Number of entry-level hires growing in consulting and other new business areas, CPA firms report.

In response to developments in information technology and changing business practices, accounting firms' staff requirements are changing.

Auditing departments, which traditionally provided that crucial first job in public accounting, now generally require fewer entry-level accountants. New growth areas, such as consulting, are where much of the hiring action is shifting, and recruiters for CPA firms increasingly are seeking graduates with a broad understanding of the way companies operate and business in general. And they are seeking them from among students in a variety of disciplines.

One example of the impact of these changes is KPMG Peat Marwick's recent announcement of plans to drastically cut the number of entry-level accountants it hires, starting in 1995. According to a letter sent to accounting educators and guidance counselors, Bernard J. Milano, partner in charge of recruiting, said Peat Marwick expected to hire only 800 to 1,000 graduates for its assurance, tax and performance improvement practices in 1995, down from the approximately 1,600 it hired for these areas in 1994. Peat Marwick also said it expected to make only about 5,000 campus visits, less than half last year's number.

This reduction in hiring "is not a temporary measure, nor is it driven by the economy," the firm said. "We have significantly changed the way we conduct our compliance services and will need far fewer individuals at inexperienced levels."

Other large firms also said they expected to hire fewer new accountants strictly for their auditing practices. However, they expected their overall graduate hiring to remain steady or to increase, mainly in response to client needs in other business areas.

For example, at Ernst & Young, Charles B. Eldridge, partner and national director of recruiting and university relations, said he thought entry-level hires in 1995 would be up from 1994, "but that would be primarily because of the increase in the firm's consulting practices. Hiring into our audit practice has declined over the last several years as a result of changes in that area and the impact of technology," he said. Ernst & Young expected to hire over 4,000 professional staff (interns, new and experienced) in 1994 and approximately the same total number in 1995, he added.

The firm also is interested in people with five to nine years' experience in areas such as banking, insurance, health care, manufacturing, benefits and compensation, corporate finance and information technology. At all levels, Eldridge stressed, teamwork, communications and analytical skills and a "process orientation" are vital. "In today's changing and increasingly competitive professional services marketplace, we want people who add value in all aspects of their work, who look at the way an entire business operates, and who--right from the beginning--are able to think on their feet, understand a client's business thoroughly and proactively develop solutions to problems."

In 1994, Coopers & Lybrand hired approximately 1,400 graduates. The firm expects to hire a similar number in 1995 for its various lines of business, according to Brent C. Inman, partner and national director of recruiting.

To meet its entry-level staffing needs, Inman said, "the firm has become very selective. Over the past four or five years, we have focused on the top students from the top schools, regardless of educational background." Coopers & Lybrand is casting a wider net, looking for people with majors in liberal arts, business or law, as well as accounting. "This is an important part of our business strategy," Inman noted. The firm also has hired close to 500 MBAs from the top 20 U.S. MBA programs over the last three years.

"We want broad thinkers, people with strong analytical skills who are effective team players," Inman said. One of the reasons his firm has had to increase its sources of entry-level staff is that "accounting education has become too narrow and has not prepared students with a broad understanding of the concepts underlying business activities. Changes are needed in accounting education, and we are very pleased that we are beginning to see progress in this regard." He emphasized that "there are excellent career opportunities in our profession."

At Price Waterhouse, hiring of entry-level accountants to fill its audit and tax needs has been "steady from year to year," according to Larry P. Scott, managing director of national recruiting. However, the firm is hiring more graduates for its big growth areas--consulting, information technology and dispute resolution and corporate recovery. "Our goal for 1995 is to hire approximately 15% more graduates than in 1994, and I expect the majority of that increase will be in these growth areas."

Arthur Andersen & Co. hired approximately 1,900 graduates in 1994, according to Dennis R. Reigle, partner and managing director, recruiting and university relations. The firm expects to hire the same number or slightly more in 1995. Similar numbers hold for Andersen Consulting, he added.

Deloitte & Touche has increased its entry-level hires by approximately 40% compared with four years ago, increasing the number of entry-level hires each year over that period, said Mark M. Chain, partner and national director of recruiting. The firm currently hires about 1,700 graduates a year for its audit and accounting and tax groups and does not anticipate cuts in these areas, he said. "We favor developing our people with opportunities from within the firm, and we need a sufficient number of people in the pipeline to staff our planned growth in client services," he added.

Sources of new hires. The question of how to prepare accounting graduates better to meet the needs of prospective employers is a top priority for both the profession and business. "Accounting education will have to change to keep in step with the dramatic changes in business," according to Ernst & Young's Eldridge. "Companies are changing the way they operate and trimming costs to be more competitive. Students need to understand that, so once they're on the job they can provide value-added services that clients require." (See "Will Future CPAs Start Their Accounting Careers in Industry?" on page 95.)

Price Waterhouse recruits at about 300 schools and actively recruits graduates with MBAs. "I expect the MBAs to be about 10% of our hires, in addition to 20% with other graduate degrees, such as master's in accounting or tax," said Scott.

Accounting students need improved skills in communications, analytical thinking and teamwork, as well as an ability to adapt to change to meet the changing business environment, he said. "We are working with the schools to modify their programs, but this will, of course, take time," he added.

Like the other firms, Arthur Andersen recruits graduates with liberal arts, as well as accounting, degrees and MBAs and those with master's degrees in specialized disciplines such as tax, accounting, finance, hospital administration and others. Andersen seeks candidates at about 400 colleges and 20 MBA programs.

According to Deloitte & Touche's Chain, the firm recruits at "hundreds of schools but focuses much of its effort on the top business schools around the country and hires people with MBAs and liberal arts degrees as well."

Considering the changing demands of prospective employers, educator Stephen E. Loeb, professor and chairman of accounting at the University of Maryland and Ernst & Young Alumni Professor of Auditing, said he thought "most graduates eventually will need a master's degree."

Corporations have said they want new hires to be better prepared to understand and meet the needs of the business world. (See "Accounting Grads Seen as Unprepared for Industry" on page 99.)