Reaching Critical Mass.

Grassroots Campaign Stirs Up Debate on AICPA's Proposed Global Credential

BY THE TIME CHARLES OSGOOD got a hold of the term "Cognitor," an lampooned it in his "Osgood File" segment on CBS in early April, the profession already had sent the working name for the AICPA's proposed global credential to the compost heap of brand awareness. Postmortems on the heavily tested term revealed that while Europeans liked it, Americans almost universally reviled, an were even suspicious of, the term.

Cognitor's demise is a minor, though illuminating, event in the profession's ongoing struggle to increase its relevance and survive in a global, technology-drive economy. At the AICPA Council's spring meeting, a bid to eliminate the credential was defeated and replaced by a California and Texas-led resolution to intensify the AICPA's member education program and to obtain grassroots feedback about key elements of the initiative.

AICPA Chair Kathy Eddy says that the information and feedback effort is designed to ensure that the AICPA has a "consistently informed constituency" before asking its members to vote on the proposal.

The issues at stake--the future of the accounting profession and CPA credential--have divided the profession. AICPA leaders have called a global credential "inevitable." State CPA societies like New York and Illinois have publicly condemned it. Some industry pundits have questioned the motives o AICPA leaders and others have proclaimed the global credential pure genius.

Whatever it is, the global credential has stirred the souls of CPAs like no other proposal in the accounting profession's history. The level of indecision expressed about the initiative by even the profession's most thoughtful leaders is remarkable.

"It's not that I'm married to the global credential vision," says Bill Holder, a University of Southern California accounting professor and AICPA

Council member. "But the process of thinking rigorously and developing information and knowledge about what the world does value will give the profession a competitive advantage. I would be amazed if everyone agreed to the global credential exactly as it was proposed. There is no way because people will learn so much in the intervening period. What I'm for, if anything, is a process of exploration."

DEVIL IN THE DETAILS

According to the AICPA, a future holder of the global credential (also known for now as XYZ) is "one who helps people or organizations achieve their objectives through the strategic use of knowledge or knowledge management systems." It is further defined by the following characteristics:

* Interdisciplinary;

* Internationally consistent and globally recognized;

* Signals a common set of exacting ethical standards;

* Underscores a unique set of competencies shared by credential holders around the world;

* Requires continuing learning and periodic evaluation;

* Complements existing professional credentials;

* Carries new market permissions and is free of government regulation and brand preconceptions;

* Focuses on the ability to provide strategic business insight; and

* Validates competencies and skills emphasizing knowledge integration that is built on the foundational education of a wide variety of disciplines.

(A description of the global competency model and business plan is available at http://www.calcpa.org/californiacpa/XYZ/XYZ.ppt.)

"The number of defining terms has increased over the past few months, but these definitions really are still very vague," says Gary McBride, professor in the graduate tax program at Cal State University, Hayward. "It's impossible to have intelligent debate on this without concrete facts that we can wrap our hands around."

According to McBride, the devil is in the details and implementation. "We need to know in a more specific way what it means to have an XYZ. What will XYZ convey to the general public? What exactly will it take to become an XYZ? How do you turn broad competencies into something measurable? What is the hurdle to entering into this credential realm? If you need higher education, how much and in what areas? Do you need a bachelor's? A master's? What is the bar?"

McBride, whose thoughts are echoed by many of his CPA peers across the state, says that the XYZ concept as currently articulated simply has no traction and the concept appears to be too corrosive to the value of the CPA credential to warrant a faith-based vote of confidence.

"It's the nature of the beast," says Gale Case, a principal with Rothstein, Kass & Co. and AICPA Council member who is still undecided on the issue. "Frustration is unavoidable. You can't set off down an untraveled path and expect to know every twist and turn.

"The global credential initiative is a bold attempt by the AICPA to do something good for the CPA profession," adds Case. "The leaders advocating it genuinely believe that it will enhance the value of the CPA credential. The proposal may ultimately prove to be misguided, but, in my view, it clearly is rooted with the best of intentions."

I AM A COGNITOR!

While they are fewer in number, some CPAs have been quite vocal proponents of the global credential.

"I am a Cognitor!" proclaims Daniel D. Morris, CPA and founder of the VeraSage Institute. Although Cognitor has been dropped as a possible name for the credential, San Jose-based Morris enthusiastically supports the global credential. "XYZ is essentially saying that in a global, multidisciplinary practice environment it is a way to distinguish your product from other people's products." To Morris, a global credential is a way for CPAs to rise above the competition.

