Accounting’s missing middle | Accounting Today
Accounting firms have a new kind of pipeline problem, and it’s no longer about filling a shortage of entry-level roles — it’s finding enough mid-level managers.
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The profession has long been plagued with a talent shortage — not enough college students are studying accounting, fewer go on to work in a firm and obtain their CPA license, and even fewer are staying long enough at firms to make partner, which is particularly crucial as large numbers of baby boomer partners reach retirement age. But now, there’s a new kid in town.
Firms have seemingly overcorrected in their resourcefulness to fill the gap of young accountants. Early in this decade, firms adopted the practice of offshoring compliance work in droves. A few years later, the artificial intelligence boom began to sweep over the accounting profession, allowing firms to automate that same work even more quickly and effectively.
By doing so, the profession inherently changed the shape of its staffing model. Accounting used to rely on large incoming classes of new accountants fresh out of school, assuming many of them would leave the profession but counting on enough to stay until partner, and thus creating a pyramid-shaped model. But now, with the labor shortage, firms are propping up those smaller incoming classes with offshoring and technology, creating a diamond-shaped staffing model.
Therein lies the problem.
“We’ve artificially reduced the need and the demand for staff and senior-level people because of these reactions to the pipeline,” Dominic Piscopo, founder of Big 4 Transparency, told Accounting Today. “But who’s going to manage the client file? Who’s going to take on that assignment? Who’s going to be responsible and really be the person in charge of that? Typically, it’s not offshore talent, and it’s definitely not AI.”
“The pipeline crisis has changed from there not being enough students who are interested in accounting, to now there not being enough people getting experience in accounting to become those competent managers down the line,” said Piscopo, who develops insights on compensation and staffing trends in the profession from a crowdsourced database of accounting and financial salaries. “We’ve reduced the feeder pipeline into creating managers, while creating probably more work for those managers.”
To solve this new pipeline problem, firms need to change the way they both hire and train staff.
What the data says
Salary data indicates much more than who’s getting paid what — it shows where firms’ focus lies and where, perhaps, it needs to be instead.
The profession saw a 3.1% overall increase in base salary the past year, with tax seeing the highest increase at 4.7%, according to Big 4 Transparency data. Broken out by job level within audit and tax, intern and staff pay increased 4.8%, senior pay increased 5.5%, manager pay increased 2.5% and senior manager pay increased 7%. Already, a problem arises.
“There’s a disconnect between where salaries are increasing and where we’re seeing unmet demand right now,” Piscopo said. “I think that’s firms still reacting to the old news.”
While salaries are increasing at lower skill-level roles, firms are competing heavily to recruit managers, he said. In other words, despite the higher demand, managers’ salaries aren’t keeping up with that of younger staff.
Reinforcing this trend is the data behind the “loyalty tax,” which is “the premium that’s paid to an externally hired employee who is doing the same job as another internally promoted employee,” according to Piscopo. The problem arises when firms look to hire externally and that prospective employee negotiates up, meaning the firm ends up paying that person disproportionately more than what they’re paying their internal people. This weakens retention by sending the signal that if an employee wants to be paid competitively, the best option is to jump ship.
The latest data shows that the loyalty tax is low and inconsequential at the staff level (new hires rarely leave so soon, given their lack of experience), but it rises to 8% at the senior level, 15% at the manager level and 4% at the senior manager level. Managers are job-hopping for higher pay at nearly double the rate of any other level role. Firms need more managers in order to sell more work, and they’re clearly willing to pay more for them.
The road to becoming a manager is shortening as well. In 2021, the average time to become a tax manager was 6.7 years. By the end of 2025, it was only 6.1 years, representing a 9% decrease. This still reflects the larger issue at hand but is also a positive change.
“What firms have a sharper need for from their onshore staff is to be able to manage the client file, be able to own a client and to be able to become the trusted advisor,” he said. “It’s in everyone’s best interest to keep hammering down that path to essential manager duties”
No newbies please
One Austin, Texas-based firm has a unique hiring strategy that’s worked quite well for them.
Maxwell Locke & Ritter, a Southwest Regional Leader with $52 million in revenue, 25 partners and over 160 staff, only hires professionals with at least four to five years of experience at firms the same size or larger. That means most team members come in at the senior associate or manager level.
“I think in the beginning, decades ago, they thought we were crazy,” Lesley Hargraves, ML&R’s incoming leading partner, previously told Accounting Today. “I think they were all just sitting back waiting to see that it didn’t work.”
The skeptics were wrong. ML&R has regularly boasted a turnover rate lower than the professional average and positive feedback from staff and clients. The idea behind the strategy is to offer a higher level of service from day one.
