Comment

Rachel Hussey explains how well-defined and inclusive work allocation practices can boost your colleagues’ career potential. One of the most common and unconscious ways in which old hierarchies are preserved in professional services firms is through the allocation of work, often at the early stage of careers. A well-defined work allocation process ensures a balanced portfolio of experience for future progression. But suppose a person is consistently allocated more challenging projects involving novel issues or premium clients. In that case, their career path is likely to take quite a different course to that of a person assigned more routine tasks, which can result in tremendous and unintended damage to the career paths of individuals. Research conducted by McKinsey in the UK in 2012 across professional services firms found that a man was three times more likely to be made a partner in an accountancy firm than a woman and ten times more likely in a law firm. McKinsey made several recommendations to address the imbalance, one of which was that women have equal access to the right career development opportunities through a systematic work allocation process based on objective criteria, such as competencies or experience. Work allocation goes to the very heart of the operation of a professional services firm. Changes to work allocation practices are hard to implement, but can have a considerable impact on the progression of female talent. McKinsey conducted follow-up research in 2015 and found that work allocation was an ongoing challenge. 70% of women in both law and accounting firms said that their firm’s work allocation process was unfair, and 86% of law firms had no formal work allocation process in place. In the absence of a systematic process, work allocation is a subtle concept that can be difficult to do in a way that promotes diversity and creates a level playing field for men and women. In deciding to whom work should be allocated, partners can make assumptions about women’s desire or capacity to do certain kinds of work or transactions. The result can be to ‘kill women with kindness’ by allocating the more challenging work to men on the team so as not to put too much pressure on a woman. A woman can ultimately end up with less experience, weaker client relationships, and lower revenue – all of which are career-limiting in a professional services firm. This phenomenon is also referred to as unconscious benevolence. Research conducted by the 30% Club in Ireland across 14 of the top Irish professional services firms in December 2019 contained some fascinating findings. For example, 21% of equity partners in accountancy firms are women, and that figure is 40% at the non-equity partner level. The research found that only four of the 14 firms that participated in the research had a formal work allocation process in place. On foot of that research, the 30% Club recommends that where firms have not adopted work allocation policies, they should pilot the introduction of such policies. They should also review work allocation practices to ensure that equal opportunities to gain expertise and experience are available to all. Finally, it urges firms to ensure that family-related absence does not impact work allocation and recognise leaders who successfully manage work allocation on their teams. Across professional services firms internationally, work allocation processes are becoming more formal and technology-enabled. Many resource management consultancies provide services and systems to firms to assist in this critical aspect of a firm’s work. Formal processes can have a significant impact on the development of female talent in firms and should, therefore, be considered as part of a firm’s diversity strategy.     Rachel Hussey is Chair of 30% Club Ireland and a Partner at Arthur Cox.

Cormac Lucey explains why, as societal fissures and inequality grow, we must no longer be satisfied with unduly simple answers to complex questions. The biblical story of the Tower of Babel explains how humans across the world speak different languages. In the generations following the Great Flood, humans spoke a single language and migrated to the land of Shinar, where they decided to build a tower tall enough to reach heaven. Unhappy at this impudence, God intervened so that humans spoke several different languages, were unable to understand each other and were thus unable to build their idolatrous tower. Today, it is not different languages, but several other aspects of life, that risk pulling us apart. Specialisation has been one of the key ingredients of dramatic economic growth in recent centuries. But growing vocational differences and technical specialisation make it more and more difficult for national leaderships comprised of generalists to manage and control a society increasingly comprised of technical specialists. Consider the economic disaster of the financial crash just over a decade ago, and the failure of the Central Bank of Ireland and the Financial Regulator to take corrective action. Consider the current lockdown and reflect on the fact that, if everyone in the Republic contracted COVID-19 and we suffered the median fatality rate estimated by the World Health Organisation (0.23%), the resulting fatalities would equal around one-third of total fatalities that we suffered from all causes in 2019. Another serious societal fissure is growing economic inequality and the increasing role