I was reminiscing about an employee dilemma I had a few years ago and my solution.  It's a bit long, but should be fruitful.  Basically, What do I do about Bob? 

In my pre-retired life a few months ago, I was Head of Tax at a multibillion, multinational publicly traded company.  A bit of background on corporate income tax responsibilities is needed for the case study.  Basically there is income tax return filing, tax planning for acquisitions, and Tax Accounting. 

Tax Accounting: what is reported in the 10K and 10Q’s is, BY FAR, the number one area of importance for a publicly traded corporate tax department.  Getting “tax” (tax rate, cash taxes, and tax deferred assets and liabilities reported in the 10K & Q) right, for the outside auditors as well as the SEC and PCAOB is vital.  I constantly told my staff, and they knew this well, “Tax Accounting is everything.”

Now to the actual employee dilemma I faced.

I needed a quick staff replacement.  Based on the high recommendation of a tax friend (head of tax of a large company just purchased by a foreign corporation.  All their US headquarter employees were being terminated, so he was retiring), I hired a 20+ yr. (18 with my friend) experienced tax accountant (we’ll call him Bob) to be on my staff. 

Bob was very personable, friendly, and cheerful with everyone.  He talked to our corporate HQ coworkers about how great the tax department was.  While he was not the fastest at finishing assigned tasks, he did create pretty workpapers.  Q1 comes around, we are starting to get into the quarterly tax accounting.  I had Bob prepare a tax account reconciliation for a small subsidiary and let me know the reason why the account balance was not what we expected.  A simple, less than an hour project.  There are lots of other areas that will need tax thought and analysis.  Periodic check-ins with him - he would happily say “no problems, just making sure things are correct”. 

Eight hours later, he gives me a hand written workpaper (pretty) of the activity of the account.  Bob simply copied the general ledger entries.  When I pointed out what needed to be completed and analyzed rather than just copied, Bob was puzzled that more was needed.  He thought tax accounting was just copying the debits and credits of the account and summing up the like accounts. 

Bob had an EXTREMELY limited understanding of the required analysis of book/tax differences.  Ask him WHY a tax number was showing up in a specific account, and WHY that specific number and not another number, he would state it was there because the accountant at the subsidiary put it there.  It was blindingly clear Bob knew little about tax accounting.  

I knew we were in deep poo with Bob’s lack of tax knowledge and skills.  I wondered how he survived 18+ years in a large corporate tax department.  Bob was going to be a massive anchor and hinderance to my tax department if there wasn’t huge Bob improvements.  Because of his low tax knowledge, Bob was causing stress on the other staff, they having to take on extra work to cover his lack of production.  Something had to be done.

First, I called my retired friend who recommended Bob and let him know how Bob was not preforming well.  He sheepishly told me tax accounting wasn’t Bob’s strong suit even though he had told me their department actually did tax accounting.  Next, I arranged for our outside tax consultants (a big 4 accounting firm, not our auditors!) to provide a tax accounting basics session  for Bob.  Over the next few months, I sent Bob to a couple of external tax accounting seminars and workshops.  We also had more internal tax accounting study sessions.

The next quarter, the same result.  Not one thing regarding tax accounting had entered Bob’s head through the time, effort, and expense put out on his behalf.  He continued to happily act as if there was no deficiency.  Not only was Bob not performing, the deficiency was simply not recognized by  Bob.  It just didn’t happen; tax accounting was not clicking with him.  At all.  This was risking the Tax department’s good reputation both within the company and externally, plus it also risked added scrutiny from the auditors.

Same result the next quarter.  Even after more outside training.  Bob was not grasping tax accounting, but cheerfully went about creating pretty, but meaningless workpapers on other tasks not tax accounting related.  Same result the next quarter.  It was clear, Bob simply did not have the mental tax horsepower to get the job done, even at a rudimentary level.  Even basic depreciation book/tax differences in Fed, AMT, and ACE puzzled and caused Bob to struggle.

So…. What to do with Bob?  Continue with more training?  Give him less companies to work on?  Give him less complicated tax assignments that would support the other staff members so they could concentrate on higher tax analysis?  How to protect and enhance the Tax Department?  What solution should be taken?