IN BRIEF
The shortage of individuals entering the CPA pipeline has reached a crisis stage. While professional institutions like the AICPA have been working on long-term strategies to address the problem, there remains a need for short-terms solutions that can help close the gap. The authors advocate a holistic human resources strategy rooted in an intergenerational approach that can attract accountants in the short term while contributing to long term retention.
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The shortage of accountants has become a crisis for the profession. A recent Wall Street Journal article reported that over 300,000 accountants left the field between 2019 and 2022 (L. Ellis, “Why So Many Accountants Are Quitting,” Wall Street Journal, Dec. 28, 2022, https://tinyurl.com/yc6ef4hy). At the same time, there has been a significant decline in the number of students graduating with an accounting major. According to the AICPA’s 2023 Trends report, students graduating with an accounting degree shrunk to about 47,000, a decrease of 10% from 2021. Furthermore, the Bureau of Labor Statistics projects a 6% growth in demand for the accounting profession, which equates to 136,400 openings per year (K. Gurchiek, “Tackling the CPA Shortage in Today’s Job Market,” SHRM, May 5, 2023, https://tinyurl.com/muw8ratv). This increase in openings has been attributed to anticipated retirements and replacements for those individuals changing careers. Overall, these statistics reflect the magnitude of the shortage of accountants the profession faces, both now and in the years to come.
Financial statement reporting errors are increasing, as evidenced in the business press and academic research. A recent article from Bloomberg.com reported that more than 720 companies cited insufficient staff in accounting and other departments as a reason for potential errors. This disturbing statistic represents a 30% increase from 2019, according to an analysis by equity research firm Hudson Labs for Bloomberg News (J. Constantz, “There Are 340,000 Fewer Accountants, and Companies Are Paying the Price,” Bloomberg, Mar. 1, 2024, https://tinyurl.com/326pufv8). Such errors undermine investors’ and creditors’ confidence in financial statements.
Regulators have attributed the recent increase in audit deficiencies to CPA firms’ staff turnover and reliance on less-experienced workers (M. Maurer, “PCAOB Proposes Turnover Metrics and Other New Disclosures for Audit Firms,” Apr. 9, 2024, https://tinyurl.com/zyyps8cv). The PCAOB, (“Concept Release on Audit Quality Indicators,” PCAOB Release 2015-005 July 1, 2015, https://tinyurl.com/2ca8wnhs) identifies audit-employee turnover as an important indicator of audit quality, and both the PCAOB and the Center for Audit Quality have raised concerns that employee turnover likely adversely affects audit quality (Center for Audit Quality, “Audit Quality Disclosure Framework (Update),” June 2023, https://thecaq.org/audit-quality-disclosure-framework). By using employee turnover data from the 20 largest US accounting firms, a recent academic study documented the relationship between audit-employee turnover and poorer accounting quality—as measured by accounting misstatements, discretionary accruals, accounting and auditing enforcement releases (AAER) and going concern opinions (J. Khavis and B. Szerwo, “Audit-Employee Turnover, Audit Quality, and The Auditor-Client Relationship,” February 2025, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4193139).
Other academic studies concluded that shortages of accountants are associated with adverse outcomes: one study linked accounting personnel shortages in corporations to increased internal control weaknesses (R. N. Hann, J. Yang, and Y. Zheng, “The Price of an Accountant Shortage: Evidence from Job Vacancy Duration and Internal Control Weaknesses,” December 2023, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4695588), while another found that such shortages have led firms to expand recruiting beyond their typical set of highly ranked “target” schools, resulting in lower audit quality (J. Ahn, R. Hoitash, U. Hoitash, and E. Krause, “Labor Supply Drought: The Case of Accountant Talent Shortage and Audit Outcomes,” September 2024, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4792026).
