Laboring In The Big 4 – A Labor Day Special Report
By Francine • Sep 1st, 2008 • Category: Pure Content
It seemed fitting to survey my writing about the relationship between the Big 4 and their employees. I’ve included a link discussing the relationship between Big 4 senior leadership and the average partner, since the average partner is really no more than a glorified employee for all the real job security and authority over firm activities that he has. And the price is high…
One of my first posts discussed the fundamental principles for professional services firms, as taught at the Harvard Business School:
1)Partnership structure is ideal.
2)Small is beautiful.
3)Organic growth is superior to growth by acquisition.
When a professional services firm strays from these principles, they run the risk of sacrificing the values, culture, code of ethics and requirement to put the client’s interests above theirs that is inherent in being a “professional.”
We can see that defying these principles has affected the firms’ ability to be good partners to their partners as well as stewards to the non-partner staff that support them.
We see it when firms struggle all over the world to develop representation at the partner level that is aligned with the percentage of women accounting graduates and those of color and diverse ethnic backgrounds.
When it comes to fair pay, the Big 4 has to worry about whether they’re paying their own staff as well as their vendors fairly. And based on the lawsuits and labor problems, they’re not doing a very good job of it.
They are paying their new recruits a healthy starting salary by most standards, but not when you consider all the unpaid overtime hours. And since there’s no free market in the college recruiting arena, it can hardly be called just and fair.
And when they want to make more money or screw up on planning and forecasting, they just let the employees go and pay them off to keep them from sharing their humiliation and hurt with anyone.
They do have formal performance review processes, but they were implemented in the last few years to respond to the need for a way to paper over the issues they had when business tanked in 2000/2001 before Sarbanes-Oxley and to address the slowdown or perceived slowdown that is occurring now. Borrowing from one of their most notorious clients, the review process is not about judging performance using an objective standard that measures knowledge, client service, and ethics, but about how well you perform compared to a peer group, however skewed and clique-ish that is.
Is this really the way to run professional services firms?
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Francine McKenna (@retheauditors) has more than twenty years of experience in consulting and professional services including tenure at two Big 4 firms, both in the US and abroad. For more info, check the "About" page.
Francine:
Don’t get me started on GE. Of all the companies in the world, this is the one I hate the most. I see GE as a massive criminal enterprise, a legal “mafia”. If there is an afterlife, I hope the various members of GE’s senior management are consigned to the lowest circle of Dante’s Inferno.
I hardly need to tell you how spot-on correct you are in every particular in this post. But there may be some readers who think you’re biased against the Big 4 firms, and thus looking to make only negative points. To them I say every point posted corresponds with my experience — 7 years now (excluding the Andersen years).
You’ve posted several times now that “small is beautiful” but I think it’s time to just state the truth. Each of the Big 4 is TOO BIG to effectively (let alone efficiently) manage itself. Their size gets in the way, constantly.
Anybody who is looking for valuable experience and accelerated growth should spend a few years in one of the Big 4 firms. Anybody who is looking for a long-term career in one of them should be advised to think twice — or more.
@Anonymous Thanks for your comment. Just a few notes:
1) I am biased against the Big 4, as a business, as a model for providing shareholder assurance of true and accurate financial statements. It’s just not happening. So, all firms being equal, none of them are providing a service to shareholders consistently. The cost of their errors and omissions, aiding and abetting, to their clients shareholders, to their employees, to the capitalist system, to their vendors, to other stakeholders is too high.
2) Yes, the firms are too big. But how can they provide assurance, certified financial statements, to multinational global companies if they are not global behemoths, with offices everywhere to serve their clients seamlessly? See 1). They’re not doing it. The model is broken. The certification of financial statements is worthless. Investors ignore the report because it is a “negative assurance”: nothing is wrong that we could see or that our very precise and limited , to limit our liability, procedures could identify, right now. The audit has not prevented fraud, errors, lawsuits on all sides, lawbreaking by management, restatements, “unexpected” liquidity crises, backdating scandals, subprime crisis, and the kind of giant errors in “judgement” and other woes that we see in the modern pubic company. Give me a $1 billion + revenue company that has escaped these issues in the last ten year, is a well run, honest, ethical company because it is a well audited company and then we will have a place to start over.
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