Raising the Stakes

When Jason Chiang got the call, he was surprised but willing to listen.

After six years in the private sector, would he be willing to return to public accounting with the midsize firm of Stonefield Josephson Inc?

He would. And shortly thereafter, he did. And Stonefield Josephson’s Orange County office had what is considered a prize acquisition in the accounting world: a manager-level CPA with seven years of experience.

It wasn’t always so. At accounting firms, it’s the salaried CPAs with about three to seven years of experience that carry a lot of the day-to-day workload in the audit practice.

With job titles like supervisor, manager or senior manager, they are considered management and exempt from overtime and other requirements.

In the 1990s, auditing work had plateaued and firms branched out into more lucrative business consulting to drive growth. The number of new CPAs coming out of the nation’s business schools and colleges also plateaued, or even dipped, as demand was slack and flashier sectors such as technology beckoned.

Then Sarbanes-Oxley accounting reform was passed, igniting a revolution in the industry.

“When Sarbanes-Oxley hit, demand went through the roof,” recalled Tom McGee, partner-in-charge of Deloitte & Touche LLP’s audit practice in OC.

The new, more complex reporting and financial management requirements of the law sent public companies, accounting firms of all sizes and regulatory agencies scrambling to add expertise.

“It was a perfect storm,” said Rick Poole, managing shareholder of Stonefield Josephson’s OC office. “You had double the workload and not as many people coming into the profession.”

“It’s been a huge strain on resources,” Poole said.

Suddenly, it was a sellers’ market for accounting experience. Salaries rose and benefit packages were beefed up. And it remains a sellers’ market to this day. The dynamic has transformed the way firms treat their managers.

“Firms have become much more employee-friendly, much more willing to accommodate employees,” said Ed Jordan, president of the OC chapter of the California Society of CPAs. “They’re doing things that in the past were unheard of.”

Many firms have moved to more flexible work schedules for their managers. Stonefield Josephson has become increasingly flexible with hours, especially with female employees starting families, said Poole.

“They want to stay in the profession, but have demands outside work,” Poole said. “They make great part-time employees—they have all the skills. Put a couple together and you have a great full-time equivalent.”

Poole said his firm also has begun paying bonuses twice a year or more and is paying overtime to its managers

At Deloitte, like the other Big Four firms a frequent target of raids on its staff, McGee said the firm has reacted with an increased emphasis on retention.

“Compensation is up dramatically in the last three to four years,” he said. “We’ve moved to flex work arrangements—a lot of the scheduling is self-controlled, as long as they’re meeting deadlines and meeting client goals. We’ve certainly added a lot of personal time off this year, and additional days off during the summer.”

Beyond that, Deloitte has increased its training and “created more opportunities to advance within the firm, to do new and exciting things and work with lots of clients,” McGee said.

“The retention rate has improved dramatically,” as a result, he said.

Similarly, Irvine-based Haskell & White LLP continues to raise salaries and restructure its compensation package, said Managing Partner Wayne Pinnell. The firm has added a profit-sharing component and is introducing an incentive program.

But “compensation is not what drives people,” Pinnell said.

“A bonus is a one-day high,” he said. “After you’ve decided how to spend it, there are 364 days left in the year … What people want is an intense environment, one with a lot of learning, a lot of interesting work with interesting clients.”

Part of that is training.

“We’re very big on training,” both to sharpen and challenge existing employees and to prepare new CPAs for management roles more rapidly, Pinnell said. “Grads today have the opportunity to grow and advance much faster than those who graduated even five years ago.”

Moving new CPAs along the track faster also is a component of strategy at the Big Four firms—Deloitte, PricewaterhouseCoopers LLP, Ernst & Young LLP and KPMG LLP. It’s an effort that’s being aided by an upswing in enrollment in accounting programs since Sarbanes-Oxley.

“We have significantly increased the number of folks we’re hiring out of colleges over the last couple of years,” said McGee, noting that the OC office plans on 38 to 40 such hires this year, compared with “maybe 30” pre-Sarbanes.

“We run a very extensive training process throughout the first two years, focused on getting them suited to taking on a senior role,” McGee said.

Meanwhile, with firms across the board sweetening the pot for employees and potential employees, just staying competitive in compensation and benefits is not enough to attract quality veterans.

Firms have become much more active in their recruiting.

Pinnell said that Haskell & White offers a bounty to employees who refer candidates, has added a full-time recruiter and has used advertising and headhunters to fill positions.

Stonefield Josephson’s Poole says firms are having to innovate and focus to get the staffing they need.

“You’re going to have people switching firms, for whatever reasons,” Poole said. “People coming out of the Big Four, it’s extremely competitive to go after them. We’re trying to identify people who have been out of public accounting for a couple of years and are trying to get them excited about coming back in.”

It’s a strategy that clicked this spring with Jason Chiang. He ended up signing on at Stonefield Josephson as a senior manager, with a pay and benefits package “pretty comparable” to what he was getting in private industry. But that wasn’t his main goal.

“I was looking to get back into a more professional environment,” Chiang said. “I wanted something not as big as the Big Four—someplace I could have an impact.”