Testing Top Talent with Giles Pearson

Hello, and welcome to the Big Four Transparency podcast. Today I'm joined by Giles Pearson, co-founder of Accountests and a former partner at PwC. Welcome to the pod, Giles. Hi, Tom. It's great to be here with you. Yeah, it's great to have you. I've seen you all over the place. We did a lot of those kind of AIR roundtables together, and we're kind of operating not too dissimilar of businesses when it comes to kind of working in the accounting space. So obviously I'm incredibly happy to know you on that front, but I think what you're doing is really interesting and very, very valuable for the industry as well. So maybe to kick us off, can you talk to us a little bit about what Accountests does? Sure. So my background, as you say, was with PwC. I was a tax and private business partner, and one of the struggles that we had was going through a hiring process and ending up with people who didn't end up having the attributes that were on the tin that we bought, if you like. So those disappointments that firms have all the time of they go through a hiring process, they hire somebody who looks like they can do the role as a whatever it is, tax manager or a senior. And then when they're in the role, they're going, well, this is not what I was expecting. So what Accountests does in that hiring space is help firms understand what it is that they're getting. So does this person have the technical skills that I need? So we have a series of skills tests across tax audit and CAS to help people work out whether this person's in my ballpark. And then personality and cognitive ability as well. So tests specific for accounting. So how are they going to fit with my team? How do I get the best out of this person? Do they have the raw intellectual capability to learn fast and problem solve? So that's really, I guess, in a nutshell, is what Accountests set out to do. We've moved a little bit into development. So on the personality side, we can now help firms, again, using personality profiles to help develop their emerging leaders, for example, or look at their team structure and how different people in the teams make decisions, work together, get jobs done together. So it's really about giving some science behind making decisions and allowing firms to make those decisions fast and with the confidence that they're going to get what they expect. I actually didn't know that you were involved post hiring as well. I think that that's really valuable and cool because I think there's some difficulties in having personality type testing in the hiring process necessarily. Some people are a little bit against that, but afterwards it can be super valuable. So when I was at Deloitte, they had this and it was split up into Guardian, Pioneer, Driver and Integrator. And when I did the test, I sort of found myself at the far end of the spectrum, kind of opposite to a lot of the other people at the firm. And I was like, oh, this explains some dynamics. And while it's a little bit of blanket statements, it's still interesting to know for sure. And I think the challenge in the firms is there's quite a few firms who are using these sorts of tools. The challenge is to get the value out of them. So they provide some personal information for you as an individual. And I'm sure when you did that, you not only could understand why maybe you didn't fit in in the way that other people did, but it also helps you to think about what are the things I need to work on to get my career to go? What are the areas where maybe my conscientiousness is less than others. So I need to think about following rules, not just dismissing processes because the firm says I need to do this and I don't buy into that. It's like, okay, I need to think about that. Or developing relationships, that may be a struggle, often is a struggle for accountants. So what am I going to do? How am I going to get to the point where I can work through that? And even though this is not my comfortable place, how do I go about developing relationships if it's not something that I'm super comfortable with? And there are techniques and things that people can learn and the people who do well at learning that are the ones who are going to make it through to become firm owners or successes out in industry. It's those who can never learn it or refuse to engage with that are going to struggle. Yeah, for sure. And so with those ongoing tests, maybe for people who are still in firms, I assume there's probably some sort of plan to have a path towards how do you bridge those remaining skill gaps or how do you kind of make up for some of those weaknesses within the firm? Yeah, look, and I guess what we try and do is provide the science for the firms to sort of, what is the current state of play look like? And then what we will encourage the firms to do, and most firms are doing this anyways, if you're a manager or senior manager director going through on a sort of a pathway to partnership, you should have a mentor. It may be a current firm owner, it may be somebody that the firm's brought in from outside to help you. What we do can really help both the coachee and the coach to have some discussions around, you know, here's where we thought we were at, here's some more objective information that says, hey, you know, you might need to think about your coping strategies and how you cope with stress, because what you're telling us is that this is something that you struggle with, okay, what are some mechanisms, what are some training opportunities that we can, or some coping mechanisms that we can build in? And if you're working with your coach on a monthly basis, then that's about saying, well, let's try this, you've got these meetings coming up or this event coming up, let's try some of these strategies, what are we learning, getting better as we go along. And often those things are sometimes hard to just sort of, where do you start? And I guess what our testing gives you is somewhere to start. Yeah, no, that makes a lot of sense. And then when you were doing this kind of hiring, where were you seeing the skill gap most of the time? Was it mostly kind of at the senior level? Was it at the manager level? Where were you seeing it that when you were hiring people from one firm to the next, there might have been things lacking? So well, I guess when you talk about skills, if we're talking about technical skills, bell