Global protests in support of social justice during the past few months, like rallies decrying climate change that preceded them, remind us that younger generations consider social purpose to be a personal calling and gladly embrace the role of change agents on a range of issues.
The COVID-19 pandemic hasn’t altered that. In fact, it’s inspired a stronger sense of individual responsibility and made them more driven than ever to effect positive societal change.
According to the 2020 Deloitte Global Millennial Survey, about three-quarters of Millennial and Gen Z respondents said the pandemic brought new issues to their attention and increased their sympathy for the needs of others in their local communities and across the globe. The same percentage said they plan to take real action to benefit their communities after the pandemic, while about 70% of respondents have already taken steps in this direction.
“Millennials and Gen Z’s have been deeply affected by the toll of the pandemic; yet their resolve and commitment to improve the world remains steady,” says Michele Parmelee, Deloitte global chief people and purpose officer. In the survey, two-thirds of Millennials and about 60% of Gen Z’s said their employment or income status has been affected by the pandemic. “Still, even facing these new challenges, they see an opportunity and have a deep desire to help create a ‘better normal’ in a post-pandemic world.”
Planet Remains A Priority
As survivors of difficult circumstances that shaped their upbringings—most notably, the recession of the late 2000s—younger generations are both resilient and uncompromising in their values, the survey shows. This is especially evident when it comes to climate change and the environment.
Before the pandemic, Millennials said protecting the environment was their top concern, followed by health care and disease prevention, unemployment and income inequality/distribution of wealth. Gen Z’s also rated the environment as their top concern, followed by unemployment and sexual harassment.
However, in the second part of the survey conducted five months later—amid a worldwide health and economic crisis—Millennials and Gen Z’s still prioritized the planet’s health. Not surprisingly, health care and disease prevention jumped as a concern for both groups in the second survey. But climate change and protecting the environment continued to top the Gen Z list and was nearly tied with health care as a concern among Millennials.
Leading By Example
Millennials and Gen Z’s are tackling their concerns by taking socially conscious actions to protect the planet and shine a spotlight on societal issues.
In the survey, younger generations said they are increasing their use of public transportation, recycling more and shopping sustainably. About half of Millennials said they walk or bike more often to reduce their carbon footprints, have stopped or limited their “fast fashion” purchases and educated themselves on the environmental aspects of the brands they consume. And nearly two-thirds of Millennials have taken steps to reduce their use of single-use plastics.
With the uncertainty created by the COVID-19 crisis and other societal challenges resulting from systemic racial injustice, social inequality, climate change and economic pressures, the path to a better normal may feel like a long and arduous journey.
While it’s still too early to know how exactly these disruptions will change society over the long term, Parmelee says: “There is no doubt that we can’t go back to the old ways of operating. We must look to the values and commitments of the younger generations to ensure we are building a more sustainable, equitable future for all.”
COVID-19 forced many companies to unexpectedly make fundamental shifts to their business models over a very short time period. Each of their pivots—from a transition to online transactions to new supply chain models, fulfillment approaches, or finance arrangements—has downstream tax implications. This, in turn, increases the complexity and workload for tax departments.
As the pandemic continues and businesses adjust to the new normal, we are seeing some common themes emerge. First, most business leaders are accelerating existing plans around digital transformation, particularly related to cloud. Second, many are re-evaluating their operating models. Some are choosing to refocus internal efforts on core competencies, cutting resources and budgets for enabling areas to reduce costs. This trend extends to tax departments.
These colliding factors are creating a paradox for tax leaders: At a time of increased complexity and need, they have fewer resources to meet the demands. Yet, this dynamic also presents opportunities to accelerate change and transform in fundamental new ways. Those that are nimble will have a greater ability to thrive.
Unsurprisingly, business leaders increasingly recognize that their existing technologies, processes, and data-management approaches are dated. Newer technologies and capabilities offer better, faster, and cheaper ways of doing things. One area in which we are seeing a significant acceleration is cloud-based enterprise resource planning (ERP) solutions.
As businesses move to cloud-based ERPs in virtually every organization, it’s important to consider that tax is the greatest consumer of enterprise data. Almost every business process has a tax implication. If you are a CEO, CFO, or CIO, one of your top priorities should be ensuring that your tax department leaders have a seat at the table when developing your digital transformation road map.
Done right, the shift to cloud-based ERP systems should save money, reduce complexity, and enable better risk management. By providing a common data source, recorded in a standard language and syntax, cloud-based ERPs should eliminate most of the heavy lifting and data mining that most tax functions perform manually today. This increases confidence in the data and frees up people to focus on analytics, scenario-planning, and strategic advice to the business.
Agile Operating Models
Tax leaders today are confronted by the high cost of digital transformation, talent gaps in expertise and capacity (which may have increased due to cost cutting measures), and the ongoing economic uncertainty intensified by COVID-19. While it is becoming evident the old ways of working will no longer suffice, there is also an increasing recognition that in many industries, the capital investment required to transform the tax department won’t be coming any time soon. Out of necessity, many have begun to rethink their operating models. They are increasingly seeing co-sourcing and outsourcing as a way to access innovative technology solutions, expertise, and capacity at a lower cost.
The good news is there is a spectrum of operating models—from maintaining an in-house model for all activities, to a model in which some activities are completed partially or fully by a third party, to a completely outsourced model in which a provider “operates” the entire function.
While co-sourcing and outsourcing may be more familiar, the “operate” model represents a more fundamental shift. Companies no longer pay to maintain their own systems, similar to a subscription model that allows access to the capabilities, skills, and resources of a third party for a set fee. Technology companies shifted to this managed service model years ago when they introduced licensing. Consider the example of Microsoft Office: Organizations buy a license to get access to a suite of Microsoft’s tools, but Microsoft maintains the software on their behalf.
In the tax function, when considering cosourcing or outsourcing, activities are evaluated on two dimensions: value to the company and need for institutional knowledge. Work that is low value and routine, where the output needs to be high quality and efficient, are strong candidates for co-sourcing or outsourcing. This may include compliance activities and data management tasks, or work that is highly specialized but ad hoc and does not require significant institutional knowledge to complete, such as transfer pricing documentation or tax controversy matters.
Accelerating The Future
Resilient tax leaders recognize the complexities emerging from the pandemic amid so many other global forces, from the changing implications of globalization, the rise of Asia, the reduction of the shared economy, and the screeching halt on international travel due to closed borders. With so much in flux, the tax function becomes even more critical in building efficient and sustainable organizations over the long-term. To do so, tax leaders must assess their current models and consider the continuum of options to most effectively run their departments.
This massively disruptive event, which hindered businesses’ ability to serve clients and customers in the same way they did in the past, is also proving to be an important catalyst for change. It has dislodged longstanding inertia behind how, where, and when work gets done. The impossible is now possible. The once unthinkable is now open for consideration. Opportunities abound. How will you use the momentum and mindset shift to accelerate the future of your tax organization?