It was a classic career path, but with a twist: after spending six years at a midsize CPA firm, John Doherty left to become the controller of a regional bank. From there, he moved on to a division of John Hancock, where he was director of financial reporting. That positioned him to advance in corporate finance to, well, almost anywhere. Yet after a mere six months at Hancock, he leapt at an opportunity to go back to his old CPA firm.
A significant jump in salary was one factor. So was the chance to enjoy more-flexible work hours, a greater diversity of work, and the satisfaction of contributing to revenue rather than overhead. "Working at a company, you're constantly watching the bottom line. The stresses of working at a CPA firm relate to client satisfaction, which is easier to manage for me," says Doherty.
All over the country similar scenes are playing out as accounting firms large and small sweeten the pot in order to lure or retain employees. The Big Four have doubled their assurance staffs in the past five years and are expected to nearly double them again in the next five, thanks largely to Section 404 of Sarbanes-Oxley. Smaller accounting firms, their client rosters expanding thanks to new rules on auditor independence, are also upping the ante. Add to that a precipitous plunge in the number of accounting degrees granted in the late 1990s and disaffection with corporate finance jobs, and suddenly the labor pool is roiled by a perfect storm, one that CFOs readily admit is difficult to navigate.
Nearly half of the CFOs surveyed in late 2005 (see "How CFOs Confront the War for Accounting Talent" at the end of this article) say that it is somewhat or very difficult to hire qualified finance staff. "It's an extremely competitive hiring environment today," says Craig Nickerson, CFO of Dynetech Corp., a privately held business-process outsourcer based in Orlando. After a five-month search, he recently hired a senior staff accountant away from Deloitte & Touche but is still looking for an accounting manager for his 33-person finance team, a position the company expected to fill this spring.
Nickerson says competition has not only driven up CPA salaries by as much as 25 percent in the past several years, but now he must contend with public accounting firms that "provide signing bonuses and a lot of fluff benefits that they've never offered before." And there is competition as well from other corporate finance departments. Dynetech had a 10 percent turnover rate among finance staff in 2005, about double its historic average, largely because people had better offers from other companies.
Even though enrollment in accounting programs has risen over the past few years, the demand for CPAs currently outstrips supply by as much as 20 percent, and relief appears to be a long way off. "We'll have an incredible shortage of accountants for the next 10 to 15 years," predicts Allan D. Koltin, president and CEO of PDI Global Inc., a Chicago-based consultancy for accounting and other professional firms.
If there is one bright spot, it may be that the turnover rates at public accounting firms remain high, averaging about 17 percent annually at large companies and 15 percent at smaller ones, and approximately four out of five people who leave those firms do so to work in corporate finance. That may already be changing as companies ranging in size from the Big Four to modest regional firms address everything from compensation to corporate culture in an effort to win the talent war. "There's so much more need for experienced managers, it's become clear to us that we can't accept the kind of turnover we used to have," says Jennifer Allyn, a director in the office of diversity at PricewaterhouseCoopers.
Money is certainly one way to get people's attention. Entry-level annual salaries now average $45,000, according to career-oriented Website Vault.com, a 9 percent increase over last year's rate, and accounting salaries are rising faster than the typical 5 percent increase in other professions. Once in the door, recent grads can expect to see raises of 5 to 10 percent a year. "If you're three years out in public accounting, you're making $60,000 easily," says Michael Assaad, vice president of permanent placement for Ajilon Finance. Add to that retention bonuses — $20,000 to $50,000 for midlevel managers — and impromptu midyear raises and the stakes get high quickly. Such increases make it "pretty much impossible for us to hire anyone but the most junior-level people" from CPA firms, says Larry Trachtenberg, CFO of Tempe, Arizona-based Mobile Mini Inc., a portable-storage-unit provider.
Those who do leave public accounting for the corporate world often cite "work/life balance" as a prime motivator, so accounting firms are fighting back on that front as well. Many are trying to give people more time off, and making sure they use it. PwC, for example, closed its offices to give its entire U.S. staff a paid vacation between Christmas and New Year's Day. The firm is also trying to get people over the idea that "losing vacation is a badge of honor," says Allyn, by having managers encourage staff to take time off and otherwise manage their professional and personal lives to avoid burnout.