curve of capability absolutely applies. And we do get some comments around for our tests, some of our tests are at CPA level. And people sometimes go to us, oh, they're a CPA, I don't need to test them. They've already shown that they have high level skills. Well, I can tell you that that's not necessarily the case. And the bell curve applies. And there are some CPAs out there who probably shouldn't be. And that doesn't mean they didn't pass the exam. What that means is that they've probably ended up in a position where they're using a very narrow range of what they've learned. And a lot of the other skills that they had have sort of passed by. So then when they go for another role, it's like this is not stuff that they now have the capability of. So you see the full gambit. In many roles, looking at somebody's resume is a start of they're going for a staff accountant role. Let's see what they've been doing. But the reality is with AI and with the fact that 85% of people lie on their resumes as CPA practice advisor has told us, you know, your only way of checking these things is to actually use a process yourself to actually discover where they're really at. And yeah, do you want to waste 15 minutes of a 40 minute interview trying to find that out or do you sort of push that to one side and go, we can get a real deep dive into this and then use that information to interview. So it's about trying to make sense of and speed up that whole process. Yeah. Yeah. And I mean, that's obviously so valuable, especially with the talent market where it is today, where it's so hard to get the right kind of talent. And then in your experience at the firm, when you had the idea to do this, obviously it was due to some unsuccessful hires. What was the rate of new hires that you would say were kind of problematic or maybe had a very significant skill gap that you kind of had wished you had identified? Yeah. Look, I don't have those numbers from my PwC days. We have surveyed our clients in the meantime and what they're telling us is that it's around 25% of people who should never have been hired or it's been a bad, poor experience for them. But accounting firms will often just suck all of this up and they often don't want to confront the issues if you like. So what they do is they manage it and look in the end, these people may well work out okay, but it's how many thousands and thousands of dollars have you spent in the meantime going through the process of discovering that they didn't have what you needed and then the mental anguish for the team and for the partner and for the employee themselves of having this, you were not performing discussion, wouldn't it be way better? It goes both ways, right? You don't want to be hired into a role if it's just going to be like, hey, why don't you know this, right? So I wanted to ask on that front, are there resources as well for the employee who maybe went through a hiring process and didn't do well on the technical exam? Do you have your own resources that that employee could maybe go to or places that you would maybe recommend? Yeah, look, that's been a constant question, I guess. We don't have the resources. It's training is not something that we're trying to do and a lot of the firms have training providers that they work with. The challenge, which we still haven't got the answer to is linking up the results of the testing directly to modules of this is what you therefore need the training on. Part of the challenge with that is in a 40-question, 40-minute test for a staff accountant, you're asking a whole range of questions. So you can't really deduce what somebody's training needs are in particular areas from that. Because in a broad sense, are they in the bottom quartile, top quartile or somewhere in the middle? But do they need training on accruals versus training on year-end adjustments or whatever? There's not enough data points to really tell you that in any certainty. I think it is a struggle to find those linkages. We've, I guess, if you like, left that to the firms to work that out. We have done a bit more work at that sort of bookkeeper and QuickBooks level. So we do tests for bookkeepers and QuickBooks users. So those links, I think, are better. And there's some great training materials out there for bookkeepers and for QuickBooks. But if you're going a bit further up the scale, if you're looking for tax, for example, there's obviously a lot of tax training providers out there. And to be honest, we leave that to the firms to work with whoever is their current provider with that. Okay. Interesting. And then, obviously, for you to have left your old job to do this, you identified this as being a major, major pain point in the industry. Can you talk to me about what that was like? You were a partner at PwC. So by all accounts, for someone following the accountant typical path, you had made it. You were done. Right? You were at the top and you were just going to keep doing what you were doing. And so, first of all, what was that like in your head to make that decision of like, okay, I made it, by all accounts, and then have decided to leave to pursue this thing? What was that mentality like? It was probably a little the other way around, to be fair. So I was a partner quite young, I guess, in PwC since I came in just after my 31st birthday. So that's pretty young these days. So I always said that when my youngest child left school, I was going to quit because while they're at school, you're pretty much tied down to being around the same place and being at home most of the time. So yeah, when my youngest finished school, I was 49 and it was like, I'm out of here. So that was a decision I'd made actually earlier on, and 18 years as a partner is enough. And if you've been relatively prudent from a financial point of view, then you are, I wouldn't say you're set for life, but you don't have to worry too much about ongoing income. Really, I guess I had decided to leave, and then this issue was bubbling along through those last two or three years I was there. And it was like, here's something that I can carry on with as a post-PwC. It was almost a hobby when we started it. And for the first two or three years, it was literally a few hours a week. And then it grew legs and we said, well, actually, if we're going to do this properly, we sort of need to get serious. And yeah, at the same time, we decided if we