Career growth opportunities and employee turnover intentions in public accounting firms

The British Accounting Review xxx (2013) 1–11

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Career growth opportunities and employee turnover intentions in public accounting firmsq Hossein Nouri a,1, Robert J. Parker b, * a

Department of Accounting, School of Business, The College of New Jersey, PO Box 7718, Ewing, NJ 08628-0718, USA Department of Accounting, College of Business Administration, University of New Orleans, Lakefront Campus, New Orleans, LA 70148, USA b

a r t i c l e i n f o

a b s t r a c t

Article history: Received 19 April 2011 Received in revised form 6 July 2012 Accepted 9 July 2012

This study examines the role of career growth opportunities in explaining turnover intentions of junior auditors in public accounting firms via a survey of them. Prior studies in applied psychology and organisational behaviour argue that employees and their organisations have a social exchange relationship in which employees and organisations provide reciprocal benefits to each other. Extending this research, this paper proposes that career growth opportunities represent a critical benefit to lower level employees in accounting firms. When these employees believe that their firm provides this benefit, they reciprocate with stronger commitment to the firm which, in turn, leads to lower turnover intentions. This study also seeks to identify the causes or antecedents of employee beliefs about career growth opportunities. Two antecedents are proposed: the effectiveness of the firm’s training programmes; and, the organisational prestige of the firm. Results of path analysis suggest that both training effectiveness and organisational prestige enhance employee beliefs about the career growth opportunities offered by the public accounting firms, which, in turn lead to higher commitment and lower turnover intentions. Ó 2013 Elsevier Ltd. All rights reserved.

Keywords: Career growth opportunities Organisational commitment Organisational prestige Public accounting firms Training effectiveness Turnover intentions

Employee turnover is a critical issue in public accounting firms as firms struggle to reduce its high costs (e.g., Hall & Smith, 2009). This issue has generated a long stream of accounting research that attempts to provide insights into turnover so that firms can better control it. As evidence of the international nature of the turnover problem and the related research effort, studies have been conducted in variety of locations such as Australia, Canada, Hong Kong, Ireland, Singapore, and United States (e.g., Ang, Goh, & Koh, 1994; Aranya & Ferris, 1984; Barker, Monks, & Buckley, 1999; Hall & Smith, 2009; Herbohn, 2004; Law, 2010; Scandura & Viator, 1994; Sweeney & Boyle, 2005; Viator, 2001). Researchers have proposed that several factors influence turnover including: organisational justice (Parker & Kohlmeyer, 2005); work-family conflict (Pasewark & Viator, 2006); flexible work arrangements (Almer & Kaplan, 2002); burnout (Fogarty, Singh, & Rhoads, 2000); and mentoring (e.g., Barker et al., 1999; Hall & Smith, 2009; Herbohn, 2004; Scandura & Viator, 1994; Sweeney & Boyle, 2005; Viator, 2001). The current study proposes that employee perceptions of career growth opportunities influence turnover in accounting firms through a social exchange process. To the knowledge of the authors, no study in the accounting literature (or in related fields) has examined turnover from this perspective. As theorized by researchers in applied psychology and organisational behaviour, organisations and their employees have a social exchange relation in which they reciprocate services and benefits (e.g., Masterson, Lewis, Goldman, & Taylor, 2000; Rupp & Cropanzano, 2002; Wayne, Shore, & Liden, 1997). As argued in the

q The authors gratefully acknowledge the assistance of two anonymous reviewers and the editors including Mike Jones. * Corresponding author. Tel.: þ1 504 280 6437; fax: þ1 504 280 6426. E-mail addresses: [email protected] (H. Nouri), [email protected] (R.J. Parker). 1 Tel.: þ1 609 771 2176. 0890-8389/$ – see front matter Ó 2013 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.bar.2013.03.002

