Spotlight on retention: business and industry moves to keep talent in-house.

While retaining the best and brightest continues to be difficult for many public accounting firms, the issue looms just as large for those in business and industry.

In just a few short years, CFOs and controllers statewide have seen a tremendous shift in the supply and demand of qualified finance and accounting staffers--and for the first time, many are competing with public accounting firms for the same scant pool of candidates.

"The pool of qualified candidates certainly has dried up," says Alexander Georgiev, CPA, controller for CBS Studio Center in Studio City. "Up until the last two or three years, I could put an ad in the paper or on a website and I would get a barrage of applicants and at least a half dozen excellently qualified applicants.

"But those days are long gone."

While many in business and industry were surprised by the shortage, this labor issue is nothing new for accounting firms. In a 2005 CalCPA survey, 45 percent of public accountants listed "attracting and retaining quality staff' as their firm's most pressing concern, while only 23 percent of accountants in industry listed the same as their company's top concern.

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THE SUPPLY CHAIN RATTLES 

A perfect storm in the supply chain has been brewing for a number of years. The number of accounting degrees awarded in the late 1990s and the early part of this decade was significantly lower than the previous decade.

Starting in the 1976-77 school year, colleges and universities pumped out more than 50,000 bachelor's and master's degrees in accounting every year, steadily building until it reached a climax of 61,220 students in the 1994-95 school year. But in 1998, those figures dropped below 50,000, reaching a low of 44,695 in 2001-02, according to the AICPA's The Supply of Accounting Graduates and the Demand of Public Accounting Recruits report.

This diminished supply of students is now entering the workforce, at a time when Sarbanes-Oxley requirements are keeping all available qualified hands busy.

"You combine the lack of candidates with the sudden demand for talent in the public accounting sector and it all adds up to an extremely tight labor market," says Georgiev. "For the first time in my 14 years here, we are competing for talent with not only our direct competitors, but the accounting firms as well."

A recent survey of hiring managers by Robert Half International, the Employment Dynamics and Growth Expectations Report released at the end of August 2006, gives shape to the labor crunch. A year ago, 55 percent of hiring managers said it was difficult to find qualified candidates. In this year's survey, 81 percent said that recruiting is equally or more challenging today.

With such a dog-eat-dog labor market, it's no surprise that companies are doing more to block the exits and keep key staffers happy.

The study also found that employee turnover rates are increasing, and as a result, 30 percent of hiring managers say their firms have instituted new policies and programs to increase staff retention rates in the last 12 months, up from 23 percent this time last year. The primary measures taken include pay raises, better benefits and more flexible schedules, according to the study.

STOCK AND POSITION OPTIONS

In Georgiev's view, the shift in the labor market has been pronounced.

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CBS Studio Center, a subsidiary of CBS Corp, is a 40-acre television and movie studio with 21 soundstages. It also rents production items such as lighting or grip services to the productions that film there. Among the high-profile productions that call CBS Studio Center home are CSI-NY and Big Brother, as well as the recent George Clooney movie, Good Night and Good Luck.

In the past, such a high-profile company could find talent fairly easily. "We've resisted using headhunters in the past because, typically, if you threw the CBS name out there, you'd get a ton of qualified candidates," he says. "It was like shooting fish in a barrel."

Georgiev oversees an 17-person finance and accounting staff. Over the last two years, he had to fill two positions in the accounts payable department--a suddenly daunting experience. After two months of futility--utilizing print and web ads and soliciting referrals from current and former staff--Georgiev had to bite the bullet.

"We're a small company, and to be without an accounts payable clerk or supervisor for any length of time is a real strain," he says. "But after two months, I had to go to a recruiter."

Executive search firms typically charge from a quarter to a third of the desired position's compensation. "It breaks my heart to pay that kind of money to find an entry-level person," Georgiev says. "But I just couldn't find qualified candidates any other way."

The company had been offering stock options to its full-time employees as an incentive for years. And on Jan. 1, 2006, CBS converted all of those options to actual stock.

In addition to offering a traditional benefits package, CBS boosts their employees' professional development by paying for CPE and graduate degrees, and their employees' physical development by building a gym on the studio lot a few years ago.

The company also took a fresh look at its hiring practices. Since the company is on the smaller side, the promotion track can seem blocked by some. So the company changed its hiring practices to help folks diversify their resumes while staying in the loop.

"Employees are encouraged to apply if a position that interests them opens up in a different department," Georgiev says. "And if the position they're moving to pays less, we don't cut their pay. It's a win-win for everybody--if someone leaves my department for another department, they're still around to help train their replacement. And if somebody comes to my department this way, I get someone who's already familiar with the company."

COVERING HEALTH AND DAY CARE

For Martha Peterson, CFO of Los Angeles-based ALL Student Loan Group, the problem is similarly acute. ALL Student Loan Group is the largest nonprofit in Los Angeles County (outside of universities and hospitals), with $1.4 billion in assets. But its finance and accounting staff numbers only 16, so when a key staffer defects, the ripples are felt throughout the division.

"It's been very challenging to say the least," she says. "Not only are we filling positions, but we're upgrading positions because the company has had very high growth. So, the level of need and sophistication of the positions has grown."

The company was in need of a divisional controller during the past year, a search that took four to five months to complete. "We went through every means you can conceive of--classified ads, web search, networking, the alumni networks, Financial Executives International. And when they all failed, we had to retain an executive search firm."

