Latest / The Accounting Podcast / Why Accountants Quit Public Accounting Firms
Transcript
- Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding! Blake Oliver: [00:00:10] Hello everyone, and welcome back to the show. I'm Blake Oliver. David Leary: [00:00:13] I'm David Leary. Blake Oliver: [00:00:14] And today we are talking about retention turnover in the accounting profession which is one of our biggest challenges, one of the biggest challenges for public accounting firms. And joining us today to talk about it is Geoff Brown of the Illinois CPA Society, the president and CEO of the Illinois CPA Society. Geoff, welcome to the show. Geoffrey Brown: [00:00:35] Good morning. Thanks for having me, Blake. Appreciate it. Blake Oliver: [00:00:37] We love the reports that the Illinois CPA Society turns out, and in December, you all released a report called Writing Retention A look into the Accounting Profession's Greatest Management Challenge. And that report showed a significant rise in turnover rates within the profession, at least within Illinois. Among the respondents to your survey, I'm curious, and I'm sure our listeners are curious, what did you find are the key drivers in the turnover trend and how is it impacting the profession in Illinois? Geoffrey Brown: [00:01:12] Yeah, I mean, I don't think it should be any shock to anyone that the key reasons that people are leaving, you know, salary that's not new. Uh, too many hours, burnout, lack of work life balance, issues with workplace culture, uh, lack of advancement opportunities, the nature of the work. You know, these aren't new issues for public accounting. But when you think about it, a lot of those issues are things that we have some management of, some opportunity to control. And so we just need to make the steps to really, you know, address those issues. Um, it's kind of interesting to me that, uh, you know, salaries have been on the rise, but we haven't done anything about the number of hours that people work. We're not addressing the work life balance. And, you know, think about the number of firms that win those best workplace awards. Um, but culture still tends to be an issue. And when you think about it holistically, I think a lot of our turnover issues are really related to workplace culture. Blake Oliver: [00:02:04] Yeah, I was kind of shocked to see well, I guess I'm not shocked. Salary was the number one reason people left. That's why they they say they left. Um, but too many hours. Slash burnout is like right there. Almost exactly. Almost exactly the same. Right. 4,849% basically. And then lack of work life balance. So it's really those three things salary too many hours slash burnout and lack of work life balance are the reason that accountants are leaving their employers. But, um, they're not leaving accounting. And we've heard some sort of contradictory surveys, evidence on that. Some people have said that, like the Wall Street Journal reported a few years ago that 17% of accountants left the profession entirely. But your study found that when people leave accounting. Firms. They're not leaving the firms. They're actually. Where are they going I guess is the. Geoffrey Brown: [00:03:03] Yeah. So just based on our research, you know, talent that left the job in the last two years, they're leaving mainly for other opportunities in public accounting. So that was 62% of our respondents. Uh, then the other ones were going to opportunities with public and private companies. That was about 23% of the respondents, and then 8% were going to private equity. And you flip that over on the employer side, you know, I've been in this world for, what, 14 months? So I've had an opportunity to have a lot of conversations with firm managing partners. And, you know, when I asked the question of where's your talent going? Um, they all said, you know, they're going for corporate finance. You know, jobs and business and industry. They think the grass is greener. Um, they're leaving the profession altogether. And then private equity, they're like, there's no way we can compete with private equity. But, you know, our survey data is telling a very different story that, you know, they're looking for other opportunities or they're finding other opportunities in public accounting. So, you know, when you think about the reasons that are driving turnover and the fact that they're staying within public accounting, it's almost like, you know, they're moving from the house that's on fire to a house that's on fire. Uh, and I say that kind of tongue in cheek, but, you know, there's got to be something about the places that they're going that they think they're going to have a different experience. So I really want to dive into that and really understand, you know, what's different between firm A and public accounting and firm B, um, that the employee is thinking that they're going to have a different go at it. Yeah. Blake Oliver: [00:04:18] I would love to dive into that with you. You you mentioned some of the less obvious factors, um, culture being one of those. What what do you see? You know, other than salary. Right. What do you see as being different between these firms that people are leaving versus the firms that people are going to. Geoffrey Brown: [00:04:35] Yeah. You know, and this is