Long-term Solutions and the Acute Crisis
In response, efforts have been made to attract prospective students to major in accounting and reduce barriers to entry into the profession. One example is the AICPA’s Pipeline Acceleration Plan, which includes initiatives to increase the awareness of accounting careers, improve the perception of accountants, provide high-quality training, improve firm culture and compensation, increase the diversity in and inclusiveness of the profession, and partner with colleges and universities to attract students to accounting. Ultimately, these initiatives may be helpful in increasing the supply of accountants but will likely take time to materialize. For example, if the AICPA’s strategies are actually effective at attracting new students to the profession, it would take at least four to five years for these new accountants to be able to accept fulltime positions in the field. Furthermore, initiatives to change the perception of the profession will likely be measured in years or even decades.
The AICPA is advancing a long-term strategy to solve an immediate problem. Thus, absent an unanticipated decline in the demand for accountants, the profession is likely to face a personnel shortage for years to come. Accounting firms and corporations cannot rely on external parties to solve this problem; they must be proactive in attracting and retaining qualified professionals.
This article attempts to provide some short-term (i.e., one year or less) solutions to help alleviate the accounting shortage. The authors’ strategy focuses on attracting new accountants and retaining those currently in the profession. These strategies are designed to provide short-term impact, potentially showing results within a year, and contributing to long-term employee retention.
We suggest employing a holistic human resource strategy incorporating findings from generationally informed research streams to provide a novel approach to closing the workforce talent gap. To better understand this approach, we first summarize the research and practical work on the impact of generational differences on employee perceptions and behaviors. Next, we provide an overview of how individual employers can adopt these strategies to attract new accounting graduates and retain current accounting professionals.
Understanding Generational Differences in the Workplace
Generational differences refer to shared characteristics across a cohort, usually 15–18 years long, that are the result of cultural experiences (e.g., the Great Depression, Civil Rights Movement), technology (e.g., smartphones, personal computers) and attitudes (e.g., social justice, climate change) (K. Parker, “ How Pew Research Center Will Report on Generations Moving Forward,” Pew Research Center, May 22, 2023, https://pewresearch.org/short-reads/2023/05/22/how-pew-research-center-will-report-on-generations-moving-forward). The practice of assigning generations is imprecise and involves a retrospective analysis of when significant shifts happen in society (Parker 2023). Exhibit 1 summarizes commonly held generational differences.
EXHIBIT 1
Generational Information and Characteristics
Research examining the impact of shared cultural experiences provides insight into strategies organizations can employ to attract and retain workers, especially in industries with defined career paths and expectations of employee longevity.
Generational Differences and Recruitment
Recruiting into the accounting profession is increasingly challenging; for example, the AICPA 2023 Trends report highlights both growing demand for accountants and a declining supply of qualified candidates. The report raises specific concerns about the gradual decline in bachelor’s degree completions and enrollment in accounting programs since 2015/2016.
Generations enter the workforce with different values and expectations, which have important implications for recruiting and retention practices. For example, research cited in Exhibit 1 shows significant differences in career advancement expectations between Millennials, Gen Xers, and Baby Boomers. Translating this to action, when recruiting Millennials, messages should emphasize the paths to partner. While in the workplace, Millennials value diversity to a greater extent than Baby Boomers and Gen Xers, additional research shows that Millennial college students placed the highest importance on strong colleague and supervisor relationships, followed by rapid advancement and development opportunities. Work/life balance was also rated highly by respondents (J. King, “How to Recognise and Reward Millennials for their Work,” Reward & Employee Benefit Association,” May 6, 2020, https://tinyurl.com/4d-fyrtph). These findings can help firms target recruiting and value messaging to prospective employees, a critical first step. Using a single message, and single platform, to recruit employees is no longer sufficient; firms are advised to create materials that authentically speak to each generation.
