• Deloitte Double Talk

    By • Jul 21st, 2008 • Category: Pure Content

    This blog gets the most traffic and comments when I post about Big 4 layoffs. I make no excuses or explanations for this. Just stating a fact. Now if I were making this stuff up, as I have been accused of doing, then you would be justified in pummeling me in the press and in person.

    Unfortunately, the stories are all too true and come directly from you, the readers, and my own reliable, on the ground sources. Now, I admit, sometimes the timing is off. Can you blame someone who has just been laid off from one of the Big 4 or is trying to make sense of rumors flying all over when they act precipitously?

    I can only try to make sense of it all myself. What is especially infuriating about many of these stories is that the partners seem oblivious or immune. As I mentioned in a previous post… If they started laying off the partners or demoting them back to rank and file because they’re not producing, like the law firms have done, or even started firing the ones that have royally screwed up, we’d really have a story.

    Instead, we have the same old story of executives, in this case partners, being duplicitous with staff and taking the money out instead of investing in those who produce it.  They must know that the end of the latest embarrassment of riches to these firms is near. Until IFRS and XBRL kick in, (although they will never be Sarbanes-Oxley,) they really haven’t a clue how to keep the money flowing. So, partners will get theirs while the getting is still good. There’s always another crop of gullible graduates knocking down the doors begging to be exploited.

    From a reliable source at Deloitte:

    This past month, our region was told that the growth of the non-consulting practices was slow, behind schedule. We were told that our region was the worst performing in the whole nation. The Regional OMP stood up on a pedestal and informed us all that, although we would be getting some raises this year, we should be prepared for “far less” than last year (last year’s were between 4 – 8%). Obviously this has many upset. However, given the “tough” times, many were willing to accept it.

    Fast forward a few weeks. Deloitte National Leadership sends all partners, principals and directors of the region a “congratulations email”. What, you might ask, is there to be congratulating the partners on, as we are “in a down year, and behind schedule?”

    Well, those of us that were privy to the email were breathless when we noticed that the congratulations was given the region’s partners on the “best year ever!”

    The average partner salary was almost US$1 million!

    So on the one hand, we are being told that there won’t be any AIP bonuses, and that we should expect lower raises than we have seen in the past 5 years but then we find out that the partners had their best year ever.

    Apparently, everything is great if you are a partner. The rest of us are looking for a new job.

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    15 Responses »

    1. Howdy Fran,

      Once again you are spot-on in your comment that the “partners will get theirs while the getting is good.” Every decision is made to preserve partner profits TODAY, many of them at the expense of future revenue.

      Our latest fiasco here in [Big 4] Advisory Consulting Services is the RIF’ing of those in service offerings who have fallen out of favor. By “fallen out of favor” I mean to say the partners don’t want to support them anymore–basically, they’ve given up trying to grow certain skillsets. Doesn’t matter what the clients want or need; if a partner can’t generate revenue from the skillset TODAY then there’s no need for that skillset.

      An acquaintance of mine, a Manager in supply chain management (SCM) consulting, was let go “because of forced ranking.” (I.e., he was given the lowest performance ranking when compared to his peers.) When he inquired as to the nature/cause of his low ranking, my buddy was informed that he wasn’t making his numbers and that the Region had decided not to pursue SCM as a service offering. Hence: he was a low performer and they were tired of paying his salary without sufficient payback.

      Okay, fine. My Manager buddy couldn’t bring in the revenue and couldn’t stay utilized … time to go, I guess. (Although that’s a lot of accountability to put on a Manager, in my opinion. And, by the way, he’d been with the firm for two years.)

      But somebody had to make the hiring decision and there had to be an original decision to pursue SCM, right? Somebody had to make a business case with revenue projections and client targets and etc. The (experienced) Manager didn’t just show up at work one day and announce he was here to build an SCM practice. He was part of a group and, in fact, not even the group lead.

      But I don’t see the partner(s) who made those calls getting any grief. We don’t have any “early outs” at the partnership level; nobody is exiting to “spend more time with family.” It’s like the bad decision-making never happened. We’ll just RIF the staff and that will make the problem go away, I guess.

      I do see the accountability below the partner level, as Managers and Directors are “force ranked” into unemployment. But what I’m wondering (and you’ve nailed it before) is: Where is the partner accountability?