anecdotal because we didn't get an opportunity to dive into this, you know, through our survey work and our focus groups. So, you know, I'm just relying on some of the conversations that I've had with, you know, newer professionals that are part of this target audience. And, you know, I think it's partly due because of the small networks that exist with accounting professionals. You know, a lot of people went to the same universities. They travel in the same professional circles, sometimes the same social circles. So you have an opportunity to really understand, you know, what's different with my firm versus the firm where, you know, my classmate works. Um, and so I think those opportunities and getting recruited in really does help reinforce, you know, that the opportunity is going to be different, that it is going to be better, and that it's not going to be 1 to 1 with what they came from. David Leary: [00:05:17] So you the survey was actually two surveys. So you surveyed about 450 firm leaders and then about a 430 employees. That's correct. Did you get any answers that were like, there's just not on the same page. Like firm leaders are thinking A. And the real reason people are leaving is be like, how did you reconcile that? Yeah, I mean. Geoffrey Brown: [00:05:37] I think the biggest disconnects were really around where employees were going, um, you know, so that disconnect around, you know, I'm leaving for another job in public accounting versus I'm leaving to go to a corporate finance business industry, uh, the role of private equity. So that was probably the most glaring disconnect for me. Um, the other piece was just the job hopping myth. Um, you know, I think that during the pandemic, you know, a lot of employers, you know, created this narrative that, you know, our people are just chasing the the next opportunity, chasing a dollar. And yes, that does play into it in some regards. But, um, people weren't leaving at the rate that we thought that they were leaving or that employers thought they were leaving. So that's one. And then, you know, I think there's a disconnect on the back end of just, you know, I wish I, you know, we had a lot of employers say to us, I wish I had had an opportunity to have a conversation with this person before they left, whereas the employee said, you know, no one ever asked me what I valued. No one ever asked me what I thought was beneficial. Uh, no one ever tried to keep me. Geoffrey Brown: [00:06:31] And so I think, you know, there's some real nuggets in that, that if you're an employer and there's a piece of talent that you're trying to retain, you know, your best and brightest, um, just, you know, take the time, ask the question, be intentional, be transparent, be approachable. Um, make sure that you're, you know, laying out for individuals, you know, what their career paths could look like. And there's a real opportunity, I think, for employers to step back and say, you know what, I've been in this business for 30 years. My pathway was X. Is that going to be the pathway that the person starting today is going to want to travel? I think we're doing that in some regards, but we need to do it faster because people talk. You know, we were talking about the the role of social media. Um, every young professional that is having a positive experience isn't posting about it, but every young professional that's having a negative experience, they're talking about it. And I think that that is a self-fulfilling prophecy of how we're not going to get the best and the brightest into the profession. And so we're going to keep having this, this discussion around, uh, retention makes sense. Blake Oliver: [00:07:31] It's no big surprise that work life balance to many hours is in the top three responses. Why people leave their accounting job. Geoff, what do you think is like how confirms deal with this right? How confirms address the work life balance issue? Did you did you identify any ways that we can solve that in the in the survey, or do you have any ideas? From your experience. Geoffrey Brown: [00:08:00] You know, one of the things that we've been doing with this, and we had our first conversation earlier this week with a group of firm leaders, and they want to have a follow up conversation because they're all of the mindset that, hey, you know, collectively, there are some things that we can do to kind of level the playing field. This is just here in Illinois. Um, they're all recruiting from the same talent pool effectively, but they think that there are some things that they can do that would really address this. You know, when we talk to young people, young professionals, they're aware of what they're getting into, like it's no surprise that they're going to work long hours. It's no surprise that they're going to work hard. That work life balance is going to be challenged throughout the year. I think what the issue is, they weren't expecting there to be multiple busy seasons. Um, they weren't expecting that. If they said they were going to have to work, you know, 60 hours this week, that it actually turned out to be 70. Um, and I think it's really being transparent, having clarity and holding true to the commitments that you make. Mhm. Um, that seems to be where we have issues with trust. Um, that's what makes