Charting the Future of the Accounting Profession
Recruiting and Retaining the Next Generation
Over the past decade, the demand for qualified accounting professionals has increased, while the supply has decreased. The current situation is partially the result of a decline in college accounting enrollments during the late 1990s, combined with new legislative requirements, such as the Sarbanes-Oxley Act (see money.cnn.com /2006702/03/pf/pay_hike_jobseeker/index .htm). A recent survey conducted by Robert Half Finance and Accounting (www.robert halffinance.com) reflects the high demand for accounting personnel: Of the 1,400 CFOs surveyed, 9% planned to add staff in the second quarter of 2008, while only 5% planned to reduce staff, and this trend is expected to continue(seewww.nextgenaccountant.com /trends.html).
Understanding how these changes will continue to impact the profession is critical. In 2007, Robert Half issued a report on behalf of the Financial Leadership Council it formed to study employment trends in accounting and finance. The council consisted of 24 members, including 16 CFOs, controllers in industry, and partners in accounting firms; three current and one former full-time accounting or finance association CEOs; and four academics, along with a FASB board member serving as an observer. The council members made a variety of recommendations after examining human resource issues (a copy of the report can be requested at www.roberthalffinance.com). The findings are organized into four sections: recruitment and retention, preparing tomorrow’s workforce, the business-academic partnership, and global business. Below is an analysis of these findings, as well as a critique of the recommendations.
Recruitment and Retention
To remain competitive in a shrinking market of qualified accountants, it is necessary to develop new and creative methods of attracting and maintaining staff. Compensation packages and stable employment alone are no longer sufficient incentives. To attract more suitable individuals to the profession, firms must understand the work-related preferences of the talented individuals considering accounting as a career, and offer positions that accommodate those desires. In addition, the profession must pay continuing attention to the interests of individuals vis-à-vis the needs of employers.
A primary issue the council considered was how to attract talented members of Generation Y (defined as people born between 1978 and 1990) to the profession. According to the report, Generation Yers often expect challenging projects and participation in the decision-making process early in their career. Companies are finding that they must offer these individuals “a more individualized approach to employment.” Structuring employment in such a manner is difficult because job responsibilities have been affected by increasing regulation (e.g., Sarbanes-Oxley). Many recent graduates become dissatisfied with the tedious nature of their entry-level positions, a problem that has increased with regulation.
To maintain a sufficient supply of qualified accountants, a fundamental shift in the structure of entry-level accounting positions may be necessary, according to the council. Such changes will be difficult to achieve. For example, a five-year accounting graduate needs significant experience in practice before being able to act as a business advisor and consultant This experience requirement is not limited to the accounting profession-surgeons often study until they are 30 years old. Additionally, while new graduates desire nontedious work assignments, auditing can be tedious by its very nature. The gap between what students expect from the profession and what the profession expects from an entrant may be difficult to overcome. One way to help reduce this expectations gap is to provide accounting students with better information about the type of work they will be responsible for as new hires.
An important means of alleviating the shortage of qualified accounting professionals in the long-term is successful “branding” of the profession. Unlike the areas of law, medicine, and criminal justice, accounting does not benefit from visibility in the media. The council concluded that the depiction of accountants in the media is often negative or stereotypical, leading to a significant misconception about what professional accountants do. This can have a profound influence on young people.
To overcome this perception, the council suggests a branding campaign that emphasizes the exciting aspects of the profession and the many career paths available. The council also recommends increasing the visibility of positive role models in a variety of positions to emphasize the multifaceted nature of the profession. Such branding should depict accounting as an attractive career choice for college students.
The council made a number of recommendations that individual firms may wish to adopt in order to attract qualified current and prospective accountants. Among these proposals was a double internship model in which individuals would have an opportunity to pursue two different internships within the same firm during different time periods. The rationale was to provide a varied work experience. The experience of the authors of this article as college professors, however, indicates that students prefer to undertake a single internship and receive a job offer upon completion. In addition, smaller firms may be unable to offer multiple internships.
Recruiters can enhance their performance by adopting a common message, emphasizing the company’s vision and values, and highlighting appropriate role models. To achieve a diverse workforce, for example, firms should consider using a diverse group of recruiters. The council also recommends greater emphasis on flexibility in the working environment as a recruiting tool. If such flexibility (e.g., flexible hours, working from home, sabbaticals) is actually available, then it should be brought up during employment interviews; however, if this flexibility applies only to select employees, the issue should not be emphasized. The authors believe that the council did not put enough emphasis on flexibility in work arrangements as a recruiting tool.
