Interview with Werner Schiesser, CEO BDO Switzerland
What were the biggest challenges for BDO in 2018?
Digitalisation was once again a powerful influence. The way in which we work is changing. We have to invest in new solutions but can’t yet predict exactly how they will affect our people and our clients. We’ve also invested in new services, such as cyber security, which we’re now ready to go to market with. Recruiting suitable employees is a growing challenge - and one we see at all levels - from trainees to certified experts. So we’re making a concerted effort to remain an attractive employer. For instance, we’ve developed our diversity management and introduced an annualised hours model. We’re also actively pursuing pro bono programs and are working to embed corporate social responsibility in our corporate culture.
What were your personal highlights of 2018?
It may not sound that exciting, but I am proud that we’ve grown for eleven years in a row now. The 3.3 percent increase in fiscal 2018 is almost entirely organic growth and reflects BDO’s excellent market position. By winning some major new clients in a variety of sectors, we’ve also set the scene to continue this success story.
What developments are you observing in your industry?
All of the larger professional services firms are forced to consider digitalisation, which has an immense impact on the way we and our clients work. It’s also a source of new business opportunities, especially in advisory services for digital topics. Business and outsourcing services are no longer the preserve of fiduciary firms. Other market players are increasingly emerging and they want a share of the business. As a result, we’re also seeing cooperation arrangements and alliances that would have made little sense a few years ago.
An important topic being discussed in our sector at the moment is flexibility - or at least partial flexibility - of working hours. In this sector, we need our people to meet the surge in client demand in the spring. And then they can take overtime over the summer. It’s not about making people work more, but releasing them from the tight corset of a labour law created with more industrial activities in mind.
Which topics will BDO be confronted with over the coming years? What opportunities and challenges do you expect?
I anticipate a good, steady development for BDO. Proximity to our clients and personal contact will become all the more important in an increasingly digitalised environment. Our decentralised structure with 34 offices means we can always be close to our clients - and we are. We also have an employee turnover rate of just 13 percent, which enables us to serve our clients with the same BDO team over a long period of time. And we're rewarded by an average client relationship length of over 20 years!
But we still need to see what’s going on around us, and enter into alliances and new kinds of collaboration arrangements in certain topic areas. One example of where we’re already doing this is our work with Daura AG, a subsidiary of Swisscom, Deutsche Börse Group, Sygnum and Luka Müller, co-founder of the law firm MME. Daura is a blockchain-based platform that enables companies to manage their share registers digitally and process capital increases efficiently.
I also see the recruitment of “suitably” qualified people as a future challenge. We are a little too small to justify a huge HR marketing budget. So we need to be that bit smarter than our large competitors. Our brand and good market reputation help us stand out compared to smaller competitors. BDO and our entire sector need to adjust training opportunities to reflect the changing way we work and new issues. There’s a lot to do!
In an international comparison, how does Switzerland fare as a business location?
Anyone born in Switzerland has already won in the lottery of life. And the same is true for companies. The location quality is really very good overall. But there are some obvious challenges. On the one hand we have the regulatory issue, where a more pragmatic approach would be welcomed at times. And then we often have different digital solutions being developed in each of the 26 cantons for the same topic. This is inefficient and shouldn’t be happening.
Another challenge is of a sociopolitical nature. Switzerland’s success isn’t automatic. The economy still needs decent framework conditions. But the economy also needs to contribute to an environment in which people with lower qualifications or fears for the future still have prospects and security in our country. If that doesn’t happen, we’ll see populist programs appearing with the promise of closed borders and an ideal world.
Blockchain is very much on the agenda right now. Will it become even more relevant in future?
Everyone is talking about blockchain. But blockchain is not about to revolutionise our lives - today or tomorrow. Cryptocurrencies, which thrust blockchain into the limelight, have been showing for some time that the sky is not the limit. Nevertheless, I am absolutely sure that this technology will find many new applications in our day-to-day lives. I can imagine that it will have as big an impact as the internet once did.
On 19 May the Swiss electorate will cast their votes on the Federal Act on Tax Reform and AHV Financing (TRAF). How important is it that the reform is accepted?
First of all, this reform is extremely important for Switzerland as a business location. It will protect many jobs and restore certainty for companies on the future of taxes and related tax expenses. If the reform is accepted, the OECD will not blacklist Switzerland as a country that does not want to cooperate or abolish unacceptable tax regimes. It also means we can avoid unilateral measures against Switzerland from certain EU countries.
How will the reform benefit your clients?
For the majority of our clients, the decisive thing is how the cantons implement the tax proposal, and what future, that is lower, tax rates companies can expect. It’s also vital that dividend taxation is structured with companies in mind. It would certainly be preferable if we can avoid additional expenses for shareholders and the companies they invest in.
What do you make of the decision to link the tax reform with AHV financing – which many are referring to as “horse trading”?
The link has already been discussed extensively. We need to keep in mind the fact that the reform will lead to higher tax revenues in the longer term. The proposal is one of those typical, politically broad compromises designed to secure Switzerland’s position as an attractive business location that offers certainty.
As part of the forthcoming referendum on the Federal Act on Tax Reform and AHV Financing (TRAF), AHV salary contributions are set to rise by a total of 0.3 percent for the first time since 1975. Will that be enough to safeguard pension funding?
No, certainly not. The boost to AHV does, from a purely financial perspective, make sense but it won’t solve the issues with pillar 1 pension funding. It’s vital that we realign our concept of retirement provision to reflect societal developments like demographic change and growing life expectancy. A “true” reform of the entire pension concept, including pillar 2 is therefore urgent. It’s a topic of concern for the general public as well. For example, retirement provision has repeatedly come up as one of the top issues in the annual “Worry Barometer”.
Is an increase in retirement age inevitable then?
Not necessarily, there are various measures that are conducive to the goal. Retirement age is certainly one of many, though. Our current approach of linking “young and old” may be standing in the way of securing an approach to pension funding that is acceptable to all. Young people are unhappy about how much the older generation has, and older citizens don’t like what the younger ones want. We need to rethink this discrepancy and find solutions that are acceptable to both sides. Just a thought right now, but we could make a generational cut and give younger people tax relief on their pensions in the future. It’s not even something new. In the past various pensions were not fully taxed, but were grated tax relief instead.
The business community will also have to do its bit to safeguard our pension system. What about BDO’s pension arrangements? What is BDO doing for its people, as a company and as part of the economy?
Alongside our excellent benefits during active employment like our voluntary commitment to higher illness, accident or maternity leave pay, we also offer our people the option to contribute higher savings to their pension fund from the age of 30. These reduce taxable income during active employment and increase the old-age capital, so that there are more funds available later in life. Voluntary contributions to the pension fund are refunded to the insured person in full, or, in the event of their death, to their dependents. At BDO, we also insure the entire portion of the salary covered by AHV requirements, apart from irregular components. We don’t deduct a coordination fee, which means our part-time employees in particular are protected from this “penalty”. These are ways we’re keeping up with developments on the (part-time) labour market. As a company, it costs us a lot of money. In return we are an attractive employer that takes corporate social responsibility - both now and when our people retire.