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current study, accounting firms offer career advancement opportunities to junior level employees and that this benefit is critical to these educated and ambitious employees who are in their early phase of their business careers. This benefit involves not only opportunities within the firm but also potential future opportunities with other employers. When employees believe that their firm provides this benefit, they reciprocate with stronger commitment to the firm. Higher organisational commitment, in turn, may lead to lower turnover and a number of other positive outcomes such as greater employee effort and performance (e.g., Mathieu & Zajac, 1990; Meyer & Allen, 1997; Randall, 1990; Riketta, 2002). Given the importance of career growth opportunities in the theorized model, this paper seeks to identify its causes or antecedents. With such knowledge, firms potentially could influence it and the favourable consequences associated with it. According to the theoretical model, effective training programmes enhance the beliefs of junior employees regarding career growth opportunities. Training effectiveness is a neglected topic in the accounting literature despite the perception of many academics and practitioners that it is critical to employee and firm success. Also, perceptions regarding organisational prestige may influence employee beliefs about how their employment benefits their career. Employees who believe that their firm has high prestige in the business community may believe that such prestige enhances their career opportunities. Organisational prestige is another neglected area in accounting research (with the notable exception of Iyer, Bamber, and Barefield (1997) who examine it with regard to the willingness of accounting firm alumni to help their former firm). To assess the proposed theoretical model, a survey was administered to junior auditors in large public accounting firms in the Northeast and Southern United States. The results of path analysis support the theoretical model. Training effectiveness and organisational prestige are associated with perceptions of career growth opportunities. Further, career growth opportunity is linked to organisational commitment, which, in turn, is linked to employee turnover intentions. The results suggest that firms can increase commitment and reduce turnover by focussing on the career growth of their employees. Results may be most applicable to public accounting environments that are similar to that of the United States. Work in American accounting firms has a reputation for high stress due to long hours and deadlines. Competition for promotion to senior level is keen within large firms as the firms have a pyramidal hierarchy (e.g., Kalbers & Cenker, 2007). Senior level employees at firms must obtain a Certified Public Accountant (CPA) certificate which is roughly equivalent to Chartered Accountant designation in United Kingdom. To obtain a CPA certificate, employees must pass the national CPA exam and have relevant accounting experience. Regarding employee turnover, the focus of the current study, staff retention has been cited as one of the top management issues in public accounting firms for several years (Brundage & Koziel, 2010). In 2010, accounting firms in United States reported annual employee turnover of 12.8% (DeFelice, 2011). 1. Theory development The theoretical model in Fig. 1 shows that career growth opportunity is the key variable in the model. The current study first discusses its proposed antecedents (training effectiveness and organisational prestige), then its relation with its consequences (organisational commitment and turnover intentions). The antecedents were selected, in part, based upon the experience of the authors who worked in large public accounting firms and subsequently became accounting instructors. Conversations with co-workers in the firms and former students who pursued careers in the firms suggested the importance of training and prestige in the career considerations of employees. 1.1. Training effectiveness and career growth opportunities Discussions of career are found in a number of literatures such as psychology, human resources, sociology, and organisational behaviour (see: Adamson, Doherty, & Viney, 1998; Arthur, 2008). While each field defines the career concept somewhat differently, there is considerable overlap (Arthur, 2008). Synthesising the various literatures, Arthur (2008) defines career as the sequence of work experiences during an individual’s lifetime. Career development (i.e., career growth) is defined in the current study as: “progression through a sequence of jobs, involving continually more advanced or diverse activities and resulting in wider or improved skills, greater responsibility and prestige, and higher income” (Bloomsbury Business & Management Dictionary 2007, p. 1353). An individual’s career may develop within the same organisation or, through job

Training Effectiveness H1

Career Growth Opportunities

H3

H3 Organisational Commitment

H4

Turnover Intentions

H2 Organisational Prestige

Fig. 1. Theoretical model.