Although the council suggests using an experienced human resources professional for recruiting, the authors’ experience as college professors indicates that students feel more comfortable with, and can better relate to, nonprofessional interviewers or former accounting or finance students. It may be helpful for recruiters to bring recent alumni to recruiting events. A council proposal to attempt to recruit individuals who are satisfied in their current positions is problematic because it is difficult to find such individuals, apart from personal referrals. The council proposes that significant bonuses be paid to any parties making such referrals. Many firms currently pay bonuses for referrals, a trend that has gained popularity in recent years. Several council members said they have increased the bonuses, which has increased the number of referrals. This method is particularly effective in recruiting quality candidates because current employees are generally reluctant to refer poor candidates because their own reputation is at stake. In addition, this method of recruiting is comparatively inexpensive.
To overcome the shortage of qualified accounting professionals at the firm level, the council also discussed the use of retention strategies, which are designed to keep quality employees in their current jobs. Re-recruiting top performers is an effective way to maintain talented staff members. The goal of this strategy is to sell top performers on their employment in the firm before they get a better offer from a competitor. Firms should also offer increased career visibility. Under such a strategy, an employer would provide a clearer vision of an employee’s potential career path. A recent study by the AICPA suggests that career growth opportunities represent one of the key reasons talented professionals stay with a firm (Anita Dennis, “Understanding the Best and Brightest,” Journal of Accountancy, November 2006). Succession plans must be developed if employees are to have successful career progress. There must be a transfer of knowledge from management to staff. One council member addressed the idea of planning for succession and knowledge transfer. At his company, McDonald’s, executives are accountable for identifying successors, which is imperative to ease the transition in management turnover at dynamically changing enterprises. Succession planning is often downplayed or given short shrift in organizations because it can be demoralizing for executives who are not secure about their own positions within the company. [A survey by Robert Half Management Resources (www.roberthalfmr.com) of 1,400 CFOs, released July 11, 2007, found that only 16% had identified successors, regardless of whether the CPO intended to leave.]
Mentoring programs may also be an effective means of retaining staff. Many companies, including accounting firms, use mentoring rings, which involve a group of employees from different areas (e.g., tax and audit). Mentors can also be used to reemphasize the importance of the CPA exam, an accomplishment that is critical to long-term retention. A council member from Plante & Moran indicated that her firm uses two levels of mentoring: New hires are assigned to experienced staff, and partners supervise all staff members, who are assigned to teams. Partners and experienced staff are evaluated, in part, on their mentoring efforts.
Improvements and adjustments in compensation can also help retain current employees. The council recommends ranking employees into quadrants and grids, and tying incentives to such ranking systems. Microsoft, for example, uses a ranking system (10% in the top group, 70% in the middle group, 20% in the third group) for different layers of compensation, including such incentives as restricted stock options and bonuses. This system could, however, demoralize average performers and lead to excessive competition at the top. If a firm has few top performers, this strategy could produce morale problems, engendering higher turnover and productivity shortfalls.
Flexible work arrangements, allowing employees to work part-time or from home, can also improve retention. The council believes there is no one suitable flexible work approach; each arrangement should be employee-driven. These arrangements, however, may be difficult to implement, in part because firms must decide which employees are eligible (i.e., top performers versus other employees). Again, it seems to the authors that the council could place more emphasis on flexible work structures as a retention strategy.
Providing employment options for retirement-age employees may also alleviate staffing concerns. Many accounting firms enforce mandatory retirement policies to give lower-ranking employees greater opportunities to move ahead. To increase the number of experienced staff, mandatory retirement could be replaced with new work arrangements such as project-based roles, phased retirement, or cyclical work periods. This strategy seems particularly attractive, given the percentage of the workforce approaching retirement age.
Changes in management style and employee responsibilities may also improve retention. Management values and expectations may need to be modified to better fit the culture of the workforce. Supervisors should maintain open communications and transparency. Although beneficial, changes in management style are often difficult to implement; the example of the U.S. auto industry illustrates this point (Subir Chowdhury, “Changing Management Styles Put Their Mark on Industry,” Quality Progress, May 2000).
Preparing Tomorrow’s Workforce
The current shortage of qualified accounting professionals can also be alleviated if the profession continues to focus on the new skills necessary to succeed in today’s working environment The council recommends an emphasis on interpersonal and critical-thinking skills. Although such skills are difficult to teach, they can be promoted or encouraged throughout a curriculum.
Oral and written communication skills are critical in accounting. While communication skills have long been incorporated into training regimens at international accounting firms, the council reemphasized the importance of these skills. The council suggests multiple methods to help young professionals enhance their communication skills, including organizing their thoughts before they speak or write. The communication method should also fit the circumstances; for example, instant messaging may not be an appropriate medium to communicate a sensitive message.
