The accounting profession is facing yet another challenge: a severe shortage of doctorally qualified faculty to teach the next generation of accountants. A growing demand for accounting professors has resulted in an inadequate supply of accounting PhDs, and accounting programs are experiencing great difficulty recruiting new faculty members. The situation is growing worse, and will not improve unless both academia and the accounting profession work together to develop long-term solutions.
Strong Demand, Short Supply
The shortage of PhD faculty in almost all business disciplines has been developing for well over a decade, and is projected to worsen due to several contributing factors: more undergraduate business enrollments, an increased number of MBA programs globally, and a growth in the number of business schools striving to meet or maintain accreditation from the Association to Advance Collegiate Schools of Business (AACSB), which requires a substantially PhD-qualified faculty. Accounting and finance face the most severe shortages. As these majors continue to become more specialized, it is becoming more difficult to hire qualified faculty.
Enrollment in accounting has rebounded since the declines in the late 1990s, and, in fact, is increasing at an astonishing rate. A 2008 AICPA study, Trends in the Supply of Accounting Graduates and the Demand for Public Accounting Recruits, reports three major increases since the last survey three years ago:
-- Accounting enrollments across all degree programs have increased by 19 percent, to a total of 203,638 students.
-- Total graduates in bachelor’s and master’s degree programs have increased by 19 percent, to 64,221. This is the largest number of graduates since the survey began in 1971-1972.
-- Eighty-three percent of bachelor’s and master’s degree graduates in accounting are produced by accounting and/or business accredited programs, while 40 percent are specifically from accounting accredited programs.
The surge in accounting enrollments and the increased number of AACSB-accredited business programs has increased demand for accounting faculty during a period when the number of accounting PhDs granted annually has decreased dramatically. A 2005 study by the American Accounting Association (AAA) and the Accounting Program Leadership Group (APLG) projects that the supply of graduating PhDs will meet only 50 percent of the demand for new professors from 2005-2008, with a projected demand of 942 new professors but a projected supply of 471 new PhDs. The shortage is most acute in tax and audit areas, with only 27 percent of the tax and 23 percent of audit requirements expected to be met. AACSB estimates the shortage of qualified business PhDs - including accounting and tax faculty - will more than double from the 2007 shortage of 1,100 to 2,400 by the year 2012.
The inadequate supply of accounting faculty has been exacerbated by the number of existing baby-boomer faculty beginning to retire. The exodus will increase over the next decade, since the most prevalent age of existing accounting PhD holders is 63.
Many schools conduct initial recruiting and interviewing at the annual meeting of AAA, and the latest placement data illustrates the difficult hiring environment that many schools are experiencing. The AAA Placement Center reports that the number of resumes at the annual meeting from 1992 to 2007 decreased from 180 to 96, and the number of schools recruiting increased from 110 to 222.
Why the Shortage?
The reasons for the waning interest in pursuing a PhD in accounting are varied, but the most common include the following.
Economic Cost - The average time to complete a PhD program is five to six years, so there is a considerable opportunity cost. Often those who truly desire to pursue a career in academia cannot afford to sacrifice years of salary at a well-paying job or the possibility of having to relocate to enter a doctoral program. While most PhD programs provide modest stipends and waive tuition, these amounts do not come close to the salaries that can be earned elsewhere.
Life Style Issues - PhD programs are incredibly stressful and have a high attrition rate. Of those who enter doctoral programs, almost 50 percent find the program too stressful and others are overwhelmed by the combination of coursework, research obligations, and teaching duties.
Fewer PhD-Granting Programs - There has been a decline in the number of universities that offer PhD programs in accounting. During the past decade, three new programs became available while at least 11 programs have become inactive. Universities are reluctant to fund PhD programs due to budgetary and incentive issues. MBA programs are generally profitable and are featured prominently in college rankings, while PhD programs are expensive to administer and require considerable faculty resources to support the program. With fellowships, tuition waivers, and stipends of $8,000 to $25,000, it is too expensive for many universities to have PhD programs.
Lack of Flexibility - Most programs ceased admitting part-time students years ago.
The PhD shortage poses a serious threat to the future of the accounting profession. The problem, if left unchecked, could damage the reputation and excellence of accounting programs. Without qualified full-time faculty, accounting programs will be forced to rely on more part-time faculty, increase the size of accounting classes, and possibly eliminate specialized courses or even entire programs. Ultimately, there will be fewer qualified entry-level professionals entering the workforce.
