Accountancy firms are finding it more difficult than ever to find the calibre of graduates they need from the UK education system. But is that because graduate numbers are falling or are academic standards simply slipping?
As one of the largest recruiters of graduates in the UK, the prospect of a skills shortage is a serious concern to the accounting profession. And more graduate vacancies are expected to be available this year, according to the Association of Graduate Recruiters (AGR), which predicts that job openings in banking and financial services could rise by as much as 15.7%.
But is there more to this graduate talent gap than meets the eye?
Since the advent of “widening participation” agendas and the aim of opening higher education to more school and college leavers, it is less likely that there would be a shortage in the number of graduates. There may, however, be a shortage of graduates who possess, or know how to display, the attributes required by employers.
AGR chief executive Stephen Isherwood confirms this: “We know that even through the darkest days of the recession, our members reported unfilled vacancies because they couldn’t find graduates with the right mix of skills and attributes.”
What most students are unlikely to have is any commercial awareness, which is arguably one of the most desirable competencies for the accounting profession.
While business and accounting degrees provide graduates with the opportunity to develop their commercial awareness, how effective they are, in terms of “work readiness” at least, depends on whether they are being taught by academics who are also practitioners with practical experience of the marketplace, or by those taking a purely theoretical approach without implementing it.
Students on the BSc accountancy programme at Manchester Business School undergo rigorous training in the basics of accounting techniques and academic theory, but also have the opportunity to meet people from the business world.
Programme director Penny Clarke says: “This involves them engaging in projects which allow them to work with practitioners and government bodies, and attend presentations from standard-setters and those directly involved in the profession.”
Standards of numeracy could be another factor in the profession’s perceived lack of graduate talent. They have shown no improvement in the past three years, according to the latest PISA tests of 15-year-olds in 65 different countries in maths, reading and science.
In maths, the performance of British 15-year-olds is now three years behind that of the world’s highest-achieving education system, Shanghai (though it should be noted that Shanghai is not representative of China as a whole).
Clarke says: “In my experience, many students do indeed lack numeracy skills, relying on calculators for the answer. This deficiency also extends to their research skills, with Wikipedia seeming to be the first source for solutions to research questions.
“University study provides the opportunity to learn how to research and critically evaluate a wide range of sources, which is a skill graduates need to put into practice when advising clients. There may be more than one ‘right’ answer. The ACA training is incredibly challenging and requires a high degree of commitment and dedication from the trainee. A graduate considering an accountancy training contract needs to be aware of the intellectual challenges they will face and the aptitude they need to possess to meet it.”
Then there are the UK’s well-publicised skill shortages in science, technology, engineering and mathematics (STEM) skills, some of the most in-demand talents within IT, construction, finance and, of course, within accountancy.
Traditionally an attractive option for graduates with strong numeracy skills, accountancy firms have found themselves competing with a widening group of organisations in other sectors which have been targeting this desirable talent.
Howard Flint, managing director at recruitment specialists Omni RMS, says: “An ageing workforce, ‘brain drain’, increase in vacancies and a restrictive migration policy mean that the country’s accountancy sector is set to be hit hard; multiple reports and surveys have indicated that the shortage is becoming critical.
“With a shrinking talent pool, the industry must fight harder than ever before to attract the highest-quality STEM employees, especially now when up against those, such as IT businesses, which are potentially viewed by young candidates as more dynamic. With financial reward no longer an overriding factor in career choice, the key to succeeding in enticing the best is to develop an attractive employer brand, one where the best candidates actively want to work for you.”
Other factors that have a bearing on graduate recruitment targets include shifting job hunting strategies. Competition to be accepted onto a blue chip graduate training programme at all costs sees many undergraduates taking a scattergun approach of applying across all sectors to as many schemes as possible; but this is hardly a strategic approach to professional career planning.
Today’s top graduates are also very aware of their value to talent-hungry employers. According to a report by consultancy firm FreshMinds, the brightest graduates know what they want from their first job and, as the so-called “war for talent” rages among major employers, many think they can find it in the technology, media and telecommunications sector.
The survey findings suggest that graduates are looking beyond the usual accountancy and consultancy sectors – known for their large graduate recruitment programmes and extensive campus presence – to IT and media companies.
While the largest proportion of recent top graduates ended up in banking and finance (13%), technology and media companies were not far behind at 12%, while consultancy and accountancy took just 8% and 4% respectively.
Perhaps one of the biggest challenges and frustrations for recruiting firms is the fixation that students have on the Big Four, which leaves them overlooking extremely good training opportunities in Group A and smaller firms.
