Like many CPAs who own a firm, I've been struggling with the pipeline problem for many, many years — this is nothing new. I don't think we need to do a lot of hand-wringing to figure out the problem, nor do we need to be perplexed by the solution.
The profession finds itself in this predicament largely because of the following:
- Low salaries paid to young accountants;
- The working hour demands placed on young accountants;
- The 150-hour requirement; and,
- The image of the profession.
The Big Four/Six/Eight firms have, for a very long time, offered unrealistically low starting salaries to their new hires. In turn, this has set the tone and the pay scale for the amount that every non-Big Four firm pays their undergrads, and heavily influences the salaries that are paid by non-public accounting employers as well.
The Big Four firms get away with the artificially low pay because of the monopoly they have on new graduates. This monopoly exists in the accounting profession because virtually every young graduate wants a Big Four firm experience on their resume, and they're willing to accept the low pay. No other profession has this problem, which is due to the fact that there are so few "Big" firms. Think about it — law, engineering, finance — in no other profession do so few firms dictate for so many.
This low pay for new undergrads comes despite the fact that the larger firms continue to place unreasonable time demands on their staff. There is simply no way to have any reasonable work-life balance when the culture at the larger firms demands 3,000-plus hours every year. Again, the larger firms get away with it because they can. The model that the larger firms use is churn, burn and replace: Young professionals who burn out in one or two years are replaced by new hires in the following years — it's that simple.
Accounting undergrads tend to have some of the same skill sets as IT students or engineering students. Why choose accounting when a student can command a higher starting salary as an IT major or engineering major? Why choose accounting when an IT or engineering degree only takes 120 credits and there is a higher starting salary?
The 150-hour requirement was a misguided attempt to improve the quality and prestige of the profession. Sadly, the real quality problem was never with the quality of the undergrads; to the extent it had anything to do with undergrads, it was with the training, supervision and mentoring that the undergrads received after they were hired. Arguably the real quality problem was with the seniors, managers, directors and partners at the larger firms.
The solution is that the Big Four either reduce partner compensation and benefits, or they charge more to their clients. I suggest they opt for the latter. CPAs have a stranglehold on tax work, auditing and accounting — there are no competitive professions for the auditing services that we provide, and very few that can really compete for the tax and accounting services we provide. Why aren't we charging more — or at least enough to increase starting pay and pay to young professionals?
The image of the profession has taken a hit because of the low salaries, the hours demanded, and the 150-hour barrier to enter. It takes at least as big of a hit from an image standpoint, and we as a profession haven't done enough to dispel that image. Boring, mundane, routine, small-minded — we've not done nearly enough to change this narrative.
We should be focusing on the fact that we sit next to the owners of virtually every business, advising and guiding them on key decisions that are made in a dynamic world. We are a key part of the inner circle of decision-makers, more important than the attorneys or the bankers. Why aren't our professional societies focused on hammering this message home to our membership, and leading the charge to get this message embedded on every high school and college campus?
This profession is noble and honorable, and we serve an invaluable role for our clients. It is a great career. It's just a shame that our problems are of our own making.
