Human Capital Deployment and Competitiveness: The Case of Small and Medium-Sized Practices in East Africa

Abstract

Purpose: The perception that small and medium-sized practices (SMPs) are unable to handle medium and large assignments has continued to place a lingering cloud over most similar sized firms. This study aimed to find out how human capital deployment strategies influences the competitiveness of SMPs in East Africa. Although a practitioner/partners are the owners of the accounting firm, they alone cannot accomplish the objectives of the firm. They need to deploy the right quantity and quality of supervisory-level and assistant-level staff. Big-4 of Deloitte, EY, KPMG and PwC are excluded from this study to ensure homogeneity of population.Methodology: Using the lists obtained from the websites of the National Board of Accountants and Auditors of Tanzania (NBAAT), the Institute of Certified Public Accountants of Uganda (ICPAU) and the Institute of Certified Public Accountants of Kenya (ICPAK), a random sample of 360 SMPs were selected. 280 firms responded fully to all the questions and these were processed for this study.Results:Exploration factor analysis confirmed reliability of the data collection instrument with Cronbach α = 0.78. The sampling adequacy was 0.78 using KMO guideline. The threat of multicollinearity was low given variance inflation factors were less than 10. Utilization ratio was 60% for assistants, 59% for supervisors and 53% for partners. The utilization ratio had a direct impact on the chargeable days on client assignments. The study revealed that an additional 100 chargeable days would increase clients billed per annum by 5. The same increase of 100 days would add USD 21900 to firm revenue. In terms of the total number of professional staff, one additional staff would lead to increase in clients billed by 4. That additional staff would add USD 27032 to revenue. There were statistically significant differences in the mean clients billed by SMPs that had 1,2 or 3 partners compared to the others with 4 or more partners. There was also a statistical significant difference in mean annual revenue (in USD) between SMPs with four partners and the rest of the other firms. There was one firm with 5-10 partners but earned less significantly lower revenue that firms with four partners. The was no statistically significant differences in mean variables between SMPs in each of the countries, implying that the population of SMPs in the three countries is close to homogenous and any statistical differences arise from other factors.Significance of study: This study will hopefully stimulate more and more research into SMPs in Africa in general and East Africa in particular (extending the study into Rwanda, Burundi and South Sudan at the appropriate time). The recruitment and development of human capital is accomplished internally within the firm. However, the clients can only judge the performance of the SMP through interaction with the professional staff deployed on the assignment.

Keywords:  Human capital, deployment, competitiveness, small and medium-sized practices, Big-4