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changes, within several organisations. Early research in this area focused on career development within an organisation under the assumption that individuals maintain long-term employment with their organisation. Recent research has noted that the nature of careers has evolved as rapid change (e.g., changes in technology, the expansion of knowledge bases, emergence of global competition) has meant that many individuals now have shorter employment with organisations (e.g., Arthur, 2008; Chay & Aryee, 1999; Granrose & Baccili, 2006; Sturges, Guest, & Davey, 2000). The current study proposes that training is linked to career growth opportunities. Training is defined as the development of the knowledge, skills, and abilities that employees require to perform their jobs competently (Nordhaug, 1989). As noted by Sturges et al. (2000), prior studies demonstrate that for new entrants into a field, such as recent graduates, training is a critical concern. Such employees value training as the mastery of basic skills is critical to career development (Sturges et al., 2000). As argued by Almer, Higgs, and Hooks (2005), in their study of auditors in public accounting firms, the training provided by firms constitutes a form of compensation to auditors. Effective training in a public accounting firm may enhance career opportunities for junior employees as effective training increases promotion possibilities within the firm and also facilitates securing favourable jobs at other organisations. The following hypothesis summarises the argument: H1 There is a positive association between training effectiveness and perceptions of career growth opportunities. 1.2. Organisational prestige and career growth opportunities Scholars in a variety of fields (e.g., management, marketing, organisational behaviour) argue that organisational image and the related construct of organisational identity “are central to the success of the organizational enterprise” (Brown, Dacin, Pratt, & Whetten, 2006, p. 100). While definitions of organisational image/identity vary widely, most definitions focus on what individuals (such as employees, customers, and the public) believe about an organisation (Brown et al., 2006). This includes employee beliefs about whether individuals outside the organisation perceive the employee’s organisation favourably. These employee beliefs have been described as beliefs about organisational prestige or construed external organisational image (Brown et al., 2006; Gioia, Schultz, & Corley, 2000). As argued in Dutton, Dukerich, and Harquail (1994), perceptions of organisational prestige are important to employees. The status of the firm “acts as a powerful mirror reflecting back” to employees how the organisation and its members are seen by those outside of the organisation (Dutton et al., 1994, p. 249). The accounting literature has largely ignored the topic with the notable exception of Iyer et al. (1997). They argue that, for the alumni of accounting firms, beliefs about their former firm’s organisational prestige (i.e., beliefs about the firm’s standing within the business community) influence the inclination of the alumni to benefit their former firm. The prestige of the organisation may affect the career opportunities of employees. Loy and Sage (1978) review sociological studies of academia that report a link between university prestige and the career mobility of academics employed by the university. Academics in high prestige universities have greater opportunities to secure favourable positions at other schools. Loy and Sage (1978) extend this research to investigate career patterns of athletic coaches. They report an association between the athletic prestige of the university and the career advancement of the school’s coaches. The current study, which investigates accounting firms, proposes that employee perceptions of the firm’s prestige influence employee beliefs about the career growth opportunities offered by the firm. An employee who believes that the firm has high prestige (i.e., the employee believes that the business community views the firm favourably) will be likely to conclude that the firm provides favourable career opportunities. For such an individual, career advancement may involve promotion within the firm, a promotion that is valued by the employee, in part, because the employee believes that the firm enjoys high prestige. Career advancement also may involve securing a favourable position in another company in the future and the organisational prestige of the employee’s current firm may facilitate this. The hypothesis below follows from these arguments: H2 There is a positive association between organisational prestige and perceptions of career growth opportunities. 1.3. Career growth opportunities and organisational commitment Organisational commitment is the bond between an employee and his/her organisation (Meyer & Allen, 1997). It has been linked to a variety of favourable outcomes for both employees and their organisations such as effort, performance, absenteeism, tardiness, and turnover (see reviews by: Mathieu & Zajac, 1990; Meyer & Allen, 1997; Randall, 1990; Riketta, 2002). Because of the desirable outcomes associated with commitment, researchers in accounting and related fields have expended significant effort in attempting to identify its antecedents. Proposed antecedents of commitment in public accounting firms include: organisational justice (Parker & Kohlmeyer, 2005); organisational culture (Chow, Harrison, McKinnon, & Wu, 2002); organisational trust, role conflict, and job insecurity (Pasewark & Strawser, 1996); and organisational reality shock (Dean, Ferris, & Konstans, 1988).2 Extending this stream of research, the current study proposes a relation between career growth opportunities and organisational commitment based upon social exchange theory. While social exchange theory has appeared extensively in the

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For an overview of accounting studies that discuss organisational commitment, see: Gregson (1992) and Ketchand and Strawser (1998, 2001).