Within the context of accounting recruiting practices, Durocher, Bujaki, and Brouard examined the legitimacy of recruiting tactics, with legitimacy defined as matching Millennial applicant preferences in their website content (“Attracting Millennials: Legitimacy Management and Bottom-Up Processes Within Accounting Firms,” Critical Perspectives on Accounting, vol. 39, pp. 1–24, 2016). Durocher et al. examined web content for the Big Four and Next Four in Canada and demonstrated that (as expected) legitimacy mattered to applicants. As seen in Exhibit 2, firms focused their web content first on highlighting meaningful work experiences, followed by career development opportunities, and the firm’s commitment to diversity. Training, development, and support were identified as important, along with teamwork, a friendly environment, and the quality of co-workers. Work-life balance was evident on about 3% of web pages. These results help recruiters understand how Millennials assess legitimacy as part of their employment search process and can inform messaging and culture-building tactics, reinforcing that applicants want to see and experience these factors when assessing their career moves.
EXHIBIT 2
Factors Influencing Job Interest
Generational Differences and Retention
Prior studies indicate that employee turnover in professional accounting firms has been a persistent and concerning issue throughout the last five decades. Survey evidence from the 1970s suggests that the big eight firms experienced approximately a 20% (with a range from 15 to 45%) annual turnover rate (B. Bao, D. Bao, and M. Vasarhelyi, “A Stochastic Model of Professional Accountant Turnover,” Accounting, Organization and Society, vol. 11, no. 3, pp. 289-296, 1986). Furthermore, approximately 70 to 80% of new hires left these firms during their first five years (A. Tyra, “Staff Turnover in CPA Firms,” The Woman CPA, January 1980, pp. 13–28; M. Egan, “CPA Firm Turnover: Problems and Solutions,” Ohio CPA Journal, Autumn 1985, pp. 11-13). A collaborative study by PricewaterhouseCoopers (PwC), the University of Southern California, and the London Business School, found that the turnover rate of Millennial professional accountants is higher than that of the preceding generations (“PwC’s NextGen: A Global Generational Study 2013 Summary and Compendium of Findings,” 2013, https://tinyurl.com/bdeznxhj).
In a more recent period, post-Covid, overall professional turnover rates increased. Based on the 2022 INSIDE Public Accounting “National Practice Management Benchmarking Report,” a third of the 574 accounting firms surveyed experienced professional staff turnover above 20% and five percent of firms reported a turnover rate of more than 30% (https://tinyurl.com/4f5vez74). A study released in 2023 surveying accounting and finance professionals showed that turnover rate was highest (39%) among the 18-38 age group (i.e., Millennials and Gen Z), compared to the two other age groups considered: 39-54 (28%) and 55 and older (23%) (Q. Duong and L. Jiles, “Talent Retention in the US Accounting and Finance Profession,” Institute of Management Accountants (IMA), October 2023, https://tinyurl.com/4z32fzm4). Based on this review of prior research, Millennials and Gen Z exhibited the highest turnover rate.
Another important issue is the relative retention rates in CPA firms versus in corporate accounting functions. Earlier studies primarily focused on the turnover from public accounting to industry (e.g., D. F. Istvan and J. B. Wollman, “Turnover in CPA Firms,” The CPA Journal, vol. 46, no. 7, p, 21, 1976). The recent scenario, termed as an “exodus” from the public accounting profession, however, is attributed to “deeper workplace shifts” among young and mid-career professionals (Ellis 2022).
Based on LinkedIn data from the post-Covid period, Lewis and Soroñgon reported that turnover is highest in the professional services industry, which includes the Big Four, compared to other industries [“Industries with the Highest (and Lowest) Turnover Rates,” Linkedin Talent Blog, Aug. 11, 2022, https://linkedin.com/business/talent/blog/talent-strategy/industries-with-the-highest-turnover-rates].