wanted to get serious, we needed to get serious in the US, which is obviously the biggest accounting market. And for us, we needed to succeed in the US to succeed as a company. So that's why we've spent a lot of time there and I've spent a lot of time in the US market And when you look at the testing we've got, the US testing is by far the broadest of everything we have. Yeah, for sure. And then how much of a difference do you think it made that you had been an accounting firm leader now building solutions for other accounting firms? Because we're starting to see, I would say probably at an increasing rate, people from outside of our industry trying to kind of come in, bring solutions in. And some of them, I mean, are just really technically heavy. So that's probably the case. I don't think a CPA with a tool is going to build canopy or whatever, right? At some point, you maybe need external kind of real tech people. But yeah, how much do you think that that helped? Yeah. And we're not really a tech firm as such. We're tech enabled. So we use a third party testing platform because that is a serious piece of technology which we decided we didn't want to build. And it has proctoring and all this stuff in it. So these are tools that are way beyond what we were wanting. That wasn't the problem we were trying to solve. So look, being a former firm owner certainly opens doors. It doesn't lead to a slam dunk in terms of making a sale. But when you start talking to people about their recent hiring experiences, especially when you're talking to the firm owners or the senior leadership of the firms, and they all roll their eyes and start telling you about the issues that they've had. And we can sympathize with each other. So from that point of view, we're very much on the same page. In terms of translating that into them using the tool, that's a longer discussion because you will know as well, these firms are running at 100 miles an hour all the time, or they feel they are in terms of their bandwidth to do something that is different. You have to be patient. And I've learned a lot about patience in the last five years or so, that's for sure. Yeah, I'm in the learning to be patient phase right now, where it's, hey, come on, you have a problem, I have the answer. But yeah, some I think just feel very underwater, which I think is in itself a huge problem in the accounting industry. Every solution provider is looking to kind of help alleviate that in a certain way, but the problem still obviously is there that people feel this way. And then yeah, some places are really resistant to change, which can be tricky as well, right? So you need to get kind of the open minded people or the growth minded people on board as well, which, you know, unfortunately, sometimes seems like it's a little bit hard to find. So yeah, I had one more. Oh, sorry, go ahead. So I was just gonna say, I think, you know, from the meetings, I was down the East Coast in January, and talking to a lot of firms. And, you know, one of the things that really struck me was that they're at this tipping point where selling time is starting to decline, because what they're starting to sell is technology solutions. And it's not that they're resisting that, but it's a really, really hard transition, because the mindset of accounting is all about, you know, if I'm working on a client's tax affairs or, you know, audit or whatever, I'm making money. And so when I'm not working on a client issue, I'm not making money. Yet, as you're increasingly selling technology, you've got to start to work not on your business, or sorry, not in your business, but on your business. And, you know, developing those tech stacks and working out how you integrate, you know, maybe AI solutions and how you build for that is, and I think firms are really struggling with that and, you know, I don't think they're nowhere near through that journey. That's just starting, but I think it's going to cause a lot of headaches for firm owners as they try and move away from hourly billing to solution-focused billing. Yeah, absolutely. And that obviously kind of ties into like skill testing, right? Where it's like, well, if it's just billable hours is what we're worried about, anyone can bill an hour, right? But as there becomes more and more kind of pressure on what are you accomplishing during said billable hour and what is the output, then it becomes obviously increasingly important to hire people who are at least close to being where they need to be to be actually a fully ramped productive employees, right? Oh, look, that's right. And, you know, the technical skills are obviously still really important, but the ability to communicate those, what you're learning, you know, AI can do all the technical stuff if you ask it the right questions. You know, where accountants still have value is asking the right questions and being able to assimilate the technical answer to the client situation and communicate that in a way that the client sees extra value because otherwise client may as well just ask AI themselves for the answer. So, you know, that's where I think that combination of technical capability and your ability to, you know, develop relationships is so critical. And yeah, firms, you know, if you hire somebody who doesn't have the technical capability, then how are you going to put them in front of a client? Because that's the bit that you're going to be able to bill for. And that's the challenge that all the firms are facing is how do we bring these people out of college, say, and turn them into advisors in a much, much shorter timeframe. Yeah, and I think, you know, in the most immediate kind of term, I would say is like the presence of offshoring and nearshoring and things like that has really decreased that time period where it's like, okay, you actually need to be a relationship owner, right? Because I think a lot of the work of like, okay, preparing the personal returns and, you know, doing that first step of preparation is getting kind of gnawed away at. And so, yeah, the need now is, yeah, can you be the subject matter expert and or own this relationship or review files and give final sign off, which is, again, is a pretty rapidly evolving thing. And we'll see probably just that's going to continue to happen, right? More and more of the process is going to get eaten away at. And so, we're going to need people doing kind of those