Why Layoffs Happen: Junior Senior
One reader asked a clever question to one of my recent posts about the market's job situation:
Just out of curiosity, how much lay offs are there in the accounting
firms? What is causing all these lay offs? I thought the CA firms had a
shortage of workers and they were hiring like crazy? I’m not really in
the accounting field, so I guess I’m behind on the new…
Layoffs are caused by an excess supply of employees, and an insufficient demand for their work - same as in any company.
How many layoffs are there and what's causing them? The short answer to both is, "it depends."
If you live in a region where there's lots of work, layoffs aren't happening.
If you're in a region where some or all audit firms lost business, you'll be looking at 2 to 20 people in a given city's office.
Yes, I can't give you a hard number, just some ballpark estimates, and that's because it's all spread around.
So much so that when someone hazards a firm number, hecklers also shout them down, in disbelief that any firm number is possible - check out the long line of angry messages that challenged the number of PWC layoffs at around 1000 in one of Francine's posts. She's a bit of an authority on this topic if for no other reason because of the number of people who flock to her blog to find out news on this front.
Aside from blogs on the profession, though, you won't find newspaper headline-grabbing events publicized like 400 or 4000 people who unfortunately lose their jobs at steel mills or automobile factories.
One of the reasons a newspaper wouldn't cover the news - even if they knew about it, though - is that while someone's losing, someone else is often winning. As a result, usually at least one company will be hiring because it won business while the competitor who lost business ends up shedding people. It's one of at least two little paradoxes you'll encounter in this article.
As usual, there are tons of specific exceptions to the rule which make it hard to make a generalization. The company you're interested in might have decided it's going to specialize in a given area, so it's going to shift people from, say, fraud to tax. If you're happy with the move, you win. If you'd rather die than switch, you'll end up leaving.
When you read about layoffs dragging out over a year-long period, that's usually because one firm recognizes trouble ahead and 'invites' people to leave early, and other firms either don't see the trouble, or believe they can 'ride through it'. Unless they're very good at finding new business, they'll typically have to show people to the door as well.
What's really interesting is to see how flexible things are - your perception that CA firms are hiring like crazy is correct. In general, the firms always need more fresh faced kids. I saw tours passing through my office recently - always fun to see them wandering the halls, somewhat dazed, somewhat in awe. But you will, however, find that in the midst of hiring booms some specialized groups or individual offices will nevertheless cut back from time to time.
So that's the other even bigger paradox - while one part of a given company is letting people go, they'll still be hiring hundreds of new staff straight out of school.
If you're familiar with the apprenticeship system of accounting firms, this will not be a surprise - skip to the next section.
If this is all foreign to you, I'll shed a little light on the process.
The Apprenticeship System
To get your CA you must work at least 30 months and accumulate 2500 hours of time spent on various parts of audit jobs and other such work. Most people get the 2500 quickly and have to wait it out for the 30 months to pass. Some leave as soon as their 30 months are up and they receive their CA certificate in the mail, others hang around - either because they haven't found a job they're more interested in, or similarily, because they're happy where they are.
Just like in the military - where one seargent looks after a group of junior warriors - you usually expect to see more juniors than seniors. While it's wonderful to have a surplus of highly experienced on hand, they're expensive - earning roughly half as much as the new kids. Now clients are charged a higher fee for those 30-month-experienced
"senior" staff than they are for the fresh out of school "junior" staff
who are trained on the job by seniors and managers. And there's always going to be work to be done which doesn't require years of experience, but rather supervision by seniors and managers to get the job done properly.
As long as a steady stream of seniors leaves for other companies or other departments the triangular/pyramid shape of the accounting firm hums along smoothly. Get too many people who enjoy their jobs too much - or just hire too many seniors away from other companies expecting sudden growth which doesn't come through - and you witness Trouble
Of course, sometimes even juniors get let go, but it makes less economic sense and is saved for only those situations where a company's in truly bad shape.
If this sounds cruel, it can be, but at good companies it isn't. Any decent Commerce program will tell you that a layoff is the worst thing you should consider - one of my good profs, who used to work for my company, even went so far as to say she would give us failing grades if we simply suggested laying off people when writing our assignments and exams instead of considering more creative and humane options to fix up poorly performing companies.
Of course, sometimes despite your best efforts everything fails - the good companies distinguish themselves by either offering transfers to other offices, or using the management team's network of contacts to find you a home at another company. Just because you had bad luck at an accounting firm doesn't mean you're lost forever - you may even end up enjoying the new job more - the pay or hours could ultimately end up being superior depending on where you end up. And good managers will introduce you to the right people to help you land on your feet.
Of course, there's more than just altruism at work - if they hired you in the first place, you're no doubt a Smart Person with very good qualities - and if you leave on good terms, you may remember your former employer fondly. They may invite you back at a more senior managerial rank down the road, or maybe you'll invite your old company to come in to propose work that you would otherwise withhold if you were going to stay angry at them for treating you poorly.
I'm not disclosing any secrets here, mind you - this entire section was taught to us in our third year university Auditing class by a professor who used to work for one of the Big Four; I've also witnessed much of this in action at various companies, so this wasn't just some dry theory you just ingested - it's reality.
What now?
Currently, as far as I can tell, the situation has stabilized lately - in the parts of Canada I'm familiar with - and hiring continues 'as usual' at all the major firms. Francine can fill you in on where things persist in being ugly though, and offer her additional explanations as to why it happens the way it does.
Music geeks, note the not subtle nod to Junior Senior - Move Your Feet in the title. Of course the song refers to moving your feet for purposes of dancing rather than switching jobs, but I think I've beat the point to death with the obvious-hammer enough now.