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management and applied psychology literatures, it has been largely ignored in accounting. To the knowledge of the authors, no study in the accounting literature has used this theory to investigate employee attitudes and behaviour in public accounting firms. (Two accounting studies use the theory to explore issues outside of public accounting: McDonough, 1971; Van den Abbeele, Roodhooft, & Warlop, 2009.) As argued in the landmark study in this area (Blau, 1964), social exchange between individuals is characterized by exchanges of services which are reciprocated over time. When an individual provides a service to another person, there is an expectation that the person who receives the favour will reciprocate in the future. The timing and degree of reciprocation is unspecified; however, the obligation for reciprocation is established. Mutual exchange over time binds individuals into long-term social bonds. The social exchange relation contrasts with the economic exchange relation, in which the exchange of services and money is clearly specified and the relationship is short-term. “Only social exchange tends to engender feelings of personal obligation, gratitude and trust; purely economic exchange as such does not” (Blau, 1964, p. 94). Subsequent researchers argue that, at the workplace, individuals have social exchange relations not only with other employees, such as superiors, but also with the organisation (e.g., Masterson et al., 2000; Rupp & Cropanzano, 2002; Wayne et al., 1997). Organisational commitment may reflect the individual’s social exchange relation with the organisation (Cropanzano, Rupp, & Byrne, 2003). As Allen and Meyer (1990, p. 1) argue, organisational commitment consists of several components including affective commitment which is the “employees’ emotional attachment to, identification with, and involvement in, the organization.” According to Cropanzano et al. (2003, p. 161), this form of commitment, as it reflects the attachment and obligations of the individual to the firm, “operationalizes” the social exchange relation of the individual with the firm. The current study proposes that opportunities for career growth influence affective organisational commitment. An employee has a social exchange relation with the firm and the opportunities for career development represent an important benefit provided by the firm. This opportunity increases the attachment and obligation that an individual has to the firm. The related hypothesis appears below: H3 There is a significant positive association between career growth opportunities and organisational commitment. 1.4. Organisational commitment and turnover intentions Finally, in the proposed model of the current paper, organisational commitment is linked to turnover intentions. Employees who are attached to the organisation are less likely to consider leaving the organisation. Numerous papers in applied psychology and organisational behaviour report evidence supporting this assertion (e.g., see reviews by: Lum, Kervin, Clark, Reid, & Sirola, 1998; Mathieu & Zajac, 1990; Meyer, Stanley, Herscovitch, & Topolnytsky, 2002). Studies in the accounting literature report similar findings (see review of early studies by Ketchand & Strawser, 2001). Among the accounting studies, Stallworth (2004) is particularly relevant as it examines the relation between different types of organisational commitment and employee turnover intentions in public accounting firms. Results indicate that affective commitment, the focus of the current study, has the strongest link with turnover intentions. The following hypothesis summarises the arguments: H4 There is a significant negative association between organisational commitment and turnover intentions. 2. Methods A survey questionnaire was administered to junior auditors in large public accounting firms in urban areas of the Northeast and Southern United States. The surveys were distributed through the internal mail system of the firms. A cover letter provided explanations, instructions, and notification that the questionnaire was anonymous. Subjects were asked to complete the survey individually and mail them directly to the researchers. Surveys were not provided to managers and partners as the study focuses on career issues of lower level employees. As argued previously, training and career growth opportunities are critical to junior employees who are in the early stages of their careers; in contrast, senior employees have completed their training and achieved significant career success. As recommended by Kalbers and Cenker (2007), surveys were distributed only to auditors as including other groups (e.g., tax accountants) might introduce biased results. The survey was distributed during Spring 2008. The American economy began to falter then which may have influenced the attitudes of accountants regarding commitment and turnover intentions. On the other hand, the full magnitude of the recession may not have been evident until the financial crisis and bank bail-outs of Autumn 2008. Of the 243 junior auditors who were contacted, 110 returned a useable survey for an effective response rate of 45 percent (110/243). To assess potential non-response bias, early respondents were compared against late respondents (Oppenheim, 1966). For the two groups, the mean value of each variable in the proposed model was compared. No significant differences occurred which suggests the absence of non-response bias. Regarding the respondents, 11% work in Big Four firms and 89% work in large regional firms. Each regional firms in the survey has at least 60 professional staff and 18 partners. In comparing Big Four and regional firms, there is no statistically significant difference in the means of any variable in the study. The median age for respondents is 25 years and the median length of employment with the firm is 2.03 years. In the sample, almost half are female (49.5%). As reported by the American Institute of Certified Public Accountants, roughly half the accounting graduates in the United States are female; further, 55% of the new recruits in public accounting firms are female (AICPA, 2009). In the current study, in comparing female and male respondents, there is no statistically significant difference for any variable in the study except beliefs about organisational prestige (this difference had no effect on statistical analyses of hypotheses). Please cite this article in press as: Nouri, H., & Parker, R. J., Career growth opportunities and employee turnover intentions in public accounting firms, The British Accounting Review (2013), http://dx.doi.org/10.1016/j.bar.2013.03.002