Public accounting firms are also leaving no stone unturned in their search for talent by, for example, paying close attention to their alumni network. Nearly 25 percent of Ernst & Young's experienced hires are "boomerangs," people who have left the firm and come back. PwC's Allyn says the firm is in the early stages of actively recruiting (or, one might say, re-recruiting) alums, and has recently started holding events targeted at specific groups of former employees, such as a group of women in the Dallas area who had left to become stay-at-home mothers. "We said, 'Come back, even on a reduced basis,'" says Allyn, an offer that at least two of the women accepted.
Smaller firms are following suit. Newton, Massachusetts-based Braver Accountants & Advisors PC maintains alumni contact information on its company intranet and is considering inviting former employees to its summer outing this year. When Beers & Cutler PLLC, based in Vienna, Virginia, faced the prospect of losing a class of potential hires to Virginia's new "five-year" (academic) requirement for CPA certification, the firm offered to pay students' additional tuition if they agree to work part-time or commit to joining the firm after completing their schooling. "We couldn't wait another year for those people to be available," says the firm's managing partner, Ed Offterdinger.
Many accounting firms now emphasize an "employee first" approach, says Koltin, in contrast to the "client first" approach of previous eras. At Braver that translates into on-site yoga and massages, and the chance to watch March Madness basketball games on new large-screen TVs in order to ease the pain of working on Saturdays during busy season. "We're upping the ante on everything this year so people will be happy when they go out to clients," says Alison K. Simons, marketing manager for Braver, which has stopped publishing the names of new hires or managers on its Website for fear that recruiters will come calling. The larger aim of such perks is to create a sense of camaraderie at the firm so "people would feel like they'd be abandoning their friends if they left," Simons explains.
Regional firms are also adding a new tier of incentives known as "nonequity partnerships" to retain valued managers who may not want to become full partners. According to a recent survey by the trade journal Inside Public Accounting, nearly 20 percent of non-national firms now offer senior managers such carrots, up from 11 percent 4 years ago. The focus on retention "is beyond anything I've ever seen," says Koltin, who has worked as a CPA and a consultant to firms over the past 26 years.
To Market, to Market
Companies, it seems, have little choice but to follow suit. "You'd think you'd just have to raise salaries to get supply in line with demand, but that's not true," says Jon Zion, president of eastern U.S. operations for Robert Half International, which tracks CFOs' forecasted hiring. "Companies are getting very creative about accommodating the quality of life and professional issues that matter to people." They are also making the hiring a priority. "In the past, we'd find a few recruiters and let them go off and find candidates," says Stuart West, vice president of finance at TiVo Inc., "but now our entire team has a sense of urgency" about finance hiring. As one sign of the times, the company's search for a new head of internal audit spanned not just weeks or months but several quarters.
Not that compensation is unimportant. Fifty percent of CFOs surveyed say they do plan to loosen the purse strings not only to attract new hires but to retain current staff as well. "Very often," says Mobile Mini's Trachtenberg, "a finance person starts with a company, gets annual increases, and then suddenly looks up and realizes they're 20 to 30 percent under market," prompting the person to leave in order to get the market rate. To stem the outflow in his 12-person finance department, he has at times given staff members as much as a 30 percent salary increase to get them up to market. "It's a big dilemma — how do you justify giving someone a raise like that when they didn't really demand it, but on the other hand, you know it's just a matter of time [before they leave if you don't]?" he says.
Another response is to focus on job content — in particular, splitting up onerous jobs among several people or even outsourcing certain tasks to avoid burning out one person. That's what TiVo did last year when it finally filled that internal-audit position. While the previous person in that role had responsibility for internal controls and Sarbanes-Oxley compliance, West says that the job has been reconfigured to include coordinating internal resources as well as outside service providers. "We felt that was an important way to make the position attractive," says West, "and it's better for controls to have more checks and balances." And, after job burnout compelled its previous controller to leave the profession, TiVo has also focused on lightening the load of current controller Anna Brunelle by boosting the skills of employees reporting to her.