So, the company has beefed up some retention tools to ward off the possibility of filling another open position.

In an age when companies pass more and more health care costs on to their employees, ALL Student Loan Group did something revolutionary. "Our benefit package is probably better than they can find in the public accounting sector, because in the last few years, the company has absorbed all employee health care costs," Peterson says. "We went in the opposite direction than most companies out there."

The company's culture emphasizes flextime to manage the commute pressure, no small consideration in Los Angeles. The company also offers a flexible spending account plan that allows employees to pay for day care. "We implemented that about two years ago, specifically to address the cost-of-living issue."

Peterson doesn't see things getting better anytime soon. "Right now, we're trying to recruit for an entry-level finance position, and it's been open for a couple of months," she says.

But the company has cast an ever-widening net to fill some positions--extending all the way to China and India. "We have become experts in how to handle H1-B visas," she says. "There have been some very qualified people coming in that way--recently, we filled a higher-level IT/finance position that way."

RAISING SALARIES AND PROMOTION OPPORTUNITIES

Kaiser Foundation Health Plan and Hospitals also has felt the labor pinch, according to Laura Weisshar, CPA, vice president and Southern California regional controller for Kaiser.

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"We're competing with all of the big accounting firms and with all of the other private and public companies for the same talent," she says. "We're relying heavily on recruiters, something we tried to avoid in previous years."

Beyond a substantial benefits package, the company's main attraction and retention tool is simple--offer more money. "Foremost, we are looking for more talented and qualified personnel and we are paying more for this talent than we did just two years ago. I would say there's probably a 20 percent differential than before SOX requirements were established," she says.

The company's corporate culture emphasizes quality of life. "Our organization values a balanced work life. We try to let our employees value the opportunities to share in their family experiences, without having to feel guilty," Weisshar says.

The company also has beefed up its promotion track to keep qualified professionals at the firm. "Because of SOX, we've added a significant number of certified professionals, and we're telling staff in our SOX unit that the function also serves to prep people for management positions," Weisshar says. "It presents more opportunities for staff, and it's great for the company because we're sending people with knowledge of controls and finance in various directions in the organization."

Since SOX became law, the percentage of CPAs on staff has more than doubled--and that's not counting the professionals who populate its SOX unit. One avenue the company has used, beyond recruiters, is hiring consultants. "We're doing that more and more because the talent is just not available for full-time positions, and many times we'll offer consultants full-time positions after they've proven their abilities."

THE INDUSTRY ADVANTAGE

Loretta Stanley, CPA, corporate controller for Carson-based skin care product manufacturer Dermalogica Inc., doesn't see a lot of turnover for her accounting staff.

So this year, when it came time to hire for an entry-level position, she was surprised by the results. "We searched for about four months and had nothing to show for it." The company, like every company surveyed for this article, is using recruiters to find entry-level talent.

The company also offers the traditional benefits, paying for CPE and graduate degrees, as well as some nontraditional benefits, such as a cafeteria plan with a day care component. "That's all come about in the last three or four years," she says.

Additionally, the company pays for gym memberships for every employee. But one perk the company offers is truly not just skin deep. "We have a massage therapist come in every Friday," Stanley says. "We set up a conference room for the day. People pay a dollar a minute, which is much less expensive than going out and getting a massage. People really love it."

Many businesses in highly competitive fields have broad recruiting needs and compete for industry-specific talent. This head start on attraction and retention efforts benefits accountants as well.

Pasadena-based Optical Research Associates is one such company. The firm, an engineering services organization that develops software, competes with some pretty heavy hitters, listing such defense-industry giants as Raytheon and Northrop Grumman as direct competitors for talent.

Much like accountants, engineers are often highly sought after for their technical skills, and as a result, the company has beefed up its benefits package to lure engineers to the firm.

"Because we're primarily a software engineering firm, we compete against the larger firms for that kind of talent," says Mary Heidsman, controller for Optical Research Associates. "So we offer a very competitive benefits package to get the engineering staff, and my accountants benefit from this competition."

Optical Research Associates recently increased the amount paid out in their employee referral program, while making it easier for people to qualify.

The company tries to boost morale with an annual field trip. Two years ago the company's finance department went to NASA's Jet Propulsion Laboratories. This year, the fun-minded won out, and the company headed to Dave & Buster's. The company also celebrates birthdays and employment anniversaries, recognitions of individual achievement and a few staff lunches at a nice restaurant.

LOOKING AHEAD

How tight is the labor market? A phone call Georgiev recently received drove the point home. "I was contacted by a recruiter asking me if I had anyone that I wanted to get rid of, anyone that they could recruit," he recalled, laughing. "A couple of years ago, that kind of call never would have happened."

While the market won't change overnight, the pipeline of qualified candidates may return to normal soon. "You know, one of the silver linings of the Sarbanes-Oxley Act was that it made accounting seem like a sexy major again, and from what I hear, the students are returning to the major," says Georgiev, "I fully expect it to get better."

Statistics bear this optimism out. Starting in 2002, the number of graduating bachelor's and master's accounting students started to inch upward, bucking the downward trend. Since the 2001-02 low of 44,695, that figure had risen to 53,760 for the 2003-04 school year.

"Change is good, and this period has forced a lot of companies to re-evaluate their hiring practices and ways to keep talent in-house," Georgiev says. "In the end, our companies will be stronger for it."

Jerry Ascierto is CalCPA's managing editor. You can reach him at [e-mail].