Results from a recent study by the Illinois CPA Society showed that both public and private accounting firms reported a higher turnover rate, indicating the retention issue is broader than just public accounting (“Righting Retention,” Insight, Special Edition, 2023, https://tinyurl.com/3pp6syut). Generational differences in expectations of the centrality of work, along with culture, may help explain these differences in retention. Recent research indicated a wide gap (roughly 40%) between expectations of worklife balance and employer strategies to provide balance (C. L. Comunale, J. H. Irving, and J. E. Trainor, “The Accounting Pipeline,” The CPA Journal, September/October 2023). A KPMG white paper (KPMG American Worker Pulse Survey, 2023, https://tinyurl.com/4yak2sbb) identified work-life balance as one of the top three issues affecting US accounting employees, with key differences in return-to-work preferences for both generation and gender. Flexibility, a component of work-life balance, was rated as important by Gen Xers and Millennials (reduced work week specifically). Almost nine out of ten managers reported rewarding employees for voluntarily returning to the office, which may contribute to future inequity in salary, career development and advancement and, likely, retention. Termed “proximity bias,” research has identified differential outcomes for employees who are in the office as compared to those that remain working from home post-Covid (e.g., A. S. Hirsch, “Preventing Proximity Bias in a Hybrid Workplace,” SHRM, Mar. 22, 2022, https://tinyurl.com/4erhsrjz).
Retention is also impacted by how different generations experience the workplace. Research by Gallup (State of the Global Workplace: The Voice of the World’s Employees, 2024, https://tinyurl.com/3jfcbjhb; State of the Global Workplace, 2022, https://tinyurl.com/d5phne36) on well-being, engagement, stress, and burnout, detailed a difference in overall well-being between those under 35 and those over. Gallup (2024) reported a 4% difference in well-being, the largest since 2009. This supported and extended their findings on employee engagement (2022), which showed the greatest level of active disengagement, stress, and burnout are experienced by Gen Z, the newest entrants in the workforce. More than half of Gen Z (and younger Millennial) employees reported being disengaged at work, three percentage points higher than their older Millennial, Gen X, and Baby Boom colleagues. More concerning, 68% of Gen Z employees report feeling stressed and 34% burnt-out. Only 40% of Baby Boomers, on the other hand, reported feeling stressed and 18% reported experiencing burnout. These differences in the manner in which employees perceive and react to the workplace have the potential to create misunderstanding, misaligned expectations, and tension, which contribute to feelings of disengagement, stress, and burnout. Thus, perceptions contribute to retention issues for firms.
Because many Baby Boom and Gen X employees serve in leadership roles in firms, this misalignment can have important implications for recruiting, career advancement, and retention. Firms would be well-advised to create formal and informal mechanisms for assessing employee engagement and providing ready access to mental health and wellness solutions.
Short-Term Recommendations to Enhance Recruitment and Retention
Although this discussion focuses on short-term recommendations that can be implemented immediately to improve outcomes within a year or less, these action steps will benefit retention as well. As evidenced by both academic and practical research cited above, generational differences contribute to variability in the perceptions, expectations, and experiences within workplaces. Much can be taken from this stream of research to inform policy and practice with firms to retain and recruit new talent. An evaluation of current human resource practices through the lens of these generational differences could yield new “sticky” policies that better engage employees and connect them with firms and the field. Measuring the success of these strategies can take multiple forms, including employee absenteeism and sick time, changes in employee engagement survey results (if conducted with regularity), and overall employee morale. Longer term analyses could include improvement in recruitment yield and offer acceptance rates, as well as retention trends.
Recruitment strategies.
The legitimacy of recruiting materials has been shown to be important to Millennial candidates and can be assumed to be important to Gen Z (D. Pandita, “Innovation in Talent Management Practices: Creating an Innovative Employer Branding Strategy to Attract Generation Z,” International Journal of Innovation Science, Vol. 14, No. 3–4, pp. 556–569, 2022, https://doi.org/10.1108/IJIS-10-2020-0217; Deloitte, Deloitte’s 2024 Gen Z and Millennial Survey. Deloitte Insights, May 2024). Ensuring that messages are generationally relevant and consistent with firm practice is important. Highlighting career paths and rapid progression (if it exists at the firm) can motivate Millennials. Creating and communicating career ladders that include opportunities in addition to partner represents opportunities to differentiate in the recruiting process.
