Employee Retention: The State of Engagement in Public Accounting Firms and Why It Matters

By Johnson, Steven; Pike, Byron | The CPA Journal, December 2018 | Go to article overview

Employee Retention: The State of Engagement in Public Accounting Firms and Why It Matters


Johnson, Steven, Pike, Byron, The CPA Journal


One of the most challenging issues facing leaders in the public accounting profession is the high rate of employee turnover. A recent survey finds that turnover in large CPA firms (those with revenues in excess of $75 million) is 17%, and one in every six firms experiences annual turnover of 20% or greater (Inside Public Accounting National Benchmarking Report, Platt Consulting Group, 2015). Given that the direct costs associated with replacing a professional staff member can be as much as 50%-60% of the employee's annual salary, there is little wonder why firms are continuously searching for ways to keep high-quality employees (Terence Mitchell, Brooks Holtom, and Thomas Lee, "How to Keep Your Best Employees: Developing an Effective Retention Policy," Academy of Management Executive, November 2001, http://bit.ly/2yUU2Zv).

Employee satisfaction has received considerable attention as companies attempt to improve employee retention. In fact, many organizations ask employees to take annual surveys to determine overall satisfaction, with the goal of targeting areas for improvement. While this is certainly a noble effort, focusing on employee engagement could represent a more effective method for not only improving employee retention, but also increasing productivity.

Many large corporations devote substantial effort to measuring and improving the engagement of their employees; CPA firms, however, have generally given little attention to this. Because employee engagement is not a one-size-fits-all solution for improving employee retention and performance, it is important to measure the engagement of employees within CPA firms. The authors surveyed a cross-section of CPA firm employees to determine the extent of their engagement. Moreover, the authors used the obtained data to identify the factors that have the greatest impact on employee engagement at CPA firms. Based on these findings, the authors provide recommendations for how CPA firms can improve the engagement of their employees, which can lead to greater employee retention and productivity.

What is Employee Engagement?

Within the academic literature, employee engagement (also referred to as "work engagement") has varying definitions. One of the most common definitions describes employee engagement as "an individual's sense of purpose and focused energy, evident to others in the display of personal initiative, adaptability, effort, and persistence directed toward organizational goals" (William Macey, Benjamin Schneider, Karen Barbera, and Scott Young, Employee Engagement: Tools for Analysis, Practice, and Competitive Advantage, WileyBlackwell, 2009). This description places emphasis on an individual's "state of mind" while at work and is much different from employee satisfaction, which generally measures an employee's level of contentment with the work environment.

To illustrate this point, satisfaction is nearly always measured by a single question in an employee survey: "How satisfied are you with your job?" Conversely, engagement is quantified using multiple questions that attempt to measure an individual's state of mind and emphasize items relating to enthusiasm, pride, passion, focus, and energy on the job.

Research consistently finds a significant relationship between employee engagement and positive outcomes within organizations. Specifically, empirical evidence suggests that employee engagement has a direct effect on job performance, return on assets, customer loyalty, profitability, and reduced employee turnover (Michael Christian and Jerel Slaughter, "Work Engagement: A Meta-analytic Review and Directions for Research in an Emerging Area," Academy of Management Annual Meeting Proceedings, August 2007, http://bit.ly/2APGEY0; James Harter, Frank Schmidt, and Theodore Hayes, "Business Unit-Level Relationship between Employee Satisfaction, Work Engagement, and Business Outcomes: A Meta-analysis," Journal of Applied Psychology, May 2002, http://bit. …

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