of education in determining an individual’s earning capacity. Here in Ireland, we are lucky that income inequality has not grown over recent decades. But it has grown substantially in the US. We can see the political polarisation that has followed and, increasingly, political affiliation in the US follows education. This pattern was very evident when the UK voted for Brexit. The political and media establishments may dismiss those who dared to vote for Brexit or Trump. But if the pandemic has taught us one thing, it is that in an ever more complex world, our fates are increasingly interdependent. In such a world, it makes little sense to dismiss large blocs of fellow citizens as if they are fools. Yet that is what has happened. This sneering reaction feeds another fissure, that which separates insiders from outsiders. We can see this in the rise and rise of monopolies and quasi-monopolies in the US. A paper published recently by two Federal Reserve economists found that the concentration of market power in a handful of companies lies behind several disturbing trends in the US economy such as a falling share of national GDP going to labour, a rising share going to capital, increasing inequality, rising financial leverage, and an increase in financial instability. Here in Ireland, we are confronted by a different monopolistic power, that of the State. At the end of Q2 this year, average weekly earnings in the Irish public sector exceeded those in the private sector by 32.6%. In the UK in 2019, (pre-pension) public and private sector earnings were approximately equal with public sector earnings 3% ahead before consideration of bonuses and 3% behind after their consideration. The stark public/private gap in Ireland arouses little public commentary, but feeds the fissures in our society. What can we do as we face this increasingly divided world? We should be careful of those who suggest simple answers to complex questions that generally don’t have yes/no answers but, rather, difficult trade-offs. Independence of judgement matters just as much for our public life as it does for our auditors. Cormac Lucey is an economic commentator and lecturer at Chartered Accountants Ireland.

2020 was nothing short of a disaster for many people, but a constellation of emerging factors can give us hope for 2021 – from an economic standpoint at least, writes Annette Hughes. For the Irish population, COVID-19 has in many ways been a double-edged sword over the past nine months. The recent transition from levels two and three to a nationwide level five lockdown caused a significant number of businesses to close once more and pushed the number of those in receipt of government wage support through the Pandemic Unemployment Payment (PUP) up by 50% month-on-month from 228,858 on 11 October to 342,505 on 9 November. However, this is still well below the 5 May peak of 598,000. EY’s labour market forecasts suggest that, for November, this represents approximately 14% of those in employment. Kerry and Donegal suffer most, with about one in five workers in receipt of PUP at present, possibly due to their dependence on tourism. The reality for the fortunate segment of the population that managed to hold on to employment is quite different. The Central Bank of Ireland has reported that household deposits increased by 10.9% year-on-year in September 2020. This is indicative of a general trend of reduced consumption and increased savings since the beginning of the pandemic, as the measured savings ratio reached an unprecedented 35.4% in Q2 2020 with a quarterly increase in savings of €10 billion for Q2 2020. This suggests that there is a section of Irish society that is broadly unaffected, has money, and is merely waiting to spend. Results from a recent survey conducted by EY indicate that the world mood is anything but black and white. The impact of COVID-19 on consumer behaviour has led to diverse spending patterns globally. In the October release of our Future Consumer Index, 26% of consumers noted that they were unaffected and unconcerned for the future, while 31% stated the antithesis, commenting that they were struggling and worried about what is yet to come. A lack of job security, family health, and discomfort around a premature return to societal norms are foremost in the minds of those who believe the COVID-19 impacts will remain in the medium- to long-term. The remaining consumers surveyed classed themselves as either okay but adapting (30%) or hard-hit but optimistic (13%). Retail in Ireland is a mixed bag of late. The CSO release for September proves the lockdown ‘banana bread, work-from-home, DIY’ hypothesis with sales of hardware, paint and glass up 31.3% year-on-year while food, beverages and tobacco also increased by 12.4%. Meanwhile, sales for fuel have reduced by 10.2%, with stationery, books and newspapers also down by 11.6% as large swathes of workers, particularly those working in multinational companies, no longer commute to Ireland’s urban centres. EY expects that economic recovery will resume in 2021, with GDP forecast to rise by 3.5% after a 3.9% contraction in 2020. The current accumulation of deposits, which are earning meagre interest in the banks, combined with reduced reliance on PUP and projected employment growth of 6.5% should significantly support consumer spending next year and act as a catalyst for increased economic activity. Annette Hughes is a Director at EY-DKM Economic Advisory.

