Why accounting firms should benchmark their hiring

It's no secret that accountants love benchmarking. Processing Content We're numbers people, and we have an insatiable curiosity about how we stack up against our peers in a rapidly evolving industry. We routinely help clients assess how their margins compare to industry averages. For instance, if a client's wages-to-sales ratio comes in at say, 35%, we warn them they're higher than the industry standard. "How can you reconfigure your staffing roster?" we'll ask. Or "You're spending a lot less on technology than your peers. Are there opportunities you're missing?" Internally, accounting firms benchmark their revenue per employee or productive hours against industry averages because benchmarking provides context. Yet few apply the same discipline to one of their biggest investments: their people. Recruiting and developing talented accountants is one of the most significant drivers of a firm's long-term success. Hiring a new team member costs thousands of dollars in advertising, recruitment fees, partner time and onboarding. Get it right and you've found someone who could become a future manager or partner. Get it wrong and you're back in the recruitment market six months later — or less. If we benchmark almost every aspect of our clients' businesses, shouldn't we be doing the same for our own hiring and human resources processes? After all, people are the most valuable assets you have at a professional services firm. Start by measuring your own performance One challenge with HR benchmarking is there isn't a wealth of published data specifically for small and medium-sized accounting firms. Unlike financial ratios, there are few industry benchmarks for recruitment, promotion or employee development. But that shouldn't stop you from measuring. The most valuable benchmark is often your own trendline over time. If your promotion rate is improving, if first-year staff turnover is falling, and if your hiring process is becoming faster and more effective, then you're heading in the right direction, regardless of what other firms are doing. The goal isn't simply to compare yourself to competitors; it's to build a better firm than you had the previous year. Five people metrics every firm should monitor Just as financial reports contain leading indicators about future performance, your people metrics can provide early warning signs of attrition and dissatisfaction before they become expensive. Here are five important people metrics to keep top of mind: 1. Promotion rate: How many of your professional staff are promoted each year? Low or declining promotion rates may indicate that talented employees can't see a career path within the firm. Consider tracking average time to become a senior, or average time to become a manager, and the percentage of leadership vacancies filled internally. Nothing damages morale faster than consistently overlooking capable internal candidates in favor of external hires. 2.Staff turnover: Most firms know their overall turnover rate, but that's only the beginning. Looking deeper, what is your first-year turnover compared to your overall turnover rate? How many high-performing employees leave each year? Are your managers leaving at a higher rate than other staff? These measures often give even greater insights than a single turnover percentage. 3. Employee feedback: Regular (anonymous) staff surveys can be incredibly valuable when they're followed by action. A short annual survey, covering topics such as career development, workload, leadership, mentoring and engagement, provides a useful pulse check on your firm. However, surveys that identify issues without any visible follow-up can end up reducing engagement. Make sure your leadership team is committed to responding to the feedback. 4. Leave balances: Unused annual leave might look good for short-term productivity, but if leave balances continue to rise, it can be an early indicator of excessive workloads and burnout. Monitoring leave balances alongside turnover often helps identify issues before valuable employees decide to leave. 5. Internal career development: The strongest firms don't just recruit talent, they develop it. Tracking professional development, CPA completion, internal promotions and leadership succession helps ensure you're building future managers rather than constantly having to recruit them from elsewhere. Is your hiring process healthy? Many firms only think about recruitment when they have a vacancy. The best firms continually refine their hiring process because they know every improvement increases the chances of finding and retaining great people. Here are some simple questions to determine how well your recruitment process is performing: How long does it take to contact applicants after they apply? How many days pass before the first interview? How long does it take to make an offer? What percentage of offers is accepted? What does each successful hire truly cost you? Perhaps the most interesting measure comes after the recruitment process has finished. Six months after every new employee starts, ask the hiring manager one simple question: "Knowing what you know today, would we hire this person again?" That single question may be the best measure of recruitment quality that you'll ever collect. If the answer is consistently yes, then your hiring process is probably working well. If the answer is frequently no, or "it depends how desperate we are," then the issue may not be the candidates; it may be your recruitment process. A practical starting point Benchmarking your people processes doesn't have to be complicated. Choose a handful of meaningful measures, review them consistently and look for trends over time. Small improvements will improve the profitability and value of your firm. If nothing else, get this topic on your firm's leadership agenda and start having informal conversations about it with firm influencers. If you're not sure where to begin, consider using a structured checklist such as the Accountests Hiring Health Check to review your current hiring process. After all, accountants have always believed that what gets measured gets improved. Perhaps it's time we applied that same thinking to our own people: "Measure What Matters."