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2.1. Measures The variables measured in this study include those in the theoretical model: training effectiveness, organisational prestige, career growth opportunities, organisational commitment, and turnover intentions. The related scales appear in the Appendix. To measure training effectiveness, the current study developed a measure based upon Campion, Cheraskin, and Stevens (1994). Campion et al. (1994) investigated the acquisition of knowledge and skills needed by employees in the finance function of a large corporation. They reviewed training materials, job analyses, performance appraisal forms, and they also interviewed executives. According to their review, the skills and knowledge that employees in the finance area required to perform their jobs competently could be classified into three categories: administrative (e.g., planning skills, communication skills); technical skills (e.g., accounting knowledge); and general business (e.g., knowledge of general business issues). In the current study, respondents were asked to assess the effectiveness of the training provided by the firm in these areas. For example, for the technical area, subjects were asked to assess the statement: “The training provided by my firm has greatly increased my knowledge of auditing.” The response scale ranges from one (not at all) to seven (very much so). There are nine items in the scale. The Cronbach alpha coefficient is .93.3 Organisational prestige was measured using a three item scale adopted from Iyer et al. (1997) who report strong construct validity and reliability for the measure. Other studies which use a similar measure of prestige include: Mael and Ashforth (1992) and Smidts, Pruyn, and Van Riel (2001). In the scale used in the current study, a sample item is “My firm is considered one of the best CPA firms.” The response scale ranges from one (strongly disagree) to seven (strongly agree). The Cronbach alpha coefficient in the current study is .69. Career growth opportunities were assessed using a scale initially developed by Bedeian, Kemery, and Pizzolatto (1991). The scale also appears in Chay and Aryee (1999). A sample item from the scale is: “I believe that my present job has aided my growth in my career.” Responses range from one (strongly disagree) to seven (strongly agree). The Cronbach alpha coefficient is .93 in the current study. Regarding organisation commitment, this study used a nine-item scale developed by Mowday, Steers, and Porter (1979). A sample item is “I really care about the fate of this organization.” The response scale ranges from one (strongly disagree) to seven (strongly agree). The Cronbach alpha coefficient in the current study is .93. This scale is one of the most widely used measures of affective commitment (Meyer, Paunonen, Gellatly, Goffin, & Jackson, 1989) and has appeared frequently in the accounting literature (e.g., Magner, Welker, & Campbell, 1995; Nouri, 1994; Parker & Kyj, 2006; Pasewark & Strawser, 1996). Prior studies reveal acceptable levels of reliability and validity (e.g., Angle & Perry, 1981; Blau, 1987; Price & Muller, 1981). Dunham, Grube, and Castaneda (1994) compare the Mowday scale with another commonly used measure of affective commitment developed by Allen and Meyer (1990). Based upon factor analysis of the two scales, Dunham et al. (1994) conclude that both scales “provide basically the same information” (p. 377).4 Employee turnover intentions were measured using a three item scale adopted from London and Howat (1978). A sample item is: “For the foreseeable future, I plan to stay with my current firm.” Response scale ranges from one (strongly disagree) to seven (strongly agree). In the statistical analysis, this measure was reversed so that a high score suggests that the employee intends to leave the firm. The Cronbach alpha coefficient is .94. To assess construct validity of the variables in the theoretical model, factor analysis was performed on the items in the scales.5 All items loaded on the appropriate factor with the exception of two items from the organisational commitment scale which cross loaded on other scales. These items were dropped from the commitment measure. To assess the normality of each measure in the study, indices for skew and kurtosis were examined (Kline, 2011, chap. 3). All measures have a skew index below the 3.0 absolute value threshold recommended by Kline (2011). Regarding the kurtosis index, all measures have a value below the 10.0 threshold recommended by Kline (2011) except career growth opportunities (kurtosis index ¼ 12.7). To assess the impact of this kurtosis, the measure for career growth opportunities was transformed into a normally distributed measure by squaring it.6 Statistical analysis for hypothesis testing was performed using the original measure of career growth opportunities and the squared measure. Results were virtually identical using either measure. Results for the original measure are reported in the paper.

3 Cronbach alpha is a commonly used measure of the reliability (i.e., consistency) of the items in a survey scale. As Kline (2011, p. 70) notes, scores around .90 are considered excellent while scores around .70 are considered adequate. The Cronbach alpha for training effectiveness is fairly high, .93, which suggests that the scale is reliable. 4 As part of their analysis, Dunham et al. (1994) administered surveys to three different samples and included the scales for affective commitment developed by both Allen and Meyer (1990) and Mowday et al. (1979). In the confirmatory factor analysis, all items in both scales loaded on the same factor which suggests that the two scales are measuring the same construct. 5 In the factor analysis, we extracted the initial factors using the principal factor method followed by an oblique rotation. As expected, the solution contains five factors (each with an eigenvalue greater than one). To assess factor loadings for each item in the scales, we used the traditional cut-off of .40. Two items in the organisational commitment scale cross loaded (loadings > .40) on multiple factors and consequently were discarded from the study. All other items loaded on the appropriate factor. 6 When data is non-normal, many researchers suggest transforming the data so that it is normally distributed. Marcoulides and Herschberger (1997, pp. 51–52) note several popular transformations such as squaring the values. In our study, the distribution of the squared values for career growth opportunities has a skew index of 1.0 (absolute value) and kurtosis index of 4.6 which suggests that this distribution does not have a normality problem.