people open to having the conversation with the firm down the road, because they're seeing this opportunity where you told me this, but now you're saying it's this. So if you're going to make a change in that regard, what else are you going to make a change around? And I think that drives back to that whole culture piece. Blake Oliver: [00:09:10] Yeah. I feel like when there used to be just one busy season, it was a much different deal. And that's, you know, three months of your life, right? In busy season. That's totally doable. I, I've worked in other industries where we had a busy season and it was great. Right. For sure. Made a bunch of money in three months. And then I kind of relaxed the rest. But it's no longer, you know, it doesn't work that way anymore. Um, and so like it just the busy season just keeps on going and going. And I guess, as I think you mentioned this in your survey too, or your report is that as people leave, it puts more pressure on the people who remain. So it becomes this, um, self-reinforcing problem. Geoffrey Brown: [00:09:54] Yeah. And that's definitely something that we saw in the survey. And we're hearing time and time again and conversations with younger professionals. We're hearing it with, uh, firm leaders. We're hearing it with that kind of middle management layer of, hey, you know, I'm finally at a place where I'm managing people. I didn't think I would be doing the same work that I was doing when I started. So, you know, no one's going to be immune to the impact of turnover unless you're at the very top, I would think. But, you know, people are feeling the burn, meaning that when someone leaves who's going to do their work because it takes time to ramp up. If you're going to bring in a new hire, they're not going to be ready on day one. So somebody is going to have to absorb that work, and it's not going to be lateral all the time. It's sometimes going to go upstream, which means that you're going to have this cadre of individuals that thought they were getting out of doing that level of work, and they're back into it. And so what does that do to them? And then you also have what's the cost uh, to firms of, you know, getting a new hire up to speed, let alone just recruiting them. Um, you know, things are starting to level off a little bit, but there was a real war for talent here in Illinois. And, you know, firms were getting creative. They were paying a premium. Um, you know, the recruiting industry was just raking it in. Um, but I think that there's a lot that we need to do to really understand what the impact that this is going to be, because, you know, you have three people leave. That means there's six people that are going to have to absorb the work in addition to what they were already doing. Um, and so it puts those individuals at risk. So it just keeps pushing things, you know, further and further into the organization. Blake Oliver: [00:11:24] We've got a real supply problem in accounting. We spoke with Sue Coffey from AICPA, and she mentioned on our show and in an interview with Accounting Today that we are only producing about half the accounting graduates that we need to satisfy demand. It's something like 50,000 a year and we need 100,000. So how do we address this supply issue, which is causing the, you know, overwork for the people who remain in the profession? Um, salaries are going up as a result of this shortage, but not not that much. It seems like the work life balance still seems to be a big issue, the overwork. So, you know, given these huge numbers of, of, you know, this huge shortage, which must be thousands, right, every year in Illinois, like, what do we do? Like we talk a lot about the 150 hour rule on this program. Um, you know, reducing education requirements. How confirms increased salaries. Uh, how can firms be more flexible, like, do you have does the Illinois society or do you personally, Geoff, have recommendations for how the profession? Geoffrey Brown: [00:12:32] I mean, I think I definitely have some some thoughts on this, and I think the society has some thoughts as well. I mean, I think it starts with the experience. Um, you know, we are competing for talent against some very in the short tum, exciting industries that are paying a lot more right out of the gate. We know that young people aren't thinking, you know, you know, five years down the road, ten years down the road, 15 years down the road in terms of their careers, they're thinking six months, one year. Um, and so when you're confronted with the opportunity to get a higher salary, uh, quicker opportunities for advancement, but it's going to level off, you're probably going to jump at that because you're not thinking about things over the long terme. And it's very difficult to have a conversation with a young person about, yeah, just stick it out for 20 years and then you'll see your pay day. Yeah. Um, it's a very difficult prospect. You know, I'm thinking back to 21 year old Geoff, and I don't know that I would have been susceptible to that type of, uh, messaging. Um, so really thinking about how do we change the career pathway model to really fit with what young people are experiencing in other industries today? I think that's one, um, the starting salary piece is definitely top of mind. Geoffrey