In addition to recrafting jobs, CFOs also face the more daunting task of recrafting entire career paths. Creating "promotability" has become "the biggest challenge in keeping existing employees satisfied," says Lanny Baker, senior vice president and CFO at Monster Worldwide. Most of the 25 people who report to him at Monster's New York headquarters spent four to seven years at CPA firms and have been with Monster for about three years, making them ripe for a change. The dilemma is that new jobs would likely mean global relocation and travel — the other 100 finance positions are in units across the United States and Europe — and "it's hard to get people in corporate to feel like they're getting ahead by going out in the field," Baker says.
That's true even at the largest companies. "You have to show them they have a career path here or they might go somewhere else," says Dell CFO Jim Schneider. To keep his international finance team of 4,500 from "feeling like the only way they can get promoted is to wait for someone to move or retire," Schneider relies on formal job categories that make it easier for him to track available positions, and he holds quarterly discussions with other top managers regarding the career prospects for a group of 60 to 100 finance employees. "We don't want to have everyone 'stovepiped.' We're trying to look at people across the organization and provide rotational assignments," he explains. "It could be an international assignment or movement from one area of finance to another to enhance employee development and have people who understand all parts of our business." He has also tried to instill a sense of ownership into his team by having as many as 100 of his nearly 2,000 U.S. finance employees serve on committees associated with employee retention, training, and career development.
Still, Schneider is the first to admit that carving out attractive career-development paths is not a foolproof method of keeping staff. He recently lost three top finance managers, including former chief accounting officer Bob Davis (now CFO of CA), to "companies that want to leverage what we've been doing."
When it comes to battling accounting firms, though, CFOs may find that success hinges less on offering the same pay and benefits and more on offering a different challenge. When Tom McGauley left PwC last November to become manager of financial reporting at Decode Genetics, a small biotech firm based in Reykjavik, Iceland, he welcomed the chance to play a more strategic role. "Sarbanes-Oxley changed the landscape of what you could do for a client," he says. "It made us the accounting police rather than a trusted business adviser." If CFOs hope to lure more finance staffers away from accounting firms, they will have to take those words to heart and learn how to accentuate the positive — augmented by a competitive compensation package, of course.
Alix Nyberg Stuart is senior writer at CFO.
New Grads See Salaries Rise
|Source: Salary Survey (Fall 2000–2005), National Association of Colleges and Employers|
Companies have long offered flexible work schedules as a way to retain employees. Now some of them can claim the programs also raise shareholder value.
Last November, a study released by the Washington, D.C.-based Corporate Voices for Working Families (CVWF) reported that companies had actually documented financial benefits from offering flexible arrangements. The study, "Business Impacts of Flexibility: An Imperative for Expansion," presented findings from 28 organizations, including IBM Corp. and Marriott International Inc., on how flex-time has improved productivity, customer satisfaction, and cycle times, and prevented turnover. What we now have is "compelling internal data," says Donna Klein, president and CEO of CVWF, "that makes the business case for flexible workplace arrangements."
At one participating firm, PNC Financial Services Group, the finance department led a push for a team-based compressed workweek some five years ago, says corporate controller Sam Patterson. Historically, he explains, finance was "in the Dark Ages when it came to addressing work/life issues. But we wanted to improve that balance for key staffers." After studying the impact both on pay and deadlines, finance instituted a flexible schedule that allows some employees to either work a 9-workday schedule with day 10 off or a 19-workday schedule with day 20 off. The result is that "the same amount of work gets done in one less day, and staff members now have the time to attend to personal matters," he says.
Rolling out such a system at a time when compliance demands are prompting many finance departments to rack up overtime isn't easy, but Patterson says that "employees value the program so much that they will do whatever is necessary to make it work." While boosting employee satisfaction was the goal in finance, other measures of success have resulted elsewhere. In the company's operations center, for example, cycle time for payments for safe-deposit services was reduced from two days to one, and bond inquiries were reduced from two days to same day completion. Today more than half of PNC's 23,000 employees participate in some form of compressed workweek, staggered hours, or telecommuting program.
In finance, there have been other intangible benefits, says Patterson. Because the schedule works only if deadlines are met and accuracy is maintained, the department's overall organizational and communication skills have improved, and there is a heightened awareness of where any project stands at any given moment. "This has taken on a life of its own," he says. "Employees won't let you get rid of it." It's better to flex, it seems, than to break. — Lori Calabro