Industry Vs Professional Services: A Simple Choice?
You will find tax professionals pursuing their careers in a wide variety of environments – in accountancy firms, in law firms, in the tax teams of large and medium sized companies, in academic and teaching roles, and of course working for governments inside their tax and customs collection agencies.
The common factor though is that the vast majority of them will have been initially trained within the accountancy or legal profession. At some point therefore, most will have faced the decision: do I remain in the profession, or do I take my skills across to another workplace, in particular to industry? What are the most important factors I need to consider: the nature of the role itself, versus my own intrinsic skills and preferences; the rewards available versus the working environment and structure; and if I do decide to move, will it be for ever?
The decision need not be irrevocable
The first thing to say is that it is, in my view, definitely not the case that if you move into industry you cannot go back to professional services at a later point. I believe there are strong arguments that a spell in industry can be a very positive enhancement to your CV, even if your medium term objective is to return to the profession.
The issues facing in-house teams now are more complex and linked to the underlying business, meaning that experiencing them first hand can only enhance your ability as an advisor if you do decide to return to the profession. Indeed, it may only be a matter of time before accounting firms require a spell in industry for candidates on partner track.
If you do decide to stay client side, it does not have to be within tax. The broadening of the tax team’s remit in recent years brings with it a greater appreciation of the business overall, and of the financial reporting and accounting systems and controls it requires. This makes it much more likely now that an in-house tax professional will be equipped for a move into a broader finance role, far more so than in the years where management of Effective Tax Rate (ETR) was the tax team’s be all and end all. Breadth of experience and a balance between technical, accounting and commercial skills are now the watchwords.
Even if the decision no longer needs to be forever, it still needs to be made. So, what issues do you need to consider?
There are many fundamental similarities between tax jobs in-house and in the profession. The core role is the same: a combination of Tax Advice and Tax Compliance. There are, however, subtle differences. In industry, I have heard from many professionals, the ownership of and emotional attachment to the ‘problem’ or ‘issue’ is much stronger, and this can be a really positive distinction compared to being a third party advisor. You also have more freedom to widen a project, if it’s in the company’s interest, without having to worry whether this is or isn’t costed for and ‘in scope’.
Furthermore, in industry the execution of the project is a critical component of the role – one which does not always have its parallel for an advisor. Ensuring that the deliverable can be executed within the tolerances and issues of the business concerned is often a key factor. This can require a different mind-set, and appeals to those who like to see the job through to the end!
Against this, some also say that in the profession building relationships is now as important as technical ability, and that this is not the case for in-house professionals. There is an element of truth in this, certainly regarding selling projects, but it should not be assumed that these skills are not at all important in industry. As highlighted in a 2016 Pure Search report, FTSE 100 Heads of Tax view stakeholder management as an increasingly important priority, alongside ensuring that tax planning fits with the underlying business. Heads of Tax need to connect strongly with senior colleagues outside of tax, to get them behind whatever plans they are proposing – in many ways they need to be treated just like the potential clients of a third party advisor!
The environment in-house is very different to in the profession – you are less likely to have to hot desk for a start! Seriously though, there are some notable differences.
Industry working hours are sometimes more manageable and predictable. Linked with this, whereas most senior roles in the profession are based in city centre offices, many of them in London, good in-house positions can be found in a variety of locations. This has the potential for much shorter commuting times, which can serve to shorten the working day and allow for easier accommodation to commitments outside work.
Managing your career progression and development
Promotion and advancement can be less automatic in industry than it is in the profession. Within the largest accountancy firms, the sheer size of the tax teams can give more opportunity for regular advancement. Training regimes can be less structured in-house than in the profession.
This means that taking direct responsibility for managing your own career is much more important in industry than in the profession. An ambitious, developing tax professional will need to take ownership of this personally. How do you do this?
Well, as a minimum you should:
Ensure your Head of Tax proactively manages your career development. This involves ensuring you get the variety that can be missing in in-house roles, and – once you are at a more senior level – some exposure to the Board and Board issues. Too often the work is done by tax team members to prepare papers for board presentations, which are then delivered by the Head of Tax in isolation!
Ensure you have your own Learning & Development budget, and a plan to spend it every year.
Look to keep your development in line with what the market requires to get the next job up by assembling a team of mentors: Partners in Big 4 firms, commercial colleagues in your business, a recruitment professional. Your chosen recruitment adviser should manage your career over the medium term, not just get you the next best job in the market.
Smaller in-house teams may offer some career development advantages. Working in smaller teams can mean responsibility for a greater variety of tax disciplines, and experience of a wider range of business issues. In terms of developing the skills required to do a Head of Tax job, this can be positive when contrasted with a narrower specialist role within a bigger FTSE 100 tax department, or the role segregation that might apply in a large accounting firm.
On one level remuneration models in the profession and in-house are broadly similar: in base salary, bonus and fringe benefits. However, there are two differences where in-house can have an advantage over the profession:
– Bonus can be a bigger proportion of overall package
– Equity participation is available in industry but is not available in the profession
Moving in-house from the profession, at any level from NQ to Senior Manager, the remuneration packages are broadly comparable, although the base salary in-house may be a slightly smaller component.
Director level moves into in-house for the first time are difficult to achieve. Here, the role begins to broaden away from predominantly technical skills. Without a prior secondment, candidates can be seen to be too narrow, and a risk in terms of managing stakeholders and executing projects through to completion.
Partner earnings outstrip Heads of Tax salaries on the whole, although the gap is narrowing. Pure’s recent study of FTSE 100 Heads of Tax indicated an upward trend in both salary and bonus packages, and it was a similar story in our survey of the FTSE 250. It may be no coincidence that we have recently seen an increase in the number of partners moving in-house to assume a Head of Tax role.
Tax professionals now live in a more demanding environment. On both sides of the fence a broader, more commercial and more dynamic skill set is required. Career flexibility and opportunity go hand in hand, and the best candidates will see their opportunities and earnings increase.
Will this expansion in the role lead to Heads of Tax now becoming the potential CFOs of the future? Well, Tax Partners are commonly the next CEOs within the Accounting Profession, so this may well happen. The key is to open your eyes and manage your career from an early stage, whichever side of the profession you happen to be in…..for now.