workplace. We know that our success depends upon full diversity of our ‘people’ resources throughout every level of the company.” But FFC backs up this statement, too, with aggressive training, recruiting, and retention measures that embrace diversity at all levels within the organization. 

The benefits of committing to diversity are many. Just a few are detailed here. 

Greater opportunities for winning – A diverse workforce helps a service provider build rapport with a client or prospect when they represent their values. This leads to a level of trust and provides greater opportunities to connect.

Greater diversity of thoughts/solutions – Great ideas and solutions come from experiences, and more diversity gives you a broader range of experiences to draw upon. Exposure to other cultures within an organization leads to enrichment among employees and a freedom to allow creative thinking. This translates to confidence, comfort, and achievement that otherwise may have been suppressed.

Greater good will – When current or prospective team members see an organization filled with faces that represent the communities in which they live and work, it creates good will between the employee and the organization. 

The Challenges to Establishing Diversity

If diversity were easy, it would have been fully realized years ago, making both PICPA’s task force and this feature moot. But working toward a fully diverse workplace is not without difficulties, and some of these are highlighted below.

Inadequate supply – There is a perception that there is a limited pool of “qualified” candidates, but 32 percent of all college enrollments are minority students. When it comes to accounting programs, only 25.5 percent of majors happen to have a minority background. Then, according to a recent AICPA report, 22 percent of the new accounting graduates hired by CPA firms are minorities. At CPA firms, the current percentage of female employees is 49 percent and that of male employees is 51 percent. However, 83 percent of these combined employees are white and only 17 percent are of different ethnic backgrounds. At each step in the supply chain, the percentage of minority representation drops, from college enrollment to overall CPA firm employees. 

The historical approaches to recruiting – There are many “elephants in the room” regarding diversity that stem largely from the rocky history of race relations in this country. One such “elephant” is associated with hiring standards. Most employers evaluating students use grade point average (GPA) as a starting point to determine which students are afforded a campus interview. Much has been written about the virtues of GPA as an evaluator of talent among college students and, intuitively, we know it is one of the few objective measures to project the performance of students once hired. But classroom success does not always equate to job performance. There are many factors that can cause a student’s GPA to be lower, such as finances, health, and family issues. 

Firms need to take a close look at whether GPA – or the difference in GPA – should be the primary basis for determining which students are afforded an opportunity to interview and compete for positions. Another question that organizations have to consider is whether they are fishing in the proper streams to attract larger numbers of minority students. 

Minority students shy away from accounting – Even though accounting has been ranked one of the hot majors for students, minority students are not considering it a viable option. Many minority students have the perception that accounting is both overly boring and difficult. They seem to hold the stereotypes and misconceptions about what accountants do, so they tend to opt for more “glamorous” majors or professions where they see more diversity.

Emphasis on inclusion over ethnicity – The broader view of diversity by some firms – including age, gender, and sexual orientation – resulted in less attention to ethnic diversity issues. 

Strategies to Overcome the Challenges

The impediments mentioned above are not insurmountable. Every CPA and CPA firm can tackle these issues with a dedicated commitment. Some possible solutions include the following items.

Balanced recruitment – When recruiting and interviewing at college campuses, ensure that your team and the promotional materials exhibit diversity. This will increase participation by minority students. Otherwise, they may gravitate toward more approachable organizations.

Partner with high schools and colleges – Create more opportunities to interact with students early and inform them about the diverse careers and amazing potential in our field.

Partner with minority organizations and schools with more minority candidates – Work with organizations that are focused on diversity and empowering minority accounting professionals. They will help you access many more qualified minority students and experienced candidates.

Tone at the top – The right mindset and leadership at the top of an organization will go a long way toward making a diversity initiative successful. Leadership can’t have a halfhearted commitment. A corporate diversity statement is an integral part of the commitment to this initiative. 

Mentoring and buddy program – When a mentor owns the responsibility to give a hand up and actively guides a minority employee to success, that employee will have better opportunities for success and will remain with the company. Investment in minorities within the firm has to be equal to nonminority team members. 

Conclusion

Valuing and accepting ethnic diversity is vital to our industry’s success. It is imperative that PICPA, as the professional association for CPAs in Pennsylvania, leads the way for future generations of minority accountants. PICPA is dedicated to this commitment, and intends to implement a forum for direct communication via its website so there is ongoing dialogue about, and effective resolutions to, diversity issues. 

CPAs are all too familiar with the phrase, “The only constant in life is change.” For the CPA profession to maximize its current success as we move into the future, leaders are needed who can adapt to the changing demographics and prepare our organizations and our team members accordingly. Such change is dependent upon greater dialogue and a recognition of the value that diversity brings to individual firms on the microlevel and the industry at the macro-level. Such change cannot occur without a strategy and a focus, both of which need to be driven by forward-thinking leaders who understand that greater diversity is not only consistent with the principles of justice, but also with good business principles.  

1 U.S. Department of Commerce, Supporting the 2010 Census, Economics and Statistics Administration (U.S. Census Bureau, 2009), p. 16

2 Nicole Santa Cruz, “Minority Populations Growing in the United States, Census Estimates Show,” Los Angeles Times, June 10, 2010, http://articles.latimes.com/ 2010/jun/10/nation/la-na-census-20100611 (accessed Jan. 12, 2011) 

Julius C. Green, CPA, JD, is a partner with ParenteBeard LLC and chair of the PICPA Diversity Committee. He can be reached at julius.green@parentebeard.com.  Meenu (Minakshi) Khanna, CPA, is a member of Fulton Financial Corp.’s diversity committee and internal audit team and a member of the PICPA Diversity Committee. She can be reached at mkhanna@fult.com.

LAST UPDATED 3/2/2011

Comments