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Rising Star
Yes, there is a shortage of qualified people at certain levels. This has been coming for a while. The move to offshoring lots of first year work in an apprenticeship model has meant that people with 3-5 years of experience are behind where they would have been 15 years ago at the same level of experience. That in turn makes the slower pace of industry jobs more attractive and means clients aren’t as hell bent on hiring someone from public or B4.
I think we’ll see profitability drop soon as the hard-to-measure things like competence impact efficiency. We’re already seeing engagements not staffed and not done even though we sold them expecting to just magically be able to find the staff at my B4. I think what may happen is that mid tier firms like BDO and GT will be able to take advantage and play the service card. The EY spin-off is a distraction for them and you know the other firms are now planning the same thing. That will destroy those tax practices when they split them. I’m actually about to leave B4 because the staffing and bad behavior by partners has gotten so far out of hand.
Partners won’t change anything because today’s compensation is so high and they would be willingly taking pay cuts. They won’t do that until forced by the market.
Granted I can't speak towards how bad B4 staffing truly is but I can tell you that I regularly oversee teams that try and plug the staffing issues with offshore resources. The few local resources I can get my hands on are far below the competency levels that I was working with 5 years ago. I can't see us playing the service card considering that we can't even properly service the current client base.
You won’t find many partners answering this. Manager here so I’ll give you some insight.
1) Yes there is a shortage as work is increasing faster than we can hire. For example, fees and work increases in AUDIT in our office by 20% but they increased headcount by like 5 new hires and 2-3 experience hire. This is my office so certain geography will differ
2) no, if any revenue is at all time highs
3) work gets done at the end of the day. This grinding culture is expected so people put up with it. Those who have done it, think it’s only fair the new comers pay their dues. From a business perspective, increase revenue and decrease expenses 🤡
1. 100% agree with SD1’s comments on staffing shortage. I work at mid-tier and the most common response to domestic staffing issues is “just send it offshore”. Additionally, due to the fact that everyone is well-aware of the staffing shortage, we basically have to accommodate anything/everything in fear that someone will leave.
2. Negative effect on profitability? Absolutely not. My firm has been touting record revenues and profitability. We have been advised by national that (tax) fees should be increased at least 10-15% increase a year ago, and another 15-20% this coming year. Yet salary raises were only about 10% for high performers (excluding promotions). For the most part, audit and tax are essential services to clients, so if significant fees increases are happening throughout the market, then there are likely no issues with profitability. I would think there would be a point in time where there would need to be a correction, but it’s hard to say if “all the firms are doing it”.
3. If it ain’t broke, don’t fix it. One of the new partners in my office mentioned he suggested that they allocate more to retention and hiring because of the staffing shortage, and he told me he basically got laughed at. A lot of the partners I work with are the “back in my day” type, so any suggestion for change is scoffed at. If they had to do it, then it’s ok for everyone else working their way up to do it too (e.g. toxic work environment, excessive hours, no training). I would hope that one day things will change, but it’s really hard to say when. Though, it seems like the newer generation is more vocal in advocating for themselves and their peers, so maybe sooner than later? But then again “money talks”, so if you want that partner money you will ultimately need to fall in line.
Anyways, hopefully this helps. This past couple years has been brutal, and I am finally walking away from public accounting.
Chief
SD2 - 100% facts! I’m in mid tier as well and the knowledge gap is what frightens me the most as I move up (or I might not even stay) I will not have anyone to pass the grunt or complex work to, so I can just review or business develop when that time comes. I see partners still prepare tax returns and that is not the life I want as a partner when I’m part of a firm. If I’m going to prepare, review and business develop then I might as well have my own firm.
Chief
Yes there is a staffing shortage and by the looks of it, it will continue. It affects partners because they can see that not that many people want to become partners so they are selling to private equity so there won’t be a need for true partners but just highly paid employees.
Chief
If it’s run by private equity, I can see it solving the problem because all they care about is the return on their investment and are willing to spend money of staff of it means they can make money. They can even raise prices to compensate for the increased salaries. I think it’ll be a few years before that happens so the quality of accounting in my opinion will be drastically reduced and since PE owns it, they are not CPAs so they don’t care as long as they are making money.
Can't speak as a partner but I do have more years of experience than a lot of partners out there so I can speak towards the industry. There is definitely a shortage of staffing much less qualified staffing. From chatting with other folks in the industry it seems like it's being driven by a lack of college graduates in the field as the industry has too much of a reputation for being a grind and not paying well. Is it affecting profitability? Not at the moment as upper management has adopted the philosophy of just offshoring everything that they can. I've had entire teams made up of offshore resources and there is zero care given regarding the quality of the work as managers are expected to just fix it. In one partners words...if it would take you 40 hours to do it but it takes offshore 100 and you 20 to fix it then I'm still ahead due to what I'm paying for offshore. There's no consideration given to the long-term implications as most of these folks figure that they'll be out of the game in 10 years and seem to be of the opinion that it'll be the next generations issue to deal with. HR policies are typically driven by national and we all know that we are just a number to national folks. There need to be changes but so long as the work is getting turned and inspections are basically passing they'll see the system as working and if you suggest changes then you must be anti-company. Personally I don't think things will change until an outside force steps in and drops the hammer on one of the large firms. Once they start getting fined for sloppy work or can't get any qualified people in the middle ranks that actually do the work that'll be the wakeup call. Probably 3-5 years before that happens and then another 5-7 to fix things. YMMV.
Chief
Yep, it’s a money game to them and the partners/leaders only care about the next 5-10 years and how it affects them and not the future since they won’t be here and also they can sell to PE.