“For our firm as a whole, it’s really benefitted us because we get to hire people who know that they want to be in public accounting,” Hao Hue, ML&R’s talent and culture manager, told Accounting Today in our May issue. “And that tends to translate to stronger retention, lower turnover, and just more stability across all of our teams. So it works really well for us internally.”
In Hargrave’s own experience as an entry-level accountant, she didn’t have the big picture of what a project looked like or how the firm was run. That kind of knowledge didn’t come until the manager or senior manager level, she said, but “here that’s all accelerated, so your learning curve can just go through the roof.”
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Same numbers, new skills
Accounting used to be touted as the bullet-proof career. After all, everyone will always need their taxes done. But all of this change may lead to the question: Is accounting still a stable profession? Experts say yes.
“Accounting is going to be a stable and a safe career that you can continue to grow in, but it is not going to be the career that it was five years ago,” said Sandra Wiley, former shareholder and president at Boomer Consulting and current chief strategist at Sandra Wiley Strategies.
Success in the profession is still about knowing and understanding how to do a return or an audit, but now it’s also about being able to communicate that knowledge in a different way than ever before, Wiley said. And new kinds of skills require a new kind of training model.
As artificial intelligence and offshoring continue to take over the rote work that used to be the responsibility of entry-level accountants, “We’re going to be teaching people how to review instead of teaching them how to do it all from the beginning,” she said. “That’s going to take more time than what we’ve done before.”
The goal is to get younger people in front of clients sooner, rather than years down the line. That means teaching skills like critical thinking, verbal and written communication, data analytics, business development and more.
“Stop making them billable right away,” Wiley said. “In six months or a year, when they really can review, when they’re doing the higher-level work, when they’re bringing in business and when they’re talking with clients, now you can make them more billable.”
Wiley cautioned that while firms make this change it could lower their revenue in the short term, but the long-term gain will be well worth it: “Instead of starting them at $100 an hour, you’re going to start them at $400 an hour. Eventually that will catch up and all of a sudden your revenue will jump, but it’s going to take a little time for the change to happen.”
Enter the simulation
Time is money, so how do firms actually go about this kind of upskilling? The American Institute of CPAs says the answer is a flight simulator — but for accounting.
“Most firms have a two- to three-week orientation period, and we’re developing something that can be tacked on as a capstone at the tail end of that,” said Carl Mayes, vice president of ethics and firm quality at the AICPA and head of its Profession Ready Initiative.
He continued, “I can’t tell you how many times we’ve heard that notion that we need that rapid upskilling, where you put them through an audit or you put them through tax returns and they develop those skills so that they can hit the ground and run.”
The Profession Ready Initiative is conducting research to identify the skills that will be most important in the future as the profession evolves. For instance, in terms of AI, skills such as prompt writing and the ability to build agents are crucial, but the most important skill is the ability to discern whether a bot is hallucinating and whether you can rely on the output.
The group will publish a formal exposure draft of its findings in 2027. It will also provide a framework to guide training and development, tech-driven learning solutions to help young professionals quickly build their skills, and resources for academics to better align their teachings with workforce requirements.
And then there’s that simulator: The AICPA is developing a virtual, simulation-based learning model where, for instance, trainees can speak with AI avatars roleplaying as clients and receive specific feedback on their communication strengths and weaknesses.
The simulator aims to solve a weakness of traditional training: lack of application. Oftentimes, a trainee is exposed to all of the technical knowledge in a whirlwind week or two, but they often lose it by the time busy season comes around.
“I think what these folks need is they need to be plopped into a real-world scenario and just let them fail,” Mayes said. “Let them try, let them ask questions and let them develop the skills in real time so that they develop them in a no-risk or low-risk environment. Then they can go out and apply them in the real world once they’ve mastered them.”
Firms are generally excited by this change, according to Mayes, but he advised that firms level-set their expectations. Competency-based education isn’t completed in a set number of hours, as opposed to, say, a 20-hour CPE course. What may take one person one week to complete may take another three weeks to complete.
Winners and losers
Who comes out of this alive? Everyone who doesn’t sit on their heels. The profession is moving forward at an unprecedented pace, and it’s not slowing down for anyone.
“I think those people that are in trouble, and quite frankly, those that are getting laid off right now, are the ones that have not learned how to do any of those things,” Wiley said. “They’re the ones that want to do what’s always been done, and that’s not going to be OK anymore.”
“Firms that are really going to win are not the ones that are simply paying more; they’re not offering more money,” she continued. “They’re offering a better future, capability, training and teaching to keep you ahead of the game.”