When it comes to sustainability, the problem is not that there are no standards. Rather, there are too many of them, writes Dr Brian Keegan. In the current abnormal news cycle, something has to be really strange to stand out. One such item in October was a report that UK authorities were to permit the opening of a coal mine in the north-east of England. This runs counter to most of the prevailing trends. True, the rehabilitation of coal was an element of Donald Trump’s first presidential campaign, but that has not prevented its decline in the US in favour of cleaner natural gas and more sustainable sources like wind and solar. Coal from this new British mine is not for energy production. It is apparently to be used in the manufacture of steel. It is also being used in the manufacture of jobs for the impoverished north-east. Job creation tends to rattle sustainability priorities and seems to have been the consideration that swayed the local council into granting permission. The incident does highlight, however, the elusiveness of sustainability because “Decent Work and Economic Growth” is Goal 8 of the 17 sustainability goals promoted by the United Nations. While these goals have garnered considerable traction in the sustainability debate, having 17 goals impedes progress because, in practice, the goals can be contradictory. Goal 13, for example, is “Climate Action”, which is at right angles to opening coal mines in some quarters. This vagueness has conflated the sustainability debate with the already nebulous concept of corporate social responsibility. Corporate social responsibility should be looked upon with suspicion. All too often, HR initiatives to boost staff morale, marketing initiatives claiming green credentials for a particular product or service, or even support for the pet charity of the chief executive are folded in under an ersatz comfort blanket of social responsibility. Claiming sustainable practices or having corporate social responsibility champions won’t cut it. There has to be a concerted drive to come up with broadly acceptable standards to measure genuine corporate progress on sustainability issues. The current problem is not that there are no standards, but rather, that there are too many of them. The current custodians of standards- and ethics-setting, the International Federation of Accountants (IFAC), recently proposed that a new sustainability standards board be established, which would exist alongside the IASB under the IFRS Foundation. This new sustainability standards board should pull together existing expertise and the work of some existing sustainability reporting initiatives. The resulting framework could then be passed to the International Audit and Accounting Standards Board to develop the best assurance processes. This IFAC initiative differs from many other governance initiatives. Too often in the past, ‘solutions’ were provided, for which there was no demand. One of the legacies of this pandemic will be a greater awareness of sustainable practices.  There is demand from investors for comparable and dependable data on environmental, social and governance factors and this form of reporting offers a value-added opportunity for accountants. On the other hand, the initiative carries the risk of becoming hijacked by environmental activism, leading to reporting requirements that would fail a cost/benefit analysis within the SME sector. Earlier this year, Harvard Business Review suggested that the chief financial officer should become the most prominent climate activist in their organisation. There is still some distance to go before this becomes a reality, but in an era when western governments are contemplating opening coal mines, nothing can be ruled out. Dr Brian Keegan is Director of Advocacy & Voice at Chartered Accountants Ireland.

