The war for talent

By John Lorinc
Illustration: Gary Taxali

The search for crack chartered accountants has become critical in these days of high demand. How does one find them?

There is a war going on. Like many wars, it is a struggle for scarce resources. But this is not a war with guns and bombs and killing; it is a war for talent in the accounting industry. The war for talent, however, has made it tougher and more expensive for companies to hire CFOs, controllers and other finance department professionals. And, in the accounting sector, the large and mid-sized firms have had to find ways to hold onto their best practitioners without breaking the bank. Human resources professional Donna Khawaja, 31, became embroiled in this war when she left Citigroup Canada to join Ernst & Young in 2004. She marched into the brand new post as director of recruiting,armed with a mandate to assemble a crack team for search and recruit missions to find finance professionals.

Of course, E&Y, like all the other large and mid-sized firms, had been recruiting on campuses for years. And the firm maintains cordial relationships with its “alumni” in the hopes that CAs who’d jumped to industry or other practices might one day consider returning. But the recent dynamics of the accounting industry — and the booming economy it serves — have drastically altered the calculus of business-as-usual human resources management, which is where experts like Khawaja come into view.

She promptly boosted the existing compliment of 6 internal recruiters, bringing in pros from other industries to create a newly structured department of 10 staff charged with developing new ideas for recruiting and retaining talented accountants. Her department, along with the HR team, has worked hand-in-glove with the rest of E&Y’s leadership to roll out an array of new benefits, learning opportunities and HR policies designed to make sure their best people stay put in a market characterized by escalating salaries and a deluge of attractive offers from industry and headhunters.

With headhunters and corporate recruiters aggressively luring CAs with handsome salaries and other perks, Khawaja is the first to admit that she’s got her work cut out for her. “It’s tough doing the job we’re doing right now,” she says cheerfully. “It’s going to be very challenging over the next couple of years. The pool is so small, so we’ve got to be very innovative and constantly manage our strategies.”

When Neil Cooney, executive director, human capital at Pricewaterhouse-Coopers Canada describes the mid-2000s as “the best professional services environment we’ve seen in years,” he’s referring to the period of time in which PwC, like most large accounting firms and the finance shops in industry, was faced with high demand for its services across all of its lines of business and market segments. Continued demand for help with regulatory re­quire­ments stemming from the Sarbanes-Oxley Act in the US and related regulatory change in Canada, a strong Canadian economy and a robust transactions market continue to drive growth across the firm. These factors have also turned into an explosion of demand for accounting and auditing services among publicly traded companies. Add to that the fact that some firms are still suffering the effects of the hiring freezes that followed the tech slump in the early part of this decade.

Any one of these macro forces would be capable of generating a demand for accountants. But taken together, they’ve produced a sizzling hot job market, especially in markets like Calgary and among audit professionals who have gained valuable experience implementing the Sarbanes-Oxley/Bill 198 reforms. “It’s pretty loud out there,” says Anne Bell, the regional managing director for Canada of Resources Global Professionals, a professional services consulting firm. “In my estimation, the market has changed quite dramatically in the last four or five years.” “There is increasing reliance on auditors and accountants,” says Sue Paterson, KPMG’s director of human resources for national recruiting. The net effect is that salary expectations have jumped, in some cases sharply, while the accounting firms have responded by sweetening the benefits pot and improving the quality of work life.

Independent consultant Andrew Chin is a Toronto-based sole practitioner who is seeing a lot of business come his way in the post-Enron era. Chin articled at Clarkson Gordon, now Ernst & Young, and left to go out on his own in 1991. In the past couple of years, freelancers like Chin have been kept busy as companies hire veteran accountants to identify, document and test all the myriad internal controls and recommend improvements. The reason — as corporate executives know all too well, as a result of Sarbanes-Oxley and Bill 198 — is that CEOs and CFOs must now personally attest to the integrity of publicly disclosed financial statements, orrisk serious implications for non­compliance. Moreover, board-level audit com-mittees have come to be seen as critical players in ensuring a company’s financialintegrity. As a result of all these changes, many companies have bolstered the staffing in their internal audit departments, while others have turned to consultants such as Chin or Resources Global Professionals forhelp. “These public companies have to getthis done,” says Chin, “but there’s a limited supply of CAs who know how to do the work.”

These tough-minded regulatory and governance changes have had a cascading effect on both industry and the accounting firms. Bell points out that many companies now want their senior financial ex-ecutives to have a CA designation, whereasin the past, either MBAs or CAs would havehad value. The CFO, adds Ralph Chauvin, a partner with The Caldwell Partners International, has taken on an increasingly broad-based strategic role at the top of the corporate ladder.