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Table 1 Descriptive statistics. Variable

Mean

SD

Observed range

Theoretical range

Training effectiveness Organisational prestige Career growth opportunities Organisational commitment Turnover intentions

45.9 18.9 31.2 39.6 5.6

9.36 2.24 4.14 7.14 3.89

16–61 9–21 7–35 13–49 3–21

9–63 3–21 5–35 7–49 3–21

n ¼ 110.

Table 2 Path analysis results. Equation

Dependent variable

Independent variables

Associated hypothesis

Path coeffic.

t-Value

p-Value

r-Square

(1)

CGO OC

(3)

TI

H1 H2 – – H3 – – – H4

.306 .380 .136 .050 .606 .021 .058 .102 .658

3.7 4.5 1.8 .6 7.3 .2 .6 .9 5.9

.001 .001 ns ns .001 ns ns ns .001

.30

(2)

TRE OPR TRE OPR CGO TRE OPR CGO OC

.49

.32

CGO, career growth opportunities; TRE, training effectiveness; OPR, organisational prestige; OC, organisational commitment; TI, turnover intentions. ns, not significant, i.e., p-value is greater than .05. n ¼ 110.

2.2. Data analysis Path analysis is used to assess the hypotheses.7 Each theorized link between the variables (see Fig. 1) has a path coefficient that is a standardized regression coefficient (Asher, 1983; Pedhazur, 1982). There are three regressions for the theoretical model: (1) career growth opportunity is regressed on its antecedents: training effectiveness and organisational prestige; (2), organisation commitment is regressed on its antecedents: training effectiveness, organisational prestige, and career growth opportunities; and (3), turnover intentions is regressed on its antecedents: training effectiveness, organisational prestige, career growth opportunities, and organisational commitment. 3. Results Table 1 shows descriptive statistics for the measures, including mean, standard deviation, and range. The regression results for the path analysis appear in Table 2 and are illustrated in Fig. 2. For each regression equation in Table 2, regression assumptions were found to be valid (linearity, homoscedasticity, no autocorrelation, normally distributed error terms). As Table 2 shows, the results support the theoretical model. Regarding H1, the proposed relation between training effectiveness and career growth opportunities, the path coefficient of .306 is statistically significant (p < .001). Regarding H2, the theorized link between organisational prestige and career growth opportunities, the path coefficient of .380 also is statistically significant (p < .001). Hypothesis three proposes a relation between career growth opportunities and organisational commitment. The related path coefficient is .606 and is significant (p < .001).8 The proposed relation between organisational commitment and turnover intentions (H4) has a path coefficient of .658 which is significant (p < .001). Further analysis suggests several mediations in the theoretical model. The indirect effect for each potential mediation is determined by multiplying the relevant path coefficients (i.e., multiply the relevant path coefficients in Table 2 which represent direct effects). Table 3 demonstrates the calculations. For each indirect effect, the t-value is calculated by dividing the coefficient value of the indirect effect by its standard error using the techniques recommended by Sobel (1982).9 The results suggest that career growth opportunity mediates the relations between the exogenous variables (training effectiveness and organisational prestige) and organisational commitment. For training effectiveness, the mediated path is

7 An alternative method, structural equation modelling (SEM), was considered. However, the sample size of the current study, 110, may be too small for this approach. As noted by several researchers, SEM requires a large sample (e.g., Anderson & Gerbing, 1988; Hoe, 2008; Kline, 2011). 8 Chay and Aryee (1999) also report a direct link between career growth opportunities and organisational commitment. They do not theorize this relation and do not comment on their finding. 9 To illustrate the techniques of Sobel (1982), consider the first path in Table 3 (TRE / CGO / OC). The coefficient value for the indirect effect is calculated by multiplying the unstandardized regression coefficients for: TRE in equation (1) of Table 2; CGO in equation (2) of Table 2. The coefficient value is divided by its standard error to determine the t-value reported in Table 3. The standard error of the indirect effect (TRE / CGO / OC) is estimated using the following equation: (b22s21 þ b21s22)1/2; b1 unstandarized regression coefficient for TRE in equation (1) in Table 2; s1 standard error of regression coefficient for TRE; b2 unstandardized regression coefficient for CGO in equation (2) in Table 2; s2 standard error of regression coefficient for CGO.

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Training Effectiveness .31 .61

Career Growth Opportunities

H3 Organisational Commitment

.66

Turnover Intentions

.38 Organisational Prestige

Fig. 2. Model with path coefficients. All path coefficients are statistically significant at the .001 level (see Table 2).