later end tasks that maybe you would only be doing in year three or four as early as possible if they're going to be productive, you know, contributors to the firm versus being while they're in their learning phase, they're not necessarily like contributing to the firm, which is not a great place to be, especially from like a salary perspective. You don't really have a lot of kind of pull there versus if you're actually contributing in a real profit center at that point, then that's going to kind of help you along. One of the points I meant to ask about earlier, too, with you leaving PwC, not only is kind of being partner at a very large firm, obviously, like a lot of people's kind of end goal and, you know, the aspirational area to arrive at as an accountant. But it seems to me outside looking in that the partner model is also very kind of restrictive in terms of ability to move away, right? So there's the golden handcuffs of it all. But then there's also the fact that like, in theory, you may have bought into the equity of a firm. I know in Canada and the US, there's like the whole kind of partner pension type of thing. Like, how did that look like for you leaving? You know, and I can't speak for the Canadian or the US model, but in New Zealand, I think they had it about right, which was it costs you nothing to get in and you get nothing when you leave. So it's all about picking the right people. So there's no financial requirement for you to be a partner. There's no requirement for you to have any equity to put in. you are not then paying out pensions out of current income. That is extremely difficult. If you have a funded pension scheme, then great. But I suspect that is very hard, in a model where during its expanding, everything is great if the partner numbers, going up, then you know, paying out prior partners, out of income is fine. The moment numbers start to come down the whole thing can get squeezed really, really fast. So, you know, I think the PWC New Zealand model was good. The challenge with that model though, is about investing in the future. And that was certainly something they were grappling with. And I don't know if that has been solved in the meantime. But, you know, if you basically pay out 100% of current income each year, how do you invest for the longer term? How do you create passive income, for example, which is what all the firms are trying to achieve, is, you know, developing products, which create an ongoing income stream that again, is not a billable hour thing, so, yeah. And nobody like holds equity, which has the possibility of increasing in value based off the investments in future growth. So everyone on board is basically incentivized to just maximize partner distributions year over year, which I've talked about as being like a huge issue and where I think private equity deals actually make sense, right? Where it's like, well, if you're stuck and like the equity holders just want to maximize distributions and it's really hard to reinvest in the firm and bring kind of new technology, invest in the right talent and stuff like that. But that is interesting though. It's cool that you kind of got the ability to sort of just, right, like set out, do your path in life and decide, you know, now's time to try something different. And like that decision to retire at like 49 or 50 years old from this firm, like, was that independent of having the next project? Was that like always, always the plan? Yeah. I know. And was that like a result of burnout or was that like from point A, like, I just want to prioritize these things? You know, look, when I became a partner, that clearly wasn't, you know, wasn't in my thinking cause you're just getting started, but five years out or five years from when I left, I made that decision, I guess really because there's more to life than, you know, PwC is a hard taskmaster. Nobody's going to say it's a walk in the park being a partner. And it's like, well, you know, there's a trade-off then at some point, how much longer do you keep working versus trying to achieve some other things in your life that you want to do? And, you know, I guess I was lucky that I had good health and wasn't a big spender. Some of the partners are big spenders and they have to keep working, but that wasn't, you know, that wasn't us. And so, yeah, I had that flexibility and decided, yeah, at 49, I can, I've done a whole lot of hiking and biking and climbing mountains and all this sort of stuff along with the account test story. So, you know, I'm pretty happy that I had the opportunity to make that choice. And, you know, look, I was very lucky that I had that chance, but having made the partnership thing, it's like, well, you know, how do we make the most out of that? And for me, that wasn't working until I was 60. And in every conversation I've had with you, you've been super upbeat, like just a happy guy. So, I mean, I'm really happy for you that that worked out. And, you know, I love what you're up to with account tests. It's cool to see someone, you know, taking on some of those gnarlier problems and, you know, helping bring the industry forward. So I'm gonna make sure I link account tests in the podcast notes, because I do think there are definitely some kind of firm runners listening who might, you know, want to consider this as part of their hiring process, especially with talent being as hard to acquire and retain as it is these days. So I'll make sure to link that. But yeah, thank you so much, Giles, for taking the time. And yeah, I really appreciate our conversation and just kind of your whole outlook on all of this is very refreshing. It's very kind of like, you know, you made the profession work for you rather than feel like you had to do what everyone says, you know, is the path and the way to go. So, yeah. Thanks, Tom. I really appreciate it. And it's great talking to you. And I really love the work that you're doing as well. And I think for the profession, you know, these are the tools that can help firms just be more nimble and, you know, stop trying to reinvent the wheel all the time. So, you know, I think you and I are both doing, are both part of that solution for them when they want to pick that up. Yeah. All right. Well, I'll take the virtual high five there. And yeah, thank you so much, Giles. And yeah, I'll definitely stay tuned on what you're up to next. Thank you. Thanks, Tom. Thank you.