Brown: [00:13:37] Um, you know, I think young people, you know, know what they're getting into when they pursue careers in public accounting. They just want the experience to match what they thought. And, you know, I think all too often the experience isn't lining up with what we told them that they were going to do, which I think is very, very difficult for them to understand. And so it's kind of problematic in that regard. We were down at the University of Illinois, uh, back in the fall and did a student panel just to really understand what was happening with, with young people, what they were thinking. And, you know, this was a group of high performers, you know, I'm not going to lie, um, they were all pretty invested in pursuing careers in public accounting. Um, but they had some thoughts about how things could be better. You know, they know what they're getting into, and they just want to hear from more people that are closer in age to them versus, you know, trotting out the the best and brightest partner to tell them about their experience. So that was really interesting for me as well. Blake Oliver: [00:14:34] Yeah. That disconnect between social media and what students are hearing from their professors, I think is a it's a big gap. And I wonder how much of that is because professors have not been in public accounting for 20 years in many cases, right. David Leary: [00:14:47] Or never were in it right. Blake Oliver: [00:14:49] Or were in it for a year or two. Right. Like so I mean, we've got to do something about like the the view of accounting on Reddit. If you go on to Reddit, the accounting subreddit, and you read what is on there, it's like it's bad, right? And I don't know. I mean, I wonder how many association leaders and professors and partners have ever even heard of Reddit or been on it. But you know that in TikTok is where Gen Z is getting their information about accounting. And, um, you know, if we did a survey of that and looked at it, it's not great, right? It's not a great image. Geoffrey Brown: [00:15:26] Well, and, you know, I always share with people that, you know, I'm, again, pretty new to the accounting world. I came over from financial advice, financial planning. Um, and one of the things that I share with definitely educators is, you know, when we would go to college campuses and we were looking to help those programs recruit new students to the financial planning programs, we would always make a stop off in the accounting department, just because there was always going to be someone who was a little unsure, a little disgruntled, maybe saw something in social media and they see an opportunity to pick some of the same skills, but in a slightly different lane. It's not the same, but you know, there's definitely some opportunities out there. Um, we need to talk about the positive experiences that young professionals are having. We definitely need to change some of the the work life balance issues. We need to address the nature of the work and the relevancy piece. I think that that's going to be a through line for a number of years to come. And we need to think about, you know, what's going to be of most. Most valuable to young people today. That same student panel that I talked about, they all had a high interest in working with nonprofit organizations. So that impact that that intrinsic value from helping people to the extent that it's possible, I think that that needs to be a greater part of the experience for some of those professionals in that 1 to 5 year experience, because we're losing too many. And that feeds right into that supply side issue that you talked about. Blake. Speaker4: [00:16:49] Yeah. Blake Oliver: [00:16:49] You mentioned that people, young people aren't willing to sit around and wait 20 years to get the to reap the rewards of, say, an accounting degree. And and we got some insight from one of our guests, um, on one of our podcasts, Joey Kinney from summit, CPA. He pointed out that when his I think it was his mother who was a CPA, when she was going down the accounting career path as a young accountant, it was about seven years to partner in the 80s and early 90s, and now it's it's more than double that. It's, you know, 14, 15 or more years to go from starting as a staff accountant to becoming a partner. And that's a really long time to wait. Um, I certainly wasn't willing to do it. You know, I left as a manager. And does the business model need to change? Right. Like we've seen firms go into private equity deals, become corporations, eliminate the partnership model. I mean, what else can we do? I, I feel like there's a lot of half measures. We say, oh, we need to increase salaries. We need to do this. We need to improve culture. But like what? Like this is a big problem. What can we meaningfully do to address this issue? Yeah. Geoffrey Brown: [00:18:04] I mean, I think it's encouraging that firms are experimenting, trying different, different options. I think the ownership model is certainly one piece of it. Um, but, you know, we need to be responsive to the needs of the next generation and also be responsive to the needs of firms. And it's a really delicate balance, I think. But I think there's an opportunity there. You know, when you think about the fact that young people aren't going to stick around for 20 years to become a partner, I was with a group of about. 