Table 3 Indirect effects. Paths

Calculations

TRE / CGO / OC OPR / CGO / OC TRE / OC / TI TRE / CGO / TI TRE / CGO / OC / TI Total for TRE on TI OPR / OC / TI OPR / CGO / TI OPR / CGO / OC / TI Total for OPR on TI CGO / OC / TI

(.306)(.606) (.380)(.606) (.136)(.658) (.306)(.102) (.306)(.606)(.658)

t-Values* .185 .230 .089 .031 .122 .180 .033 .039 .152 .146 .399

(.050)(.658) (.380)(.102) (.380)(.606)(.658) (.606)(.658)

3.26 3.84

2.85

3.22 4.57

TRE, training effectiveness; OPR, organisational prestige; CGO, career growth opportunities OC, organisational commitment; TI, turnover intentions. *All t-values have p-value of less than .01. Calculation of t-value is discussed in footnote 9. To calculate indirect effects, path coefficients from Table 2 are used. n ¼ 110.

TRE / CGO / OC, where TRE represents training effectiveness, CGO represents career growth opportunities, and OC represents organisational commitment. The indirect effect of TRE on OC (via CGO) has a t-value of 3.26 which is significant (p < .01, Table 3). For organisational prestige, the mediated path is OPR / CGO / OC, where OPR represents organisational prestige. The indirect effect of OPR on OC (via CGO) has a t-value of 3.84 which is significant (p < .01, Table 3). Results also suggest significant indirect effects for the exogenous variables on turnover intentions (TI). For training effectiveness, there are several paths linking it to turnover intentions. (See Table 3 for paths.) The indirect effect of TRE on TI (via CGO and OC) has a t-value of 2.85 which is significant (p < .01, Table 3). Organisational prestige has similar paths linking it to turnover intentions (see Table 3). The indirect effect has a t-value of 3.22 which is significant (p < .01, Table 3). Lastly, results suggest that organisational commitment mediates the relation between career growth opportunities and turnover intentions. The related path is CGO / OC / TI. As Table 3 indicates, the t-value for this path is 4.57 which is significant (p < .01). Additional insight into the relationships between variables is gained by breaking down the observed correlations between variables into the relevant effects (direct, indirect, unanalyzed, and spurious). The relative magnitude of the effects

Table 4 Decomposition of observed correlations. Variables

Correlation

Direct effect

Indirect effect

TRE/CGO OPR/CGO TRE/OC OPR/OC CGO/OC TRE/TI OPR/TI CGO/TI OC/TI

.41* .46* .40* .37* .69* .18 .13 .31* .56*

.31* .38* .14 .05 .61* .02 .06 .10 .66*

– –

Unanalyzed effect

.19* .23*

.10 .08 .07 .09

– .18* .15* .40* –

– .02 .04 – –

Spurious effect – – – – .08 – – .01 .10

TRE, training effectiveness; OPR, organisational prestige; CGO, career growth opportunities OC, organisational commitment; TI, turnover intentions. *p-value less than .01. Coefficient values for direct effects are from Table 2. Coefficient values for indirect effects are from Table 3. n ¼ 110.