A few rungs down, life for controllers and internal auditors has also changed, for the better. Internal audit was long regarded as a backwater staffed by accountants on their way to retirement. No longer: “It’s the golden age for [internal] auditors,” says Morris Tambor, who runs MTCG & Associates Inc. [n.b. MTCG means Morris Tambor Consulting Group], a boutique executive search firm that specializes in general management, operations and finance executives. With CFOs certifying financial statements, their controllers and auditors are increasingly viewed internally as catalysts for process improvements that not only shore up financial performance but also hone processes and keep their bosses compliant with regulatory requirements. “The skill sets have changed for auditors,” he points out. “More and more, auditors are putting together a road map around career management.”

Meanwhile, the large and mid-size accounting firms are seeing demand for their audit services expand in response to these regulatory changes. “There’s no doubt that in the post-Enron environment, we’re seeing complex accounting standards coming into play, and it takes time to do the work,” says Don Craig, national functional leader for Deloitte & Touche’s audit practice.

Some firms have taken to recruiting abroad to deal with the labour squeeze. “We don’t have enough qualified candidates in Canada,” says Khawaja. “We’ve gone global in looking for audit professionals.” In some cases, that means bringing young accountants to Canada on short-term exchanges from other countries. But it has also meant finding many more per-manent recruits. In fiscal 2005, no fewer than 45% of E&Y’s hires came from the twelve countries with which Canada has certification reciprocity agreements. A decade ago, says Khawaja, the bulk of the newrecruits would have come from Canadiancampuses.

Which is not to say Canadian commerce grads aren’t being pressed into service to deal with the new realities. Philip Beau-lieu, associate professor in accounting at the University of Calgary’s Hakayne School of Business, says he’s had students who have been assigned to work on Sarbanes-Oxley compliance projects during their summer work placements. “This bodes very well forthese students because it’s an indication that there’s a demand for these skills.”

Add the organic growth of economic activity to that fact of accounting life and it’s not surprising to see that many firms are working hard to staff up. PwC’s Cooney notes there’s been a net increase of over 400 staff in the firm’s Canadian operation this year, compared to a jump of 300 in the previous year.

The result, of course, is that we’re in the midst of a bona fide “seller’s market,” says Tambor. “A lot of these guys have been writing their own ticket.” Adds Lance Osborne, president of Lannick Associates,an executive search firm, “These guys are in short supply and they know it.” Part of the problem, he adds, is that a lot of accountants who have done time in the au-dit trenches are suffering from burnout due to the enormous volume of compliance work. “The hottest part of the market is the part CAs are tending to stay away from,” he says.

Consequently, salary expectations have been running very high for two years, es-pecially among younger CAs, according to recruiters and industry insiders. The going rate for a CA with a few years’ experience is in the $70,000-to-$75,000 range, and the large firms say they are being very careful not to let salary inflation turn into a run-away train. As Craig notes, despite all the pent-up demand for seasoned audit professionals, the compensation grid within the firm’s Canadian operations has been moving up by only about 2% to 3% annually — which is essentially a cost-of-living increase.

Anecdotally, however, there are reports of a much hotter financial environment, with some CAs negotiating year-over-year wage hikes of as much as $10,000 between 2005 and 2006. Bell says many candidates at all levels of experience are now asking for salaries in the $90,000-to-$125,000 range. “Employers are aghast that the market has moved that dramatically.” Osborne adds that the labour market is such that employers looking for CAs with the requisite experience either have to pay the price or reduce their expectations. “Human resources will say the top salary we’ll pay for a CA is $72,000. But the market says, ‘I don’t care.’ If you can’t pay market rates, you can’t hire the guy you’re looking for.”

Higher up the corporate food chain, says Morris Tambor, in general, director-level accountants are commanding base salaries of $95,000 to $120,000 — a range that doesn’t include signing bonuses, which, these days, range from $5,000 to $20,000 one-time pay-outs — or premiums for extended travel time for auditors who log many hours on the road. But he points out that many employers still know they have the latitude to balk when approached by young CAs, with only a few years of professional practice to their names, demanding $90,000 a year plus perks. “There needs to be a greater sense of realism,” he says.

In a climate of rising salaries and talent scarcity, Osborne argues that all employers — industry and professional firms alike — need to ensure that they protect themselves against the cost and productivity losses associated with replacing key accounting personnel. He counsels his clients to pay about 5% above the going rate, a level that helps keep the headhunters at bay and the resumés in desk drawers. “The biggest thing you can do to retain your people is show them the love,” he says. “If you do that, you won’t have as much turnover.”