Critical-thinking skills are also important for professional development When making decisions, successful accountants must be able to analyze alternative options and evaluate the benefits and costs of each. Universities have spent much time modifying their curricula in recent years to place more emphasis on these skills. This means less attention is given to factual teaming, and more attention is given to discovery learning through experimentation and applications. Instead of right or wrong answers, the focus is on finding approaches to problems and decisions that do not lend themselves to simple solutions. The council stressed the importance of cross-functional teams in the workplace in developing critical-thinking skills on the job.
Ira Solomon, a member of the council and head of the department of accountancy at the University of Illinois at Urbana-Champaign, argues that critical-thinking skills can be nurtured by applying progressive teaching practices. These practices include encouraging preemptive self-criticism of judgments and decisions; focusing on the development of both left- and right-brain skills; stipulating one’s hypothesis fully; and asking for multiple solutions. Training designed with this framework can enhance employees’ critical-thinking skills.
An expanded partnership between the business and academic communities might also help reduce the current shortage of qualified staff. Specifically, the council calls for more meaningful involvement from corporate executives on university advisory boards. Such interaction may result in accounting and business curricula that better prepare students for the realities of practice. The academic members of the council emphasize that students would benefit from greater access to real-life case studies and projects. The academics also point out that students would benefit from access to the firms’ data for their own research. The council also called for more internships for accounting students and more funding from firms for innovations in accounting and finance education.
One key outcome of globalization is the harmonization of international and U.S.-based accounting standards. It is likely that the United States will continue to actively converge FASB’s GAAP to the IASB’s International Financial Reporting Standards (IFRS). SEC Chairman Christopher Cox has stated that the SEC will most likely allow foreign private issuers to choose between U.S. GAAP and IFRS. In addition, an August 27, 2007, concept release (available at sec.gov/rules/concept/2007 /33-8831.pdf) suggests that U.S. companies may someday be allowed to file financial statements under IFRS.
The ability to recruit talented accountants overseas is a potential benefit to increased globalizatioa The council reported that most U.S.-based accounting firms are not recruiting internationally, and recommended that they explore the international talent pool (both in Canada and across the globe) for potential employees. To attract international talent, recruiters must familiarize themselves with international talent markets and offer competitive salaries. In addition, an infrastructure that supports international collaboration must be in place. While a company’s operations may be geographically disparate, personnel should possess a common knowledge base, culture, and ethical values, while respecting local customs and traditions. Accordingly, accounting and financial professionals must become more culturally sensitive to such differences in behavior and attitude.
Overall, the Financial Leadership Council’s report provides a set of provocative recommendations on: enhancing recruitment strategies in accounting and finance; collaborating between business and academia; improving the scope and quality of accounting education; using branding to improve the image of accounting and finance to students; and dealing with the challenges and opportunities of globalization. In the authors’ opinion, the recommendations of the council are sound and can help the profession overcome the many hurdles it currently faces.
A few additional points raised by the council’s report warrant discussion. Expanded examples of successful retention strategies would be useful. In addition, the council does not distinguish between small and large firms. Many of the issues new recruits have with the tedious nature of staff accounting positions may be less pronounced at smaller firms. For example, new recruits may have closer client contact early on or participate in more diverse tasks (e.g., doing both audit and tax assignments). The council does not address the issue of exhaustion after five years, which is a particularly acute problem in larger firms because they are more likely to require extensive travel and significant overtime for new staff. Also, there is a compelling need for more women to be in positions of authority in accounting and finance, but there is no explicit mention of this matter in the report, apart from hiring minorities.
Another potential way of alleviating a staffing shortage at the firm level is to maintain contact with former employees, who could provide a source of business to the firm or may wish to return at a later date in some capacity. This issue is considered in the council’s report, but could be explored in greater detail. While the council does recommend more challenging and diversified assignments to retain top performers, no explicit proposal encourages such individuals to pursue international assignments within these firms by taking extended sabbaticals to work for the firm abroad. Such a practice could foster greater loyalty to the firm and improve its retention rate.
From the authors’ perspective as college professors, another means of attracting better-qualified students to accounting is to make the curriculum more challenging and exciting. This can be achieved by emphasizing case studies, actual fieldwork, and internships, as opposed to rote memorization of accounting standards and procedures. Based on stories from alumni, firms could do a better job of reducing the stress associated with accounting positions and improving the work-life balance for their staff. Accounting positions would be far more attractive to students, and firms would experience lower turnover among their staff.
Robert Bloom, PhD, is a professor and Wasmer Fellow in the department of accountancy at the Boler School of Business at John Carmtt University, University Heights, Ohio. Mark Myring, PhD, is the Alumni Distinguished Professor and director of graduate studies in accounting at the Miller College of Business at Ball State University, Muncie, Ind.
Copyright New York State Society of Certified Public Accountants Jun 2008
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