Big 4 vs. Regional Accounting Firms: Is the Gap Closing?

Published: Mar 18, 2015

 Finance       Job Search       Workplace Issues       
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In just under a month, Vault will release its annual Accounting Rankings. This year, the rankings are based on a survey of more than 8,300 accountants, and include an overall 50 best to work for ranking, an overall prestige ranking, several quality of life rankings, and a handful of diversity rankings.

Last year, in the overall prestige categories, PwC, EY, Deloitte, and KPMG (the so-called Big 4) ranked No. 1, 2, 3, and 4, respectively. However, it was the mid-sized firms—those outside the Big 4—that cleaned up in the quality of life categories. For example, New York-based Friedman took the top spot in compensation and work/life balance. Michigan-based Plante Moran ranked No. 1 in culture, informal training, internal mobility, and promotion policies. And California’s Armanino took the top honors in work hours and travel requirements.

All of which didn’t come as much of a surprise. For years, the national Big 4 firms have outranked the smaller regional firms when it comes to prestige, while the regionals have provided the more congenial workplaces. However, in recent years, due to this disparity, the Big 4 have gone to lengths to compete with the regional firms when it comes to culture, work/life balance, and other workplace issues, implementing policies to increase the happiness of their staffs.

Meanwhile, the regional firms have gone to great lengths to increase their business reach to better compete with the Big 4 when it comes to offering more complex and varied work experience. And, for the most part, this has meant an increase in mergers: the regional firms have had to combine in order to create larger, more national type of firms.

The latest example of this came in October of 2014 when the formidable Chicago-based Baker Tilly merged with Philadelphia-based ParenteBeard. This catapulted Baker Tilly (which had already acquired another significant firm in Virchow Krause a few years back) into one of the top 12 accounting firms in the U.S. Prior to the merger, Baker Tilly was merely a top 25 firm.

Another recent example was the creation of the top 10 firm CohnReznick, which is the product of New Jersey’s J.H. Cohn merging with Washington, D.C.’s Reznick Group in 2012. Both firms were strong regionals, and combined they now have offices across the country. And in September of last year, CohnReznick got even larger when it acquired another small regional firm: Bethesda, Md.-based Watkins Meegan, which had 200 employees and about $40 million in annual revenues.

All this is important because a firm with a national reach can better serve clients with a national reach. In other words, the growing regionals can now better compete against the Big 4 when it comes to getting bigger clients. And if they can get bigger, more complex clients, then their staffs, in turn, receive more complex, more interesting, more challenging experience. And this is one of the most important, if not the most important deciding factors for young people today when they’re choosing which firm to join and begin their careers with.

Back to the Big 4 and their workplace issues. Just as the regional firms have become more national, the national firms have become more regional—in respect to creating better, more congenial work environments. Consider these stats from our latest survey: Big 4 professionals who took our survey this year gave their overall job satisfaction a rating of 7.96 out of 10, which is 2.2 percent higher than they gave their satisfaction last year (7.79). They also gave higher ratings this year in all of the following categories: work hours (3.6 percent higher), culture (1.6 percent higher), work/life balance (1.5 percent), and compensation (1.4 percent).

Though these percentages might not seem that large, they are significant in that it signals that the Big 4’s policies are making an impact. Already, the Big 4 are national leaders in the area of maternity and paternity leave policies. And if their compensation packages and work/life balance offerings (both areas have been very troublesome in the past, as many Big 4 staff members have been extremely unhappy about these areas) can catch up, then the gap between the national and regionals in quality of life stands to shrink considerably.

At the same time, the growth of the regionals will lessen the ability the Big 4 have of merely luring young professionals with their size and reach. Which is to say, it should be very interesting to see what happens in this year’s rankings. Will the Big 4 still dominate prestige? Will they gain a lot of ground in the quality of life rankings? How will the growing regionals fare? And what about KPMG, which last year made a formidable acquisition of its own, merging with hedge fund accounting experts Rothstein Kass? Will it finally leap out of its No. 4 spot in prestige and best to work for?

To find out the answers, check back here on Tax Day, April 15. That’s when we’ll be releasing all of our latest Accounting Rankings.

Follow me @VaultFinance.

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