Pro-Forma Employment Up 6% Among the County’s 35 Largest Shops
An economy that continues to grow and demand more accounting services has fueled a long trend of employment growth at Orange County’s top 35 accounting firms, which continued in the past year, according to the Business Journal list.
Together, the 35 firms on the Business Journal’s list have 3,913 OC employees. Although that is 1% less than last year’s total, the decrease is due to the $11 billion sale of No. 4 Ernst & Young’s management consulting business to France’s Cap Gemeni SA, knocking out 296 jobs from the list.
If those jobs were still on this year’s list, the total OC employment at the firms would have shown a 6% increase. Their CPA ranks grew 5%, to 1,423 and the number of partners in OC grew 1%, to 328.
Industry veterans attribute the growth to the strong economy, the rising number of emerging companies, increased merger and acquisition activity and more public offerings.
The list is dominated by the Big 5 firms, though in a new order since the Ernst & Young transaction. Some of the other Big 5 firms may see similar drops in employment if they sell their management consulting practices, though some industry experts say not all will be letting go of those operations. Arthur Andersen’s management consulting, for instance, is handled by its sister company, Andersen Consulting.
No. 1 on the list this year is Deloitte & Touche, which grew its OC employment by 10% to 931 employees and had to take another floor in its building to house the extra people. Managing partner Robert Grant attributed the growth in employment to “the dramatic move to consulting services from compliance services.”
That has been an industry-wide trend for the past five years that has swelled the ranks of most accounting firms and brought in extra revenue. But the SEC is worried about accounting firms both preparing and auditing the books for companies; its chairman, Arthur Leavitt, has demanded that the firms stay at arm’s length from the companies they audit.
The SEC concern is part of the reason Ernst & Young sold its management consulting practice.
Another issue for accounting firms is increased competition for talent. The growing number of emerging companies and those that offer stock options lure CPAs and other accounting professionals to work in-house instead of for a firm.
“It is pretty tight competitively,” Grant said. To counteract that phenomena, Deloitte & Touche; implemented an investment fund for its employees that Grant said would give them significant individual compensation over several years.
No. 2 on the list, PricewaterhouseCoopers, moved up one spot from last year though it reported no change in OC employment. The firm has 550 employees in the county. The firm’s company-wide ranks grew 3% to 160,000 employees. No. 3 KPMG also moved up a notch, growing its local employment 9% to 450.
After selling off a large portion of its business and losing the corresponding employees, Ernst & Young dropped two spots and came in at No.4. The firm lost 44% of its OC workforce, and now has 382 employees here, though company-wide it only lost 9%, dropping 8,000 employees to 77,000.
Bruce Stump, managing partner at Ernst & Young;’s Orange County office, said the consulting practice here was disproportionately large.
“We had a fairly significant consulting practice,” Stump said. “There are a lot of growth companies here that need systems consulting.”
No. 5 on the list, Arthur Andersen, grew its OC ranks by five, to 300 employees, almost matching the company-wide growth rate of 3%, to 72,000 employees. Mike Puntoriero, managing partner at Arthur Andersen, said the growth is due to the increased number of services the firm provides outside of audit, tax and consulting services.
Small Firms Get Bigger
Although the Big 5 dominate the industry locally, totaling about two-thirds of the employment on the entire list, there’s still plenty of room in the local economy for the smaller firms.
In fact, the next 30 firms outpaced the Big 5 in job growth, staffing up 11% in the past year for a total of 1,320 employees.
There also were some changes in the second-tier lineup, with a new “best of the rest,” the local office of Chicago-based BDO Seidman LLP which moved up one spot to No. 6. Its ranks grew 16%, or 12 employees, to 87 total OC employees. The firm also added two CPAs. Joe Johnson, a partner at BDO Seidman, said the increase was due to the firm’s effort to grow its audit, tax and healthcare consulting practices.
Last year’s No. 6, the Anaheim office of Bloomington, Minn.-based RSM McGladrey dropped 8% of its OC workforce and dropped three spots to No. 9, which RSM’s managing director in charge, Ron Barzen, said was due to the tight labor market for accounting professionals.
Shortage of Accountants
“There is a severe shortage of accountants in our profession,” Brazen said. “We always have people leaving, and we can’t fill those positions.”
RSM is going to campuses to inspire interest in the accounting industry and is working with state CPA societies to promote the industry as a profession.
The talent shortage is hurting productivity, too.
“We have to ask our other people to work harder,” Barzen said. “We have some growth opportunities we can’t take.”
RSM McGladrey Inc. was the only firm besides Ernst & Young that lost employees, dropping seven workers or 8%.
The largest OC-based firm on the list is No. 7 Corbin & Wertz, Irvine, which added 14 employees with a couple of acquisitions to pass No. 10 Squar, Milner, Reehl & Williamson, Newport Beach, which added five positions.
New to the list are No. 32 Kieckhafer, Schiffer & Co. LLP, which grew by three jobs, to 21 and Newport Beach-based Kelly & Co., which came in at No. 35 with 18 OC employees, up from 12 last year.
Six firms on the list reported no growth. n