Welcome to a new edition of Accountancy Ireland, the last in what has been an extraordinarily difficult year for most. The best-laid plans made last December are by now  unrecognisable after months spent adapting to shifting realities. Chartered Accountants Ireland started the year with the presumption that Brexit would be the main issue for members in their external environment. Although a global pandemic overshadowed it, the Institute has worked throughout the year to support members on Brexit-related matters and to advocate on their behalf. As we approach the end of the Brexit transition period, our events and updates have continued. We recently opened registration for the third intake of students for our Certificate in Customs and Trade and, in the final quarter of the year, launched a new Brexit Digest e-newsletter full of practical guidance for businesses in Ireland and Northern Ireland. In recognition of Chartered Accountants’ critical role in driving the sustainability agenda, the Institute also recently published the Sustainability for Accountants guide, along with a Sustainability Hub on our website. The fight against climate change is now a corporate imperative. Moving our gaze west, Americans have gone to the polls and the New Year will bring a new administration. In this edition, we look ahead to what the next four years might bring. Change is also afoot in global tax, and Accountancy Ireland looks at the OECD’s proposed reform of the global digital and corporation tax system. Closer to home again, the Institute has endeavoured to respond quickly and effectively to meet the needs of members during the COVID-19 pandemic. Our primary focus has been on providing timely, helpful and practical support to members as they serve their clients and steer their organisations. As an educator, we are acutely aware of the challenges facing students during these months. Our education provision has evolved dramatically over the last year and our CAP1, CAP2 and FAE programmes successfully launched on our new online education platform. Producing the highest-calibre finance professionals is more important than ever for our economy. This festive season will be very different, but I’d like to wish members and students a peaceful, safe and enjoyable Christmas. For those who find themselves in particular difficulty, remember that assistance is available from CA Support. You can find details on our website. Thank you to the committees, volunteers, management and staff of the Institute for their efforts during 2020. I hope that we can make a return to a more normal way of life in the New Year. Paul Henry President

Rachel Hussey asks whether gender quotas really do their job in bringing equality to the workforce and boards.Sometimes change needs help and, in the world of business, what gets measured gets done. So, like many advocates for change, I joined the debate as to the merits of gender quotas or targets as an effective means to address the lack of gender balance on boards and at senior decision-making tables. Quotas provoke strong responses, both in favour and against. Unlike most debates, however, we are all agreed on where we want to go, we just disagree on how to get there. There is a subtle difference between quotas and targets. Quotas are generally mandated by an external force, such as government or regulatory bodies, and they operate on a pass/fail basis with penalties for failure to reach the quota. Targets are voluntary in nature and are typically set internally by the business or industry. While there may be internal or external peer pressure to reach the target, lack of progress has less punitive consequences.There is a considerable amount of evidence that gender quotas for boards may not bring about systemic and sustainable changes. Quotas tend to drive short-term changes that are reversed once the quotas are lifted. For example, Norway introduced a 40% quota for boards of listed companies in 2006. The quota was reached by companies, but the side effects were counterproductive. A number of companies delisted before the legislation was introduced, thereby dodging the requirement. However, the biggest problem was that in the rush to meet the quotas, companies no longer focused on the pipeline of women in their businesses, which is the key to sustainable success. The Norwegians’ own studies show that eight years after the quota was introduced, there were no women CEOs in the country’s 60 largest companies. There was also no evidence of higher pay or more career-advancing opportunities for the vast majority of women in the workforce. Having more women at board level did little to benefit women. On the contrary, it failed to attract more women to climb the corporate ladder and it failed to open up more mid-career opportunities and better pay.By contrast, in the UK in 2011, Lord Davies set a target for FTSE 100 companies to have 25% women on their boards by 2015 (from a starting point of 12.5%). Lord Davies may have had the threat of quotas in his back pocket, but the target set was reached and exceeded. The percentage of women on the boards of FTSE 100 companies by the end of 2015 was 26.5%. Today, across the FTSE 350, the percentage of women on boards is 33%. In contrast to the quota approach in Norway, there was no reduction in the number of listed companies and no reductions in the numbers of women moving up the corporate ladder. The more recent Hampton-Alexander review has now extended the idea of targets to C-suite roles to drive similar progress at the top table.In Ireland, the 30% Club’s goal is that women should make up at least 30% of boards and senior management, and we believe that this should – and can – be achieved by voluntary means. We do not support the idea of quotas and, instead, our members drive accountability for their own progress through target-setting, leading to a greater focus on pipeline talent and more sustainable progress. In 2018, the government established Balance for Better Business, which has set targets for Irish companies. Its first target, 25% of women on the boards of Irish plcs, has been reached. Likewise, the government’s own target of 40% of women on State boards has resulted in a substantial increase in the percentage of women on those boards.And finally, there’s still the question of targets versus merit. For me, there no debate on this question. Targets focus on greater diversity in appointments, but never at the expense of the potential to do the job. It is easy to dislike the idea of others being selected solely on the basis of their status, and if merit-based criteria are not emphasised, people assume that they are non-existent. This is both unfair to appointees and to the wider employee population. It is our job as leaders to show that targets and merit are inextricably linked and there is no place for the perception or reality of a free pass.Rachel Hussey is Chair of 30% Club Ireland and a Partner at Arthur Cox.