• Hey Big 4! If I Were You, Here’s What I’d Do (Instead…)

    By • Apr 8th, 2009 • Category: Audit Firm Management, Latest, Pure Content, Your Career

    All of the Big 4 firms have had significant reductions in staff during the last 18 months, and especially the last 8-12 months. The largest reductions seem to be at Deloitte and KPMG. But significant cuts have occurred at EY and have been rumored  to have occurred, although couched in “performance only” language, at PwC. Only KPMG and Deloitte have issued voluntary, anticipatory press releases for their “workforce resizing.” But not recently. PwC was forced to acknowledge some cuts last February due to reports here, but did so reluctantly and only after questioning by another publication. Their reductions have been mainly through attrition and forced ranking approaches that pushed employees to seek other opportunities involuntarily. These cuts have occurred in the US and outside the US.

    One of the main suggestions I make to firm spokespersons and their recruiting professionals is about the handling of these terminations by HR/local partners. The numbers to cut may come down from on high, often decided on a nameless, faceless and arbitrary basis. However, execution, literally and figuratively, is all local. I’ve heard many reports and I’ve seen the personal and professional impact of botched paperwork, poorly handled meetings, and inconsistent treatment within offices and even within practices in a specific location. I’ve heard strong cases for discrimination complaints and have had former employees cry on the phone when describing their shame and embarrassment mixed with confusion and a sense of betrayal. If the firms could do one thing better, if they must continue, it would be to develop teams of highly trained, focused, dedicated professionals to handle these issues in each location so that consistency and adherence to  appropriate policy, procedure and employee rights/employer responsibilities is ensured. The local partner who thinks they can talk their way through and make exceptions ends up promoting more bias, perceived favoritism, and unfair retribution and punishment and is, therefore, a dangerous weapon that must be stopped.

    So what’s happening out there? How are the Big 4 cutting costs and eliminating payroll costs in order to “survive” ?

    (This information is based on not only emails, calls, and personal interviews I’ve conducted, many of which are included in the blog posts linked to, but the thousands of comments provided by readers in particular on the posts here, here and here.)

    Existing employees

    • All of the firms have had reductions in force
      • KPMG
      • PwC
      • EY
      • Deloitte
    • Implementation by some of short weeks with proportionate reductions in pay, although how realistic this is in actual practice remains to be seen.
    • Implementation of mandatory paid holidays during non-busy season
    • Offering sabbaticals to top performers
    • Offering secondments to top performers, although this is just moving the checkers around the checkerboard, since
      • a secondment is usually paid for by originating firm, and
      • then there’s the problem of not enough work in the destination, and
      • the commitment to reemploy after the time period that is now subject to quite a bit of uncertainty.
    • Reducing Paid Time Off (PTO) carryover – Effectively reduces liability for vacation and other time off from a scheduling and a financial liability perspective. The financial aspect is especially significant due to the obligation to pay accrued paid time in the event of involuntary terminations.
    • Application of “forced ranking” techniques to seemingly force otherwise or previously good or above average performers into lower performance categories. This approach is used to justify termination or an unexpected Performance Improvement Plan (PIP) process that is really just a self-fulfilling prophecy
    • Denial of unemployment compensation based on the sudden or fabricated “performance problems.”
    • Attempts at recouping signing, CPA, or other bonuses based on “performance-based” terminations versus business based reductions.
    • Demotion and outright termination of partners who are effectively at-will employees via similar techniques as the staff terminations.
    • Forcing equity partners, including those in protected categories, out via sudden poor performance ratings, loss of responsibility and corresponding compensation level reductions
    • Terminating pre-MLOA (primarily pregnant women,) on MLOA, or MLOA immediately upon return to work under the guise of job elimination.
    • Terminating visa holders, often with no notice, who then have very short times to find new sponsors or else return to their home country. Many of these employees were recruited from the university. Firms save costs of sponsorship and other legalization costs if employee had been kept on. In some cases, firms have denied these employees their rights under law, due to rushed terminations, stonewalling, or denial of required legal assistance.
    • Reducing administrative staff by closing administrative and technology support centers in some cities.

    And how are the firms reducing payroll and costs related to new recruits and employees under one year of tenure?

