Every staff member of every firm is a free agent. We do not realize it, but they do.
The concept of free agency in sports teams is well accepted, but virtually ignored in professional firms and in particular in public accounting. Rather than use baseball or football, I think free agency with actors is more closely aligned with public accounting. In sports the players have contracts and, while their skill levels start from scratch, they are bound to the team for a period of years. In movie acting, a single role could catapult someone into stardom and command very high salaries. In public accounting, our staff start out as raw beginners acquiring all of their skills on our dime while they are working for us. No contracts bind them, and once they acquire the skills, they own them.
The way it works with the movies is that the producer tries to get someone relatively new and inexpensive who they think has talent, charisma and potential to “star” in a movie. Think in terms of Julia Roberts in "Pretty Woman." Actually, everyone who starts out, starts out with low recognition and low pay. I just saw Sylvester Stallone being interviewed by David Rubenstein and he explained how he got "Rocky" produced and how little he got. If the movie becomes a big hit, the newly christened star asks for and then gets humongous payments for future movies. Questions: Should they get the high pay since it was the producer who really put them in that position? Shouldn’t they give the producer a discount for being a nice person and getting them started?
Well, in public accounting it is the boss (or firm) that teaches the staff person everything they know. Shouldn’t that staff person continue working at the low pay they started with since it was their boss that put them in the position? Well, I believe many partners still think this way and are shocked when a staff member leaves for more money. I don’t mean leaving the profession for a big jump (only to stagnate there, but that is a different story); I mean going to a similar firm for the pay they are entitled to, i.e., worth, based on their present knowledge and experience.
Staff are free agents in that once they acquire the experience and knowledge, they can easily get a new position at the salary level where they are capable of performing. They do not “owe” the firm that taught them anything. (By the way, I get too many calls and emails from practitioners shocked at this occurrence.)
My suggestion is, I believe, pretty simple. Pay your staff what they are worth, considering the experience and knowledge they have grown into, and not what they started with, or what you taught them. Further, let everyone in your firm know this is your policy. If you need to replace the person who left with someone of similar experience and knowledge, you would be paying them the higher salary. Well, do it for your present staff who are really worth more than outsiders since they are familiar with your processes and clients.
What you teach your staff, they own and can then rent to the highest bidders. They are free agents. Treat them like that and give them the respect they grew into, and the right pay.
Comment: Staff who leave to go into private industry usually did not have as good an experience as they should have had in public. That’s a different issue not being addressed here, as are the pay levels and future career prospects.
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