"The XYZ is a principle that says there will be a global designation for accreditation of professionals," says Morris. "It doesn't replace the CPA-it enhances it. It brings other professionals up to a credible level so that when competing in a global environment, if a client wants to understand the credibility of a person providing a proposal, now they will not only be able to look at literature being presented, but also at a reputation." (For a detailed list of the global credential's benefits, see sidebar, Page 26.)

Los Angeles-based CPA John Hoag agrees that a global (CPA) credential is a good idea, however he offers a different spin: "The name should be built on the CPA name. Contrary to the AICPA 'study' which indicated that the term CPA was not 'brand-expandable,' I think it is one of our most valuable assets and should be protected, perpetuated and become the core building block for a worldwide credentialing process. I believe the notion that non-CPAs would obtain the credential is a major flaw, and will be rejected by the AICPA rank and file membership."

Barry Stone says that in his more than 30 years as a CPA he has been content to sit back and watch-until now. "Previously, there was no threat of demeaning my professional status," says Stone. "Now, I believe the attempt to call a CPA by some other name is a genuine threat to my livelihood.

"Integrity accompanies everyone's image of a CPA," Stone continues. "That didn't happen overnight. How can a person with intelligence believe that XYZ, Cognitor or any other made-up meaningless name will invoke the respect and confidence that CPA conveys?"

The AICPA sees it differently. In fact, based on research conducted earlier this year, AICPA Senior Vice President of Public Affairs John Hunnicutt asserts that all CPAs will benefit from the new credential whether they pursue it or not. "The very creation of the XYZ credential and its early population and association with CPAs appears to cause potential users to deem the CPA as being a more strategic partner in business.

"CPAs constantly compete successfully against non-CPAs by using the CPA credential to their advantage," says Hunnicutt.

However, he adds, "Firms of all sizes have been increasingly hiring or otherwise affiliating with non-CPA professionals to enhance the value of the services they deliver to clients."

Patrick Purcell, who recently retired from his position as CFO for Paramount Pictures, says that he has found the global credential to be very fuzzy, misplaced, and not in synch with the profession's objectives as stated in the Vision Project and elsewhere.

Purcell adds that perhaps there are other motivations for including non-CPAs. "It struck me as a desperate effort to launch an entirely new professional qualification, thereby inferring that the CPA credential was doomed to extinction (or, at the least, to a long-term decline in prestige)."

Brian Rowbotham, whose firm Rowbotham and Co. has experienced significant international success, says that if a global credential emerges, he'd probably get certified, even though he doesn't believe it would change the way his firm operates.

"Our firm has worked hard to build its reputation. We have made an investment in long-term training, marketing, article writing and more. Although this credential might provide acknowledgement of the kind of work we do, it won't direct business to our firm." And, he adds, it won't bring business to anyone else's firm either unless they do all of the prerequisite legwork.

COMPELLING EVIDENCE IN FAVOR OF XYZ

To supporters and some of the undecided, the most compelling evidence in favor of the global credential is the impact it will have on the profession's future.

"The number of students going into accounting is now down from four percent to about two percent nationwide," says Diana Sanderson, former CalCPA president and AICPA Council member. "We are essentially not producing enough people to fulfill our needs. The research seems to indicate that either a 'Vision' CPA or this global credential has created quite a bit of interest among college students particularly those who are undecided. I think it is worth continuing to explore if we want to see our profession continue."

McBride responds cautiously to the student research. "Students have no stake in CPA. They are idealists. Why should they be concerned about preserving the CPA profession?"

The larger issue according to McBride and others is potential dilution of the value of the CPA brand. "By introducing XYZ, you are saying that CPA is not enough, that it is not all of the things that an XYZ is," asserts McBride.

"That's simply not true," counters Hunnicutt. "The CPA is a brand that stands on its own, and will continue to do so. Many CPAs will not choose the XYZ, and their professional choices will be fully supported. In fact, that is one of the principle reasons for launching the XYZ: to maximize the professional choices CPAs have today and far into the future."

Hunnicutt adds that the AICPA has pledged, along with state societies, to continue to commit resources to the CPA brand, while new organizations, consisting of holders of the new credential, will work to establish XYZ.

EXPAND THE BRAND

When he caught wind of the grassroots information effort, Zaf Iqbal was a little put off. "To say that CPAs don't understand the global credential is patronizing and arrogant," says Iqbal, an accounting professor at Cal Poly San Luis Obispo.

"The AJCPA claims XYZ won't erode the prestige and status of the CPA certification, but it does." Iqbal supports his opinion by pointing out that this erosion is exacerbated since non-CPAs are a crucial piece to this new credential.