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can be assessed as the effects are determined using standardized coefficients. Table 4 provides this analysis for each possible pair of variables in the theoretical model using the approach recommended by Pedhazur (1982, chap. 15). For example, for training effectiveness and career growth opportunities (TRE/CGO, Table 4), the correlation is .41 which consists of direct effect, .31, and an unanalyzed effect of .10. The unanalyzed effect results from the correlated relation between the exogenous variables in the model, training effectiveness and organisational prestige. Some effects in Table 4 are spurious due to the influence of antecedents in the theoretical model. For example, for career growth opportunities and organisational commitment (CGO/OC, Table 4), the correlation is .69 which consists of a direct effect, .61, and a spurious effect of .08. The spurious effect results from the influence of the CGO antecedents, training effectiveness and organisational prestige, on organisational commitment. 4. Discussion and conclusions Employee turnover in public accounting firms is a costly, on-going problem; consequently, accounting researchers have devoted considerable effort in attempting to understand it. Extending this stream of research, the current study argues that beliefs about career growth opportunities influence the turnover intentions of junior employees through a social exchange process. When the employee believes that the firm provides career growth opportunities, the employee reciprocates with increased commitment to the firm which leads to lower turnover. Results from a survey of junior auditors in several accounting firms support the proposed model.10 Social exchange theory is a largely neglected area in accounting research that may provide insights into the attitudes and behaviours of accountants. Within the exchange between accounting firm and employee, opportunity for career growth may be a particularly relevant benefit to junior employees who, in general, are young, educated and ambitious. The current study reports evidence that suggests links between career growth and both organisational commitment and turnover intention. Future research could examine links between career growth and other potential employee outcomes such as job satisfaction, motivation, and organisational citizenship behaviour (employee behaviour that benefits coworkers and the organisation). Results of the current study suggest that one way for accounting firms to increase commitment and reduce turnover of junior employees is to focus on their career development. This may include discussions with employees that explicitly detail how their work experience contributes to their career growth. Employees in their first years at a firm may be unaware of the many ways that their job experiences enhance their development. Results also suggest that accounting firms could influence employee perceptions of career growth opportunities through the proposed antecedents: training effectiveness and organisational prestige. Training effectiveness has a direct effect on career growth opportunities and indirect effects on both organisational commitment and turnover intentions. This provides an additional motivation for firms to strengthen their training programme beyond the need to improve training to increase employee performance. The effectiveness of training programmes in accounting firms has largely been ignored in the accounting literature despite a perception among practitioners and academics that training is critical to employee and firm success. Regarding organisational prestige, it also has a direct effect on career growth opportunities and indirect effects on commitment and turnover intentions. How an organisation enhances its prestige among employees and external constituencies is discussed in Fuller, Hester, Barnett, Frey, and Relaya (2006). This includes disseminating information about organisational and employee accomplishments both within the organisation and externally though e-mail, memos, web sites, advertising, etc. The perceptions of employees in accounting firms regarding the prestige of their firms have been largely ignored in the accounting literature (with the exception of Iyer et al. (1997)). The current study examines employee beliefs about their firm’s prestige, but a related topic, also neglected by accounting researchers, is the image of the accounting firms among current and potential clients. Stuart (1998), a researcher in organisation studies, reports that client companies choose their accounting firms, in part, based upon the organisational image projected by the firm. There may be further opportunities for research in this area. While the current study examines how perceptions of training and prestige influence the attitudes of current employees, a related research issue is how perceptions of training and prestige influence potential employees such as new graduates looking for their first job. In evaluating the desirability of a firm, job seekers might consider the firm’s prestige and reputation for training. The current study also contributes to the accounting literature that has investigated organisational commitment in public accounting. As previously discussed, several accounting researchers have examined the causes or antecedents of organisational commitment in accounting firms. The current study extends this stream of research by examining additional antecedents: training effectiveness, organisational prestige, and career growth opportunities. Results suggest that these antecedents have significant links with organisation commitment, and, through commitment, indirect links with employee turnover. These antecedents, through their effect on commitment, may have indirect links to other favourable outcomes associated with commitment.

10 The findings of the current study are subject to the usual limitations of survey research. Causal direction cannot be proven. Omitted variables may exist. Results may be specific to the accounting firms examined and not generalizable to other accounting firms. Also, participants were junior auditors so results may not be applicable to senior level auditors (managers and partners) or other types of employees in accounting firm (e.g., tax accountants).

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Appendix. Survey questions Training effectiveness (TRE) (1) The training provided by my firm has greatly increased my knowledge of accounting. (2) The training provided by my firm has greatly increased my knowledge of auditing. (3) Training has significantly increased my general understanding of business. (4) Training has contributed to my development as a business person. (5) Training has significantly increased my communication skills, both oral and written. (6) Training has significantly improved my planning and organizing skills. (7) Training has significantly improved my interpersonal skills. (8) Training has significantly improved my ability to analyze complex accounting and auditing issues. (9) Training from my firm has helped me grow as a business person. Organisational prestige (OPR) (1) My firm is considered one of the best CPA firms. (2) People in my profession think highly of my firm. (3) My firm does not have good reputation in the business community (reverse wording). Career growth opportunities (CGO) (1) My present job is useful in achieving my career goals. (2) My present job is relevant to growth and development in my career. (3) I feel that my present job will lead to future attainment of my career goals. (4) Working for my firm will help my career. (5) I believe that my present job has aided my growth in my career. Organisational commitment (OC) (1) I talk up this organization to my friends as a great organization to work for. (2) I would accept almost any type of job assignment in order to keep working for this organization. (3) I am extremely glad that I chose this organization to work for over others that I was considering at the time I joined. (4) I find that my values and the organization’s values are very similar. *(5) I am proud to tell others that I am part of this firm. (6) This organization really inspires the very best in me in the way of job performance. (7) I am willing to put in a great deal of effort beyond that normally expected in order to help this organization be successful. *(8) For me, this is the best of all possible organizations for which to work. (9) I really care about the fate of this organization. *Cross loaded, dropped from measure (see footnote 5). Turnover intentions (TI) (1) Barring unforeseen circumstances, I intend to stay with my current firm. (2) I plan to remain with my current firm for at least a few years. (3) For the foreseeable future, I plan to stay with my current firm.

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