The 150-hour rule is not the problem

Every time the accounting profession feels a squeeze for human resources (call it talent or human capital), the knee-jerk reaction is “blame” the 150-hour educational requirement. While the 150-hour requirement may be a factor, it is only one of many factors that contribute to pipeline concerns. But to conclude that the education requirement is the only reason — or even the primary reason — is a bit shallow. 

Some members of the profession don’t want to acknowledge some harsh realities:

• Young professionals are leaving the profession early in their career;
• Overall university enrollment has been declining;
• “Career competition” is intense;
• The work is boring and HR management is poor;
• Recruitment of ethnic and culturally diverse minorities is weak; and,
• The public accounting business model is outdated.

The Wall Street Journal has reported that more than 300,000 U.S. accountants and auditors have left their jobs in the past two years, a 17% decline (Dec. 28, 2022). There might be some skepticism about that number, but if it is only one-half of that, it is a big number of people to lose. Those are people who have completed the education requirement. Their departure as young professionals is creating increased demand for people across the profession. Over the past 20 years, universities have produced a little more than 50,000 graduates per year. 
Of course, there has been a decline in students completing a bachelor’s degree in accounting over the past few years. According to the American Institute of CPAs, it has been a decline of about 9% between 2012 and 2020. That matches pretty closely with the overall decrease in all undergraduate enrollments of 9.9% between 2009 and 2020 (National Center for Education Statistics). 

So, assume that all academic majors are seeing similar decreases in students. The good news? Total undergraduate enrollment is projected to increase by 8% (from 15.9 million to 17.1 million students) between 2020 and 2030. Accounting majors will likely increase as a result. Good news, but it will take a while for the pipeline to increase.

The world we live in is constantly changing. Change creates opportunity. Students have more choices for a career than they have ever had, particularly in financial services and technology. Accounting is facing “career competition” like never before.

The work is boring. Many young accountants don’t see the relevance of their work. That is why they are leaving (remember – 300,000 left). If what you are doing isn’t relevant, the work you are doing isn’t very gratifying — it is boring. That might be the fault of standard-setters establishing standards that seem to be irrelevant. It could also be the fault of partners that tell your professional what to do, but rarely, if ever take time to explain why to do it. So the challenge is how to make the work more interesting and relevant to your practitioners (and clients).

The profession needs to get serious about minority recruitment. The percentage of minority CPAs is not even close to keeping up with the percentage of minorities in other professions. Today, minorities only represent 4.3% of the accounting profession, compared to 14.1% of the legal profession. While the AICPA and many state CPA societies have programs focused on minority recruitment, the wider profession (including employers) is underperforming. This is well illustrated in the recent Illinois CPA Society report, “Uncovering the Barriers to Success.” One participant comment is telling: “Every time I thought I had a handle on things, my manager gave me negative feedback but no guidance on how to improve. I really liked public accounting, but this cycle made me doubt myself and left me feeling drained.” 

The business model is broken. Increasingly it seems that younger staff are not interested in ownership. Partnership is not as desirable as a career goal as it was in prior generations. Partners need to talk to their younger staff about why that is. It may require some changes that are uncomfortable, but if you want staff to eventually become owners, you don’t have much choice. 

And partners need to share the wealth. That’s right: Share the wealth. Re-think your compensation strategy. Firms are increasingly competing with industry accounting and other professions that do a better job in terms of compensation. So, partners need to take a hard look at the business model and compensation strategy if they are serious about attracting and keeping people. It may be a hard reality, but it is reality.

The profession needs to be cautious about moving to a 120-hour education requirement. That is not the “core reason” for the decline in the HR pipeline.