15 new professionals, all less than three years of experience. Um, none of only one of them was licensed. Four were in process, the other ten weren't sure. Um, and we're in the CPA business. You know, I'm not going to lie, we're in the CPA business. We're a state CPA Society. So I'm always interested in how do we get people to become CPAs. Um, and so when they talked about it, they're like, I have no interest in being a partner. I want to take care of my family. I want to have work life balance. So until we can change the experience to meet those needs, we're going to have a difficult go at it. Geoffrey Brown: [00:19:04] And I don't know if there's going to be a private equity ownership model or an ESOP that is going to fully address what we're experiencing on that side to really meet the needs of the next generation. I'm really concerned because, you know, these are tomorrow's firm leaders, or they should be on paper, they should be. But if we're not giving them the on ramp that they need and making it enticing for them to be able to stay in the profession and see it through to the next generation, then then what are we going to do? And so I think that's where we have an opportunity, you know, as a state CPA Society, as a thought leader, as a catalyst for change, to just drive a dialog about, you know, what are the options out there? Uh, unfortunately, we don't own a CPA firm, so there's not much that we can do in that regard, but we can continue talking about what we see as the issues, what we're hearing from the different audiences, and try to engage the right players in creating change. David Leary: [00:19:56] Geoff, do you think, um, a lot of this turnover is or how much would you attribute to bigger firms gobbling up smaller firms? Because, like, I could see I'm happy maybe working at the smaller firm. I have good life balance. I'm not burnt out. It's not too many hours. I like the culture now they get bought by a bigger firm because it's the there's not enough at the bottom of the funnel. Is that one reason that these are the three reasons people are popping up or giving the reasons is just they they got acquired. Geoffrey Brown: [00:20:23] Yeah. I mean, I don't know that that's a high driver of it, David, but I definitely think it's something that we need to keep an eye on because I think a lot of our talent issues, you know, both early professionals and careerists, are driven from from the top down versus bottom up. But we do know that we have a lot of young people that are having very positive experiences working in smaller firms, making conscious decisions to, to, you know, embed themselves in those organizations. So it's something that we should keep an eye on. Blake Oliver: [00:20:53] So we did see some positive changes indicated in the survey. Employers who were surveyed said, uh, to what changes has your organization made to improve employee retention within the last two years? Uh, 63, 64% have increased compensation, 60% now offer a remote work option and 49% offer flexible hours. Hopefully, we'll see more of those firms offer the flexibility, which is, um, one of the it's the second most important benefit that employees highlighted. Right. So so we've got we've got a lot of room for firms to offer more flexibility. And 75% of employees said they want that below compensation. Geoffrey Brown: [00:21:42] So that's very encouraging. My fear is that, you know, we spent the last three and a half years, four years being incredibly responsive to our employees. How sustainable is that over the course of the long terme? You know, I'm already hearing from firm leaders that they're talking about how do we appeal some of this back? How do we get people back into the office? And I'm like, these things are here to stay. Um, they need to become a part of the model. They need to be, you know, just standard benefits, standard, you know, structural issues related to our work environments. And if we're not willing to do that, then we're just going to keep talking about these retention issues because there are plenty of other places that that is their norm. It's not going back. And so if we're going to retain our best and brightest, then we need to do this. Blake Oliver: [00:22:26] I think that's the perfect way to leave it. Geoff Brown, president and CEO of the Illinois CPA Society. Thank you so much for speaking with us today. Geoffrey Brown: [00:22:34] Oh, thanks for the opportunity, Blake. I really appreciate. Blake Oliver: [00:22:36] It. Now, if folks want to learn about the survey, if they want to read it themselves, we'll be sure to include a link in the show notes. Very good. And and Geoff, you know, let's say we've got some listeners in Illinois. They want to get connected with the society. What what should they do? Geoffrey Brown: [00:22:51] Where should they go? You know, they can definitely visit our website wyspa. Org or just give us a shout. You know, we definitely have phones. Phones are back in business. So you know, feel free to pick up. But, uh, we're here, we're interested, and we always love hearing from CPAs and accounting professionals in Illinois and beyond. Blake Oliver: [00:23:09] Thanks, Geoff. Geoffrey Brown: [00:23:10] Thank you.