Increasing the Supply of PhDs
The accounting profession recognizes the responsibility to help address the faculty shortage. Major CPA firms, the AICPA, and the Institute of Management Accountants (IMA) launched initiatives to encourage professionals to pursue PhDs. The profession’s Accounting Doctoral Scholars program is a joint effort between accounting firms and CPA state societies, including PICPA, that will be administered by AICPA. The program will provide funding for up to 30 new candidates each year for four years for a total of 120 newly trained PhDs. Information can be found at AICPA’s www.adsphd.org site. Other examples include Deloitte USA’s Doctoral Fellowship Program, which provides grants of $25,000 annually to accounting doctoral students; KPMG’s PhD Project, which provides scholarships for minority doctoral students; AICPA’s fellowship program for minority doctoral students; and IMA’s Foundation for Applied Research financial support program for doctoral students specializing in the management accounting area.
The five-year commitment to a doctoral program is, without a doubt, a deterrent to many who may consider pursuing a PhD. Coursework is usually a two-year part of the program, with qualifying examinations and completing a dissertation taking up to three years. Doctoral programs might want to consider efficiencies to shorten these programs. Another suggestion is for PhD programs to reconsider admitting part-time candidates. This flexible option may be an enticement for working professionals who cannot afford to leave their jobs to pursue full-time studies. Part-time PhD candidates have been shown to succeed as well as full-time students, and many graduate within a year of the full-time students.
The current situation also raises a controversial question: Is a doctoral degree necessary to teach accounting? Since many accounting PhD graduates in recent years do not have professional experience, critics often offer the following analogy: surgery should be taught by a doctor who has actually performed surgery, and not by an academic who has never been in the operating room. Therefore, accounting courses should be taught by experienced professionals, not by academics who have no professional experience. This view is somewhat extreme. However, as mentioned previously, the faculty shortage is most acute in the areas of auditing and taxation. These are the most practical areas in accounting, and a strong case can be made that these courses should be taught by faculty members with professional experience. Acknowledging the inadequate supply of PhDs - AACSB refers to PhDs as academically qualified, or AQ - and the need to develop alternate strategies to staff classrooms, AACSB states:
"Many faculties - traditional research and others - will resolve their shortages by recruiting more professionally qualified (PQ) faculty. For schools that have a teaching and practice mission, it is legitimate to skew the faculty complement toward practice-oriented faculty, including those who do not have doctoral degrees (AQ), providing those faculty have expertise as teaching and practicing professionals."
To help increase the supply of professionally qualified faculty, AACSB recently launched a Bridge Program targeted toward accounting professionals and business executives interested in a second career as a university teacher. Accounting professionals with a master’s degree and professional experience of significant duration and responsibility are eligible to apply to the program.
Accreditation indicates a school’s commitment to quality, and more business programs are pursuing specialized business accreditation. AACSB is regarded as the premier accreditation for business programs. To illustrate the significance of AACSB accreditation, some firms are beginning to limit their recruitment and employee education efforts to schools that have AACSB accreditation. In 2006, for example, Intel Corp. revised its employee tuition reimbursement program to only reimburse for business courses completed at AACSB-accredited programs.
That said, AACSB accreditation is often cited for exacerbating the PhD shortage problem. AACSB standards relating to faculty resources can be challenging to satisfy, especially for smaller, teaching-oriented institutions, and there are alternative accreditations that some schools may find more appropriate for their missions. Whether the presence of alternative accreditations for business programs is desirable or not is beyond the scope of this article. However, organizations that employ accounting and business talent may want to consider the following points. First, the faculty shortage is most severe at schools that have the highest standards for faculty, such as AACSB-accredited schools. Second, if employers deem a teaching-oriented program to be important, and they value a program in which students get a practical perspective in their business and accounting courses, they may want to broaden their horizons. Students from institutions that have attained an alternative accreditation, or even those from unaccredited programs, may fill their needs very effectively. Finally, AACSB may want to consider allowing some flexibility in who meets "academically qualified" requirements.
For many years there was a great concern about an insufficient number of students majoring in accounting to meet the demand of employers. Fearing an imminent crisis, the profession and academe coordinated efforts to attract more talented young men and women to the accounting field. Having been successful in achieving greater enrollments, such a coordinated effort should now be directed toward solving another vital question: who will teach accounting students in the future?
Marge O’Reilly-Allen, CPA, PhD, is chair of the accounting department at Rider University in Lawrenceville, N.J., and a member of the Pennsylvania CPA Journal Editorial Board. She can be reached at [email protected].
David D. Wagaman, CPA, is a professor at Kutztown University of Pennsylvania in Kutztown, and a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at [email protected]. Published with permission from the Pennsylvania Institute of CPAs.