      I’m guessing it’s like tenure in the higher ed field. Is that the right analogy, do you think?

      Finally (and as I’m sure you’ll appreciate) SCM is red-hot and decent, experienced SCM professionals are in high demand. So my buddy will end up okay, I guess. But that fact also says volumes about the continual poor business judgment of our leadership … which is what you rail about fairly frequently.

    2. “De-equitizing” as it’s often referred to is not always a good thing. It can demotivate some of the junior staff. There’s a certain sense of, “is nothing sacred anymore?” I’ve heard this from some lawyer friends.

      However, when you have a senior manager beating partners in sales year after year only to be told the numbers aren’t there for becoming a partner, well, that might demotivate you out the door. You lose one of your better sellers because you have to keep some fat on the books.

      Also, there’s a big difference between faculty tenure and partner tenure. Faculty members receive tenure because they are expected to speak their minds. It’s their job to be controversial and challenge establishment. So, they should say what they want to say without the fear of losing their jobs. Tenure is a key component to academic freedom. I think good faculty earn the right to tenure. I’m not sure if partners have.

    3. I believe Anon1 may have been referring more to the higher ed faculty that reach tenure and promptly slump to contributing minimal effort, especially in terms of actual teaching (I know I’ve personally experienced this at a research university) and research. Its not that they’re outspoken with their opinions in their particular field, but more that they drop the ball when it comes to actually doing their job and contributing to the institution both from an academic and development standpoint.

      Not a perfect analogy, to be certain. But it correlates more closely with Big 4 partnerships than the freedom of academic speech does.

    4. Anon 2- I see your point. I have also seen tenured professors get very lax. I am only saying there is a good reason for job security in higher ed. For public accounting, it’s harder to make the case. I guess it was more of digression from the main point.

    5. http://www.cfo.com/article.cfm/11777812/c_11780170?f=home_todayinfinance

      Interesting little article on Deloitte. It seems like it was the best year ever. Its possible some of the foreign revenue growth could be a result of the week dollar. Someone would have to look into that.

    6. Hi @Chicago Accountant, Check my Twitters for my comments today on this article.

    7. Rumor is that Deloitte is laying off its tax staff. Someone saw an e-mail on the printer that was addressed to the partners. Deloitte has shipped most its compliance work to India, and most of the staff have nothing to do. Of course, the layoffs will be blamed on poor performance and take place after the tax filing deadlines.

    8. Many companies are outsourcing U.S. jobs overseas, but still charging their customers the same high dollar price for the goods and services. Congress stopped the corporate inversions and called it unamerican. Remember what they said about Stanley Tools? Nonetheless, companies just pursued another avenue. No wonder our economy is going to pieces.

    9. This single comment from an unknown source makes its credibility dubious at best. The dollar figure for the “average” partner is also ridiculous.

    10. […] Even in the face of what I have called double dealing, incompetence, betrayal, and downright double-faced lies by the firms, the regulators and the universities, many still defend not only the firm leadership […]

    11. Maybe I’m just naive, but aren’t there any positives to report about in accounting/auditing? This blog and goingconcern.com all seem to be focused on how badly the big 4 shit the bed, how rich the partners are at other’s expense, etc. What would you do if you were a partner? My dad made $30/week at a Big 4 firm in the 60s, wouldn’t you milk the cow to exhaustion if you had to pay those kind of dues?

    12. @Noah

      The “positives” get reported by the firms themselves via their PR folks and reported in most mainstream media, recruiting events, their own websites. This is the rest of the story.
      And no, I wouldn’t “milk the cow” to exhaustion under those circumstances. I didn’t when I was there. That’s a short-term, short-sighted , self-interested approach that serves no one but that individual well. Since the public accounting firms have a public duty, I expect much more.
      Francine

    13. Makeing $30/week — not too unusual in the 60s. Time value of money accounts for that. What dues was he paying — sounds like a reasonably good salary for the times.

    14. Anyone watched Barry’s straight talk about the raise this year? As usual, well done Barry… He made the morale among the staff even lower… Why did this guy always come out and said something everyone already knew, and made it in a much worse way…

    15. […] longer audit, I still try to keep up with changes in the industry. This was the blog that broke the Deloitte layoff story in 2008 right before it […]

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