Developing and communicating options for remote and hybrid work, along with work/life balance programs, can serve as a competitive advantage in the recruitment process. This is an expectation for Gen Zers, but also increasingly for Gen Xers who are caring for children and parents simultaneously. Because of the profession’s reputation for long hours and frequent travel, building flexibility wherever possible will serve both recruiting and retention efforts.
Engagement and retention strategies.
Creating a holistic employee engagement strategy is critical to drive retention. Engagement and retention strategies rely on an up-to-date understanding of generational needs and preferences, which require assessment of current practice and policy. Areas of possible focus are discussed below; practitioners should also seek employee voice through focus groups, engagement/morale surveys, and human resource audits.
Career development. Younger generations expect rapid career development. Do firms offer career paths that remain motivating due to the timing and frequency of promotions or developmental activities? Are there alternatives to partnerships in public accounting firms that may offer better work/life balance opportunities? Analyzing mobility programs within the organization to ensure that employees are recognized, challenged, and reinforced for their work on a faster schedule will be important to engage these workers.
Developing and communicating options for remote and hybrid work, along with work/life balance programs, can serve as a competitive advantage in the recruitment process.
These career paths should be paired with professional development opportunities, providing both technical and social tools to boost engagement and better manage feelings of stress and burnout. While not directly examined in the Gallup (2022) study, feelings of stress and burnout for younger generations may be the result of feeling underprepared or unready for the demands of the profession (I. Wilson, “Young Accountants at Risk of ‘Burnout,’ Warns Springfox,” Accounting Times, Aug. 13, 2024, https://tinyurl.com/2ktwem7p).
Creating policy and practice around frequent feedback that is linked to career development and advancement opportunities should better engage Millennial workers (“Managers: Millennials Want Feedback, but Won’t Ask for It,” Gallup, https://tinyurl.com/dsjcurpn; N.M. Baker Rosa, S.O. Hastings, “Managing Millennials: Looking Beyond Generational Stereotypes,” Journal of Organizational Change Management, vol. 31, no. 4, pp. 920–930, 2018, https://doi.org/10.1108/JOCM-10-2015-0193). Establishing milestones within existing career paths within firms or creating micro-promotions may be powerful motivators to retain workers in this generation. Further, creating paths that include an option other than partnership that affords similar prestige and salary may be a meaningful addition to career development programs within firms. The importance of creating and sustaining supportive relationships within the work team (supervisor and colleagues) also follows these results.
Mentorship. Younger generations demonstrate a higher need for feedback, and they seek formal and informal mentorship programs to accelerate workplace socialization (W. M. Murphy, “Reverse Mentoring at Work: Fostering Cross-Generational Learning and Developing Millennial Leaders,” Human Resource Management, vol. 51, no. 4, pp. 549–573, 2012). Formal, targeted mentorship programs have been found to yield positive benefits for women and accountants of color, but informal forms of mentorship that connect to the political system within an organization remain elusive (T. A. Scandura and E. A. Williams, “An Investigation of the Moderating Effects of Gender on the Relationships between Mentorship Initiation and Protégé Perceptions of Mentoring Functions,” Journal of Vocational Behavior, vol. 59, no. 3, pp.342–363, 2001, https://doi.org/10.1006/jvbe.2001.1809; D. A. Thomas, “The Truth about Mentoring Minorities: Race Matters,” Harvard Business Review, vol. 79, no. 4, pp. 98-107, 2001). Creating opportunities for individuals both within and across identity groups to meet in an informal setting can build these partnerships. Allyship training for all staff could also increase informal mentoring relationships (T. M. Melaku, A. Beeman, D. G. Smith, and W. B. Johnson, “Be a Better Ally,” Harvard Business Review, 98(6), 131-139, 2020).