What seems to be clear is that the large public accounting firms are holding their own in the bidding war for knowledgeable audit professionals and other accounting specialists in high demand by industry. It’s not just due to competitive salaries. Khawaja points out that her firm has instituted generous referral bonuses for their employees, ranging from $2,000 to $7,000. At least as relevant is PwC’s decision, made three years ago, to roll out a Canada-wide profit-sharing program, which, Cooney notes, establishes “a very direct link between the firm’s success and our growth.”

As Toronto search consultant Andrew Gaspar observes, “The salaries in the public accounting firms are pulling up those in industry. It’s much more difficult now to move people out of public practice than it used to be.”

Bell has pursued a career path that reveals something about the current climate. She originally articled at PwC, but eventually decamped for CIBC’s wealth management group, where she worked for more than a decade, ultimately becoming the CFO. In recent years, however, she join­ed Resources Global Professionals, which specializes in parachuting veteran fixers into “complex situations” — one-off projects, such as retooling a company’s reporting systems to satisfy a raft of new regulatory requirements. The company’s niche “provides practice opportunities for experienced folks who are leaving industry positions to work in professional service firms.” The associates, who typically have more than 18 years of experience, have the latitude to pick and choose their assignments, of which there’s no shortage at the moment. In effect, they’re offering up an alternative career path, one that navigates between over-pressurized work environments that typify both industry and professional practice these days. As she says, “Some accountants are really questioning,‘Where does it all end? Will this white watercontinue forever?’ ”

The dilemma is formidable: the account-ing profession is surfing on the crest of a massive wave of business, set in motion by economic growth and regulatory reform. There’s big pressure on wages but not nearly enough bodies to do the work. “It’s not only an issue of recruitment,” observes Paterson. “It’s also an issue of retention.”

In the past few years, but increasingly in the past four to six quarters, the Big Four firms have begun to look very closely at how best to minimize turnover and burnout in workplaces that are often regarded as accounting factories where associates and junior partners are expected to put in punishing hours. With the tight job market, however, some practices are looking to improve the quality of work life, reasoning that more money doesn’t necessarily make for more fulfilled employees. “When we look at our demographics,” says Khawaja, “our professionals don’t want to work a hundred hours per week. They want more balance.” Work environment perks, adds Craig, “is one area where the professional service firms are way ahead of industry.”

Ernst & Young has been devoting a lot of attention to so-called quality-of-life improvements and has been rewarded for its efforts by landing on various best-employer lists. With all the international recruits coming on line, the company not only pro­vides the customary relocation benefits, but has been proactive about hooking up new hires with mentors and providing access to concierge services — a one-call problem-solving service for employees who need information on anything from health care to day care.

They’ve also rolled out or expanded a variety of flexible work arrangements — telecommuting, part-time opportunities for parents (mostly mothers) with young children, reduced summer hours, back-up day care and more days where the entire op­eration is simply closed. As Khawaja says, when the staff know that everyone’s lap top will be closed on a given day, staff can take a breather without worrying about what senior partners may think if they see an empty office.

Many firms, in turn, are putting renewed emphasis on providing their associates with professional development op-portunities so younger accountants can stay abreast of all the changes coming down from the securities commissions and the tax courts. But, as Craig points out, simply providing training is necessary but not sufficient: at Deloitte, the senior management team has quietly made it known to all partners that they are not to thwart busy associates who want to attend such sessions.

The other piece of the retention puzzle involves health and wellness. With health insurance costs skyrocketing, many firms have come to the conclusion that investing in their employees’ physical well-being translates into a more balanced work­force as well as reduced pressure on insurance premiums. Over the past couple of years, says Cooney, the firm significantly expanded its fitness perks, offering associates and partners accounts that they can use for fitness clubs and personal trainers. At Deloitte, says Craig, the value of this particular fringe benefit jumped to $600 from $400 between 2005 and 2006. Such perks are intended to dampen the upward pressure on salaries, but they don’t come cheap. As Craig notes, Deloitte’s spending on learning and personal growth benefits lurched up by 43% in the past year.

Has it worked?

Gaspar, whose business thrives on industry placements for high-quality, specialized finance professionals plucked from large and mid-size firms, professional service organizations and other industry, admits that such incentives “makes it very difficult to recruit people. Firms have recognized it is difficult to find good people and are working harder at keeping them.”

Cooney says that despite the labour market pressures associated with the economy and the regulatory environment, turn­over declined slightly at PwC in the past year.

Craig points out that Deloitte’s net turnover dropped to 16% of the total workforce from 19% between fiscal 2004 and 2005. With an audit staff of about 2000 professionals across the country, those kinds of improvements translate into about 60 or 70 accountants who will not need to be replaced, a costly process that includes candidate interviews, headhunter fees, and lost productivity.

“It’s not one big thing you do [to retain employees],” says Craig. “It’s a series of small things.”

John Lorinc is a Toronto freelance writer.