Although committed to expanding the CPA brand, Hunnicutt says, "Members need to recognize that expansion is constrained by a number of forces. First of all there are advantageous market attributes that we wish to retain; for example, CPAS are competent, trustworthy and have integrity. But CPAS are also stereotyped as narrowly focused historians, not forward thinkers. Preserving the former while changing the latter is extremely difficult."

According to Hunnicutt, the AICPA already is engaged in the difficult battles of changing state regulations, and modernizing and broadening the CPA exam and accounting education. However he says that although the AICPA has influence, it has little ultimate control over factors that have a major impact on how CPAs are perceived.

By comparison, Hunnicutt says, "XYZ will be market-based and privately owned by the global institute and its members.

Credential holders will have a great deal of control in shaping the marketplace for XYZ."

According to XYZ supporters, another hurdle is self-perceptions among CPAs, as well as CPA firms' employment practices and marketing strategies. "During the Vision process, we found that many CPAs who had moved outside the attest and tax functions believed that it was inappropriate to identify themselves as CPAs," says Hunnicutt.

"Ultimately, if CPA-owned firms provide Vision-aligned services, but do not deploy CPAs to do the work, nor call themselves CPAs, progress in changing marketplace ideas will be very difficult." However, Hunnicutt adds, "our research data indicates that the identification of XYZ as something that began with the CPA profession can help to accelerate the expansion of the CPA brand."

COST OF THE INITIATIVE

As of mid-May, Hunnicutt reports that it has spent less than two percent of the AICPA total budget on the global credential, which is the amount that would have been spent on any long-term planning initiative.

Global Credential Steering Committee COO Judy Trepeck projects that the global institute or academy will be self-supporting as early as 2002, and that it will refund developmental costs to the AICPA and other founders. The global institute initially will be funded through the support of business alliances, who Trepeck describes as "future providers of qualified education for XYZ credential holders."

As the debate over the global credential careens toward critical mass, its future will be determined by individual CPAs who have reviewed the issues and taken a stand for or against the proposal.

"A critical issue in this debate is whether non-CPAs should be allowed to hold the global credential," says CalCPA Chief Executive Officer Susan Waters. "The member who takes no position for or against this issue will in a very real sense be ceding his or her professional destiny to the care of others."

AICPA Defines XYZ Benefits

CALIFORNIA CPA asked the AICPA leaders to define in as concrete terms as possible how the global credential will benefit today's CPAs. This is what they said:

While it will take time and exposure for the XYZ credential to obtain its optimum brand positioning, there will be significant short-term benefits to CPAs.

* For those CPAs seeking to obtain an additional credential signifying breadth of knowledge in multiple business disciplines, the XYZ credential offers a fast-track path. Unlike MBA programs, which require attendance at classes for 18-24 months with minimum credit for real-life learning, the XYZ credential will be available to qualified CPAs with five or more years experience. The self-assessment for admission during an interim period makes it easy to close any identified gaps in knowledge, accelerating the CPAs achievement of the XYZ.

* Research data indicates that a very high percentage of clients (75 percent) and employers (83 percent) would be more likely to hire an XYZ for a senior strategic business planning position or engage a professional services firm that employs XYZs. Executives also indicated a willingness to pay a premium (on average 14 percent for an employee, 11 percent for a consultant) to holders of the credential.

* The CPA/XYZ combination will be positioned as the ideal for business advisory services, combining depth of knowledge in finance and business, with breadth of knowledge in strategically critical and diverse disciplines.

* In the short term, the majority of XYZ credential holders will most likely be CPAs, offering them first-to-market advantages in a globally recognized credential.

* Those who pursue the credential will be "first in the door," and thus have maximum influence on the creation and early direction of XYZ. The early adopter advantage also means that CPAs will have the greatest penetration in the credential arena as XYZ's brand equity begins to reach critical levels.

* Through the global institute and the national credential granting organization, CPA/XYZs will have access to a robust and broad-based online learning platform, as well as unique networking opportunities among an elite group of interdisciplinary professionals working around the globe.

* The XYZ marketing program is predicated on a co-branding platform, so the CPA profession will ultimately receive exposure through the Global Institute's advertising and marketing efforts, paid for by XYZ members of the Global Institute, in addition to image programs sponsored by the AICPA and state CPA societies.

* The CPA/XYZ combination will help validate a wide range of interdisciplinary competencies not conveyed by the CPA license itself. This could have a widespread positive impact since more than 90 percent of members do not perform audits.