April 2001
Migratory Patterns of Entry-Level Accountants
By Kenneth M. Hiltebeitel and Bruce A. Leauby
While keeping a trained staff of employees is difficult, so too is funding the high cost of employee turnover. One international public accounting firm estimates that hiring and replacing an existing employee costs 150% of that employee’s annual salary. Given such expensive personnel costs, firms need to understand why entry-level accountants are leaving their jobs and where they are going.
The accounting profession is changing the work environment for entry-level accountants, trying to increase the level of job satisfaction and organizational commitment in the hopes of improving retention rates. To this end, the authors conducted a survey examining the initial employment and migratory patterns of recent accounting graduates that left their first place of employment for another. The data can be compared to a practice’s internal research to evaluate retention success.
The Survey
A questionnaire was mailed to more than 1,200 accounting graduates from three universities and 573 responded (47.8%). All of the participants had received their accounting degree within three years of the survey. The average age of the respondents was 23.5.
Exhibit 1 presents a profile of the respondents’ first and second jobs. For their first job, 55.8% of the respondents chose public accounting, 30.1% chose private industry, and 8.2% chose governmental and nonprofit accounting. International firms (the Big Five and private industry) accounted for 62% of the respondents’ first jobs, and local firms, 23.9%.
Exhibit 1 reveals that 20.1% of respondents changed jobs within the first three years of their employment. Of those, 23.5% chose public accounting and 51.3% chose private accounting. Of the respondents that changed jobs, 32.3% left public accounting firms, with the Big Five experiencing the largest exodus.
When analyzing turnover by year of graduation, significant increases result the more time the respondents had been a part of the workforce. Eight percent of the respondents that had graduated within one year of the survey had already changed jobs. Of the respondents that had graduated two and three years prior to the survey, 19.2% and 31% had changed jobs, respectively. Of the respondents that had been in the workforce for three years, 61.7% had changed jobs at least once.
While the turnover rate increases over time for both males and females, there is a higher turnover associated with females. Of the male respondents, 18.9% had changed jobs, whereas 21.5% of the female respondents had. Many firms have recently responded to this disparity by initiating special programs for the retention of female employees.
The survey asked respondents to indicate their overall level of satisfaction with their first job. Using a seven-point scale, the mean response was 4.8. However, the migratory group had a mean response of 3.9, whereas the nonmigratory group had a mean response of 5.1. Clearly, those graduates that left for a second job were less satisfied than those that continued with their initial employment. To prevent unnecessary turnover, firms should determine an employee’s job fulfillment as early as possible and attempt to rectify complaints as early as appropriate or feasible.
The survey also addressed whether academic performance had any bearing on employee retention. The migratory group’s GPA was 3.17 while the nonmigratory group’s GPA was 3.29, suggesting that better students tend to stay longer with their initial employer. This finding validates the practice of recruiting students that have demonstrated academic excellence in the hopes of preventing high turnover.
Exhibit 2 provides additional insight as to where the migratory group went for their second job. The table reveals that 53 accountants left public accounting (reading across) while 27 entered the field (reading down), resulting in a net loss of 26 individuals. On the other hand, private accounting experienced a net gain of 22 accountants (59 entering and 37 leaving). To uncover the reasons behind employee migration, each employment area of the accounting profession needs to be addressed.
Public accounting. Compared to the other job classifications, the turnover rates are the lowest in public accounting, at 16.6%. On the surface, this finding appears to be favorable. However, many individuals working in public accounting do so in order to gain the work experience necessary for their CPA license. Of the 53 respondents that did leave their first job in public accounting, only 18 (34%) remained in the field—a majority (53%) moved into private industry.
A breakdown of the 35 net departures from public accounting by year of graduation and gender follows:
| Male | Female | |
| One-year graduate | 3 | 5 |
| Two-year graduate | 6 | 11 |
| Three-year graduate | 5 | 5 |
| Total | 14 | 21 |
These statistics support the belief that most people tend to leave public accounting after gaining the experience (two years) needed to sit for the CPA exam. This theory rings true for females in particular.
A breakdown by year of graduation and gender of the 18 individuals that changed jobs but remained in the public accounting profession clearly indicates males tend to remain in public accounting longer than females.
| Male | Female | |
| One-year graduate | 4 | 2 |
| Two-year graduate | 6 | 3 |
| Three-year graduate | 2 | 1 |
| Total | 12 | 6 |
Private accounting. Private accounting has an overall turnover rate of 21.5%, but a majority of those changing jobs stayed within the field (57%). Apparently, these respondents’ initial decision to enter private accounting was a good one. Some good news can be found for the public accounting profession, since 7 out of 37 left private industry for public accounting. It is not uncommon for large public accounting firms to hire at the senior level or higher, and these findings support that availability and challenge the notion that all departures go in one direction.
Governmental accounting. Although the number of respondents in this classification was small, it is interesting to note that of the five that changed jobs, four stayed in the governmental or nonprofit area.
Nonprofit accounting. There is a relatively high turnover rate in this category (36%). Interestingly, only one-third remained in the nonprofit and governmental area.
Not in accounting. Of the survey’s 33 accounting majors that did not have an initial job in accounting, 11 (33%) made a second job change, with eight of those (73%) entering accounting. Perhaps these individuals were unable to find an initial job in accounting, accepting a position in another area until a change was possible.
Exhibit 2 reveals an additional positive note: Of the 115 that changed jobs, only nine sought employment outside of accounting. This finding suggests that the 92% that migrated still were satisfied with the opportunities afforded to them in the accounting profession.
A Closer Look at Job Changes in Public and Private Accounting
Exhibit 3 takes a closer look at the job changes pertaining to public and private accounting. The survey responses indicate that employees tend to migrate to firms that are of similar size. For example, of the 31 people from the Big Five that left public accounting, 22 (71%) remained with large firms, albeit the majority went to large private firms.
Of the 15 people that left regional or local public accounting firms, 11 (73%) stayed with a smaller firm, eight choosing a public accounting practice. Based on initial hire, smaller public accounting firms appear to have an eye for candidates that want to develop a career in public accounting. The findings also suggest that graduates use the Big Five as a stepping stone to larger private firms.
As demonstrated in Exhibit 3, accountants that leave large private firms usually go to other large firms. Of the 17 that left large firms for a second job, 13 entered a similar type and size firm. This migratory pattern concerning firm size is true for small firms, too, but the findings are less pronounced.
All employers are aware of the high cost associated with replacing employees. In the last few years, many firms have implemented major changes to their recruiting and human resources methods to initially hire the right person for the right job and provide a work environment that fosters job satisfaction. Studies conducted within the next few years can determine whether these policy changes are accomplishing their objectives.
Editor:
Robert H. Colson, PhD, CPA
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