Designing effective and strategic position titles at accounting firms
The right number and titles of positions in an accounting firm lead to stronger firm stability and growth. They can also lead to better employee job satisfaction and employee longevity because they set a clearer path to partner.
Many firms have not re-evaluated titles or job levels in years and have not felt the need to address this internal restructuring. In addition, position titles and levels may have evolved within the firm without much strategic planning as the firm matures. If this topic has not been revisited in the past 10 years, it is worth placing on the next partner meeting agenda. So how does a CPA firm decide the right number and the titles of positions?
Here are some initial factors that will aid in the decision process:
1. The strategic mission of the firm to expand its leadership base.
2. The size of the firm in both revenue and the number of employees.
3. The variety or diversity of the client base.
4. The relative complexity of the work.
5. The growth rate in the firm’s new hires and new clients.
Factors for Setting the Number of Position Titles
Deciding upon the number of position titles or levels is probably the most important strategic task. This is more art than science. First, consideration must be given to the firm’s vision for the future. Many maturing firms today are struggling with succession. For some, merging with another firm or being acquired is the solution. For others, organic continuity and growth is the vision of the future. For those firms that choose autotomy and organic continuity, identifying a clear and measurable path to partner is critical to the success of the succession plan.
“Time in grade” is not the best criteria for determining an employee’s qualification for advancement to the next level. Merit-based advancement should be the standard. Advancement should be measured by the ability to perform at the next level and deal effectively with the complexity and diversity of the work, and the ability to deal effectively with more demanding clients. Promotion to partner, or the level just before partner, generally requires the additional quality of business development acumen.
Advancement based on this merit-based approach may frustrate employees who view their “time in grade” as too long and believe their service time should suffice for the promotion. On the other hand, the over-achiever type of employee would prefer the merit-based approach because it would award him or her for their abilities rather than merely waiting in line. The firm would benefit most from the merit-based approach because the work would be matched with the better qualified employee. In addition, the merit-based approach serves both as a filter and identifier for partner candidates.
The number of levels or steps to partner must be viewed and determined by examining the gradation of the complexity of the client work, and not “time in grade.” The size of the firm, in terms of number of clients, revenue and number of employees can in many cases play a role in the level of work complexity. A smaller firm, however, does not necessarily mean that the work is less complex. There are many smaller boutique firms that specialize in very complex areas, such as international accounting and tax. As clients grow their business and their transactions become more complex, a firm may likewise grow in size and demand more technically qualified employees. This may lead to a greater number of position levels and titles.
For example, the Big Four typically have a high number of levels. Some Big Four firms have at least two levels for entry-level employees, a senior level, at least two levels of manager, a director or managing director level, and partner (which has its degrees of advancement). Some smaller firms have fewer levels, including entry level, manager and partner.
When selecting the number of position levels, the firm should also be cognizant of the employee’s view toward promotion and advancement to partner. A raise in compensation typically accompanies a promotion. Compensation increases for promotion to the next level tend to be less as a percentage of total compensation where there are many position levels. This could dampen the employee’s appreciation for the promotion.
Fewer levels, with larger compensation increases for promotion, should have the opposite effect. However, where there are more levels, there are conceivably more promotions and more opportunities for increases in compensation.
In either case, the employee must be counseled and have an understanding and appreciation of the relationship between compensation, the number of position levels, and the measureable goals and accomplishments in order to achieve a promotion. As always, communication is key.
There is almost a standardization of accounting firm titles that are understood in the marketplace to designate an employee’s experience profile. Job ads typically describe the level of responsibility and inherent compensation level with a certain standard title. For example, a “manager” is typically a higher position than a “supervisor.” Nevertheless, from a purely definitional perspective, the titles of “manager” and “supervisor” could be synonymous. Other standardized titles, such as titles for entry-level employees (“staff,” “analyst” or “consultant”) seem to be popular standard titles today, but can be confusing and misleading.
Even though it’s possibly a more descriptive title of an entry-level position, the days of “junior accountant” seem to be gone, thankfully. I would advocate for a new slate of standardized titles that may be more representative of the position and less confusing. I realize that any implementation of new titles will take time for acceptance in the marketplace and at the firm, but it may be worth the disruption.
Here are my suggestions for effective position titles for firms that either require a greater number or fewer number of position levels. The list below is intended to mirror titles used in other industries and avoid distinctions between titles that are confusing, such as “manager” versus “supervisor”:
Firms Requiring a Greater Number of Position Levels
Firms Requiring a Fewer Number of Position Levels
The title “associate” is appropriate for entry-level employees to signify a sense of belonging rather than titles such as “staff accountant” that tend to be cold, or “analyst” that tries to describe a job task. Some Big Four firms have already adopted the title “associate.” The titles “manager” and “director” remain in the line-up.