"With financial reward no longer an overriding factor in career choice the key is to develop an attractive employer brand - one where the best candidates want to work for you
The fact is, training opportunities with the Big Four are that much more publicised and advertised than the alternatives, and inevitably attract the lion’s share of graduate applications because EY, KPMG, PwC and Deloitte are names – often the only names – graduates are familiar with.
Shirish Mistry, national head of resourcing at Mazars, agrees that this has created huge recruitment challenges for many firms, including his own. “Whenever we go to university career days and other events, we find that students really don’t know who we are,” he says.
“I believe that this is partly due to the fact that university careers advisors are not providing them with all the information they need to consider all options within the profession. They only think about the Big Four, and that leaves the BDOs, the Grant Thorntons, and ourselves with the much bigger task of getting our branding out there, via ICAEW, web portals and journals, to show students what we have to offer.”
He also remarks that the future graduates they are presenting to often have little idea of what accountancy actually entails. Their perception of a career in accountancy is frequently restricted to “doing things with numbers” and “being good at maths”.
“I have had people come along from the firm to talk to students about the various functions within accountancy, such as tax and internal audit, and you can see from their response that this is a revelation for them. They had no idea that the accountancy profession was this varied or as interesting,” adds Mistry.While the Big Four are never going to suffer from a shortage of skilled graduates knocking on their doors, even they have seen changes in the calibre of applicants that have led them to take action.
EY receives around 16,000 graduate applications each year, which it filters down to around 3,000 applicants who are then interviewed.
Head of student recruitment Julie Stanbridge says: “We are only in the market for the very best talent, and we are not just looking at their academic achievements or emotional intelligence; it is very much a search for the all rounder, and we have the strategies and assessment processes in place which can identify them.
“One change we have noticed in recent years is a greater focus on the importance of employability skills – so important in this profession – and we are working with the universities that we recruit from to help undergraduates develop those skills.”
Angus Farr, director and lead trainer at training organisation Training Counts, spends a great deal of his time travelling the country and in his own words: “Scaring second year undergraduates into preparing for the workplace.”
Farr, who is also a chartered accountant, asks: “Is there a gap between what accountancy employers want and what they get?
“I would say yes. But is it more acute now than in previous years? I’m not sure. There certainly seems to be a paradox, where more and more graduates are coming onto the market, and yet employers still say they are struggling to find the talent they need.”
There is also a big gap between what students think they are applying for and what they are actually letting themselves in for, he continues.
“There is still an understanding that exists among graduates that if you are numerate you will be able to pass the professional exams and be well suited to life as an accountant.
“The reality is, what really matters are the softer skills: good communication, interpersonal skills. Being a good accountant is about much more than being good at passing exams,” adds Farr.
Overseas talent shortages
Graduate recruitment is a challenge for accountancy firms all over the world, with those in Malaysia having to invest a significant amount to secure the graduate talent they need.
Wei Yuen Loh, ICAEW’s head of Malaysia, says: “A lot of effort goes into recruiting top talent, and the attrition rate is high. One firm told us it is not unusual to see 30% attrition in the first two years. Malaysian graduates are highly sought after by overseas firms, and many are recruited by Singaporean companies, although exact figures are not available.”
As part of its plan to become a high-income nation, the Malaysian government has implemented a number of strategies, one of the key ones being to address the need to have professionally qualified accountants to support the economy.
TalentCorp is a government agency set up to look into getting Malaysian talent back home and attract foreign talent from overseas through its Returning Expert Programme. It also provides financial incentives to encourage small and medium sized firms and companies to train more accountants, and the Big Four plus BDO to train non-accounting graduates. “We are working with TalentCorp to encourage ACA training in Malaysia for non-Malaysians by facilitating a five-year work visa,” says Loh.
Peneraju is another government agency that has been set up to provide financial incentives for Bumiputera, or local Malays, to train as professional accountants.
In March, the Malaysian Big Four, plus other major employers, were at Chartered Accountants’ Hall in London for an insight and recruitment event, which brought together employers and potential ACA students interested in training in Malaysia.
Soft skills on the rise
Employers want to see an in-depth knowledge of accountancy, finance and business, but they are also looking for skills learnt outside the classroom, says Hazel Garvey, director of business development at ICAEW.
“They are looking for new recruits to be professional, ethical and good communicators,” she explains. “Recruits need to work well with others, be eager to learn and act professionally. These ‘soft’ skills are developed during the ACA qualification, as students are required to combine technical knowledge, professional skills and practical experience as part of their training.
“Our message is very clear: if you want to become a chartered accountant, there are more opportunities than you might expect. We have more than 3,000 employers globally who can take on trainees.
“Our trainees work in every sector and in any type of business. We have members working in practice and members working in the fashion industry, for example.
“Almost half of our graduate students have degrees in subjects other than accounting or business. These include law, civil engineering, philosophy and modern languages.”
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