Focusing on developing intergenerational mentorship programs will be critical in the coming years, as retirements increase. Intergenerational teams allow for mutual learning and upskilling. Older workers can experiment with new technology and transfer organizational knowledge, culture, and history, while younger workers bring in new skill and fresh perspectives. These mentorship relationships can be meaningful in employee development and engagement, by demystifying organizational culture. Similarly, constructing teams that intentionally blend generations provide opportunities for similarities to surface, thereby reducing tension, elevating perceptions of support, and increasing engagement. Increased collaboration and improved team dynamics are important considerations for employee morale and retention, as well as organizational performance.
Best practices for intergenerational mentoring programs include the following:
- Defining the goals and expectations for participants, emphasizing alignment of employee and organizational goals. Possible goals may be knowledge transfer, informal network development, employee (mentor and mentee) support, and employee retention and engagement.
- Create opportunities for compatible mentor/mentee relationships to occur naturally (rather than through assignment). Provide opportunities for interested individuals to meet, share experiences, and build trust before assigning the relationship.
- Provide training and support for the mentor/mentee to get the most out of their relationship. Possible areas of training could include communications strategies, awareness of intergenerational patterns, and technology training.
- Create experiences and activities that provide structure for the relationship to develop, especially at the beginning.
- Evaluate the success of the program through the measurement of key metrics (research supports job satisfaction, increased self-esteem, enhanced cooperation, personal growth, and efficiency in work output as outcomes of mentoring programs; see K. Gadomska-Lila, “Effectiveness of Reverse Mentoring in Creating Intergenerational Relationships,” Journal of Organizational Change Management, vol. 23, no. 7, 2020, pp. 1313–1328).
Work/life balance. Work-life balance remains an expectation of employees, especially those from younger generations. Aligning human resources practices around remote work, reduced work weeks, and enhanced paid time off (PTO) (e.g., to allow for volunteering) are important in designing systems that engage all employees. Not all positions allow for such flexibility, which may require an alternate career path for employees who seek it. Traditional organizations separate from employees when work preferences cannot be accommodated; creative employers will find different ways to engage these employees in order to retain them (Deloitte 2024).
Compensation and workplace environment. Total compensation, inclusive of benefits and workplace environment, is even more important to employees now, especially college graduates just entering the market. Pay transparency is a salient issue for Gen Z talent (W. Heisler, “Pay Transparency: How Much Disclosure do Employees Want?” Business Horizons, 2024, https://doi.org/10.1016/j.bushor.2024.11.004). The desire for competitive health care coverage and rates, opportunities to engage in philanthropic efforts on work time may have a greater impact on offer acceptance than simple pay rates. The desire for meaningful work, coupled with the recognition that work isn’t the only determinant of happiness, has led organizations to reassess their benefit packages to ensure they meet the needs of current and prospective employees.
Nevertheless, pay remains an important factor in retention and organizations are responding. Pay increases have returned to the workforce in 2022, as have bonuses. Pay increases have averaged around 3.5% across industries for 2022, which lags inflation, meaning that real wages continue to fall (M. Cohn, “Accountants See Bonuses Growing this Year,” Accounting Today, Dec. 21, 2022, https://tinyurl.com/2p9tbm9b; S. Coffey, “Employers Focusing on Starting Salaries and Workload to Ease Pipeline Pain,” Journal of Accountancy, Nov. 13, 2024, https://tinyurl.com/34zppxry). Organizations must think beyond pay to retain employees, including opportunities for remote or hybrid work. According to McKinsey’s American Opportunity Survey (https://tinyurl.com/3s4my5np), 58% of workers report working from home at least one day a week; 87% would take the opportunity to work remotely if offered.
Immediate Impact
The shortage of qualified accountants and CPAs remains a critical state. Evidence suggests that the shortage of qualified accounting professionals is beginning to impact the accuracy of financial reporting. Thus it is critical for the profession to be proactive in attracting and retaining qualified individuals.
This article provides a group of short-term suggestions that can help increase the retention of qualified accountants in the profession. These recommendations are grounded in better understanding generational differences within any organization. While implementing these recommendations will take an investment in time and resources, they can enhance your organization’s ability to maintain a high-quality workforce.
