The Great Power Shift Inside Accounting Firms

We tend to view changes in corporate culture through the lens of leadership or organizational behaviour. But, often, shifts in the labour market, societal shocks or disruptive technology can play an even greater role in shaping the rules and quirks of a workplace.

The accounting profession provides an excellent case study. Big accounting firms — like Deloitte, PwC, EY or KPMG in Canada — have long been considered finishing schools that don’t just employ people but fundamentally reshape them into a particular type of professional. Sure, the hours are intense, the hierarchy is structured and the culture carries high expectations of performance. In return, though, you earn a pathway to partnership and a credential that opens doors.

But the conditions that enable this system are eroding, says Bertrand Malsch, PWC/Tom O’Neill Professor of Accounting at Smith School of Business. “Accounting firms are increasingly seen less as elite, all-consuming career destinations, and more as comparable to other large organizations — offering solid opportunities but without the same expectation of personal sacrifice,” he says. 

That’s a key takeaway from a study Malsch conducted with Oriane Couchoux (Carleton University) and Laurence Daoust (HEC Montréal), both of whom completed their PhDs at Smith. Between 2021 and 2023, the researchers interviewed 31 junior auditors and partners at Canada’s Big Four firms. The study captured a snapshot of a key transitional period for professional firms: Fieldwork occurred after pandemic-era remote work mandates had lifted but before hybrid arrangements had taken hold.

Their study showed how the big accounting firms began losing their grip on young accounting professionals as a result of a number of destabilizing forces beyond their control, notably changes in both the labour market and generational expectations.

Labour market disruptions 

Among business students, accounting has lost some of its lustre as a career path. Until recently, enrolment in university accounting programs across North America had been flat, prompting CPA Canada to raise alarms about a talent shortage. Firms that depend on a steady supply of high-potential recruits have been feeling the strain.

One partner in the study described the new hiring math in the years after the pandemic: “You used to have 300 applications, you’d pick 60. Now you probably have 100 applications, and you need 60.” 

And once they are hired, junior accountants increasingly bring different professional aspirations than those historically relied upon to sustain a culture of internal drive, and they seem less willing to conform to its established rules. 

Not surprisingly, the unspoken agreements binding the professional culture are starting to dissolve. For generations, it was understood that you stayed at a Big Four firm for at least two years before leaving, and that you did not quit in the middle of the busy audit season. These taboos have been broken, Malsch says. Some staff auditors leave before they even earn their CPA designation. One junior auditor in the study admitted she was the first in her cohort to resign before getting her exam results, and that 10 others from her cohort of 60 had since done the same.

In the post-Covid world, remote and hybrid work have also exposed younger auditors to greater flexibility and improved work–life balance. The study suggests that, without regular physical presence, the informal mechanisms that once reinforced knowledge sharing and cultural transmission have weakened. 

“It’s much more challenging to transfer norms through a screen than in person through meetings, going to lunch, travelling together,” says Malsch.

Management paralysis

The result is what the researchers describe as “disciplinary and pastoral paralysis” among partners and senior managers — a condition in which neither traditional control mechanisms nor newer incentives, such as higher pay or greater flexibility, appear to be effective.

“They are dealing with a real shift in how much control they have,” says Malsch. “Increasingly, they seem to be caught between two less-than-ideal responses: taking on more work themselves to offset uneven levels of engagement, or retreating from the relational aspects of their roles as the returns on that effort diminish.”

Some of the most candid moments in the study came from partners and managers reflecting on the impasse. “I don’t know what the solution is to make these people loyal and happy at work,” one manager admitted. “I talk to colleagues internationally, and it's the same situation everywhere.”

Is power shifting back to partners?

Malsch and his colleagues are careful not to overstate their findings. The Big Four are not going anywhere. The partnership track still exists. 

“It’s a nuanced argument because there are still very talented people in these firms who are highly motivated to become partners,” says Malsch. “It’s still seen as an attractive profession and worth playing the game to be a partner. That’s not the point. We’re saying the way we thought of them as being transformative institutions is less evident in the data.” 

There is also reason to believe that the conditions the researchers picked up on during the 2021 to 2023 study period are changing yet again, and that the balance of power inside these big firms may be swinging back to firm management. On the demand side, the arrival of AI agents is disrupting accounting and auditing as it is all other knowledge work, meaning fewer junior staff may be needed in the near future. On the supply side, enrolment in university-level accounting programs appears to be moving back up as the economy sours.

Even with these developments, however, the challenges for the partners leading the big accounting firms will persist. Malsch says these leaders have two options. One is to try to return to the pre-Covid period when socialization mechanisms were stronger and junior accountants were more readily shaped by the organizational environment. “The risk if you go this way is that you will deter the younger generation that wants to work hybrid or remote and have flexibility.” The other alternative is to embrace what Malsch terms “pastoral care”: adapt even more to this generation with hybrid and remote work and employee-friendly work conditions.

“Ultimately, they’ll have to find a way to reactivate or reengineer the mechanisms that used to work,” says Malsch. “But how do you do that in a way that doesn’t deter people? It’ll have to be a tradeoff.”

Whether the Big Four can deliberately navigate this transition — developing new models of leadership, mentorship and professional identity that align with the workforce they have rather than the one they once expected — will be a central management challenge in the years ahead.