    • Firms are terminating employees with less than one year of tenure, even though most of them came to the firm after serving an internships prior to graduation and are most often the top graduates of the top accounting programs in the world. These new hires are returning to campus to their alumni placement offices and asking for support as well as spreading the word to their friends still in school, thereby engendering quite a bit of fear and uncertainty amongst imminent hires.
    • The firms are still recruiting on campus and, in some cases, paying bonuses for referrals for campus recruits. This is happening while they are terminating tenured employees, including those in protected age categories. Although the spigot on the university pipeline has finally been turned a half-turn during the last six months, the firms were very reluctant to do anything until their hand was forced.
    • Firms are holding fewer interviews in campus for internships and full time or are holding interviews with no commitment to number of hires.
    • Start dates for those already offered a job and accepted have been delayed, sometimes multiple times.
    • Some firms have rescinded offers completely, leaving students with few options.
    • Firms are frequently changing practice or location both before and after a letter of acceptance has been issued.
    • Some firms are sending out offer letters with no salary, “pending changes in their compensation programs and evaluation of market conditions at the time of start date.”
    • Changing salary after offer is extended and accepted.

    Other techniques to reduce costs/increase profitability being employed

    • Forcing professionals to eat hours or work even more than usual to make up for less staff and or reduced budget. This is happening without overtime and with less paid time off, comp time off and insecurity in taking earned time off.
    • Overbilling or inaccurate, inflated billing, especially on fixed fee/monthly retainer engagements such as internal audit and tax compliance.
    • Forcing managers and partners to do staff work, thereby losing more margin (because the client can’t be charged a higher rate of course for same work) and resulting in a loss of review/quality assurance layer and objective independent risk management.

    Why they’re doing it

    What are the business reasons the firms are feeling a reduction in profitability, a loss of business and a strong feeling that they need to take significant measures to reduce costs?

    • Compression of number of clients both on audit and consulting /tax side due to number of bankruptcies, acquisitions, nationalizations and attendant pressure on fees in remaining clients related to subprime and financial “crisis.”
    • Significant reduction of Sarbanes-Oxley revenue stream due to maturity of this initiative with regard to financial controls, in particular, and pressure from clients on fees for any current or future work both on the external audit and the consulting sides.
    • Over-hiring or wrongly allocated staff during SOx era left some firms overstaffed in wrong practices, wrong locations, and not prepared for reallocation/reassignment.
    • No comparable new “next big thing” in practice pipeline. IFRS, XBRL, not as big.
    • Bankruptcy trustee and corporate investigation work is shorter term specialized work compared to audit, with key independence constraints in US and limited duration, except in rare instances, (Lehman for PwC in UK, for example.)
    • Softening of all spending on technology and business process improvement consulting unless it has clear and compelling cost saving component and even then delayed starts, reduced scopes and pressure form clients on rates.
    • Firms took longer than they should have to slow flow from university pipeline due to reluctance of firms to alienate universities and dependence on leverage (constant stream of lower cost/lower hassle resources from universities.)
    • Firms did not see cost savings and efficiencies from offshoring that they’d hoped (Deloitte and PwC, in particular) just as their clients did not.
    • Significant and increasing litigation settlement and ongoing securities and wage and hour litigation defense costs.
    • Fear, anticipation of additional costs associated with wage and hour litigation.
    • Significant increase in compliance costs, including technology, that has not resulted in efficiencies, as a result of scandals like KPMG tax shelter, independence violations, and increased PCAOB inspections.

    It’s not easy to turn the massive Titanic-like ships of states that are the Big 4 firms away from the iceberg. It may be that they can use the excuse of the financial “crisis” to defend the actions they’ve taken to reduce costs and make, “…targeted and limited workforce reductions where appropriate.”

    But the things they are doing to respond to what they see as a business downturn and a profitability squeeze are only tactics. They plug holes temporarily. They don’t renew, redirect, and retool the firms to respond to reality. It’s hard to fault them. They are constrained by a model and a mentality that quashes long- or even medium-term strategic thinking. Notice: I didn’t say anything about increased competition for the Big 4 firms.  There is none, by design.

    So I asked myself, “fm, what would you do if one of them asked you to step up and offer solutions?” After all, I’ve been accused by even my own readers of stirring up the masses to violence and rebellion, not to mention encouraging demands for overtime pay, unionization, and potentially the rejection of the default position that a Big 4 career is the only worthy one for a top graduate of a top accounting program.

    If anyone asked me to help find a way to get through this period,

    • Without reductions in force,
    • Without betraying the trust of otherwise very loyal employees,
    • Without losing the confidence of key clients,
    • Without endangering quality and integrity in the work they’ve been enfranchised to do under the exclusive licensing of various federal governments and public/private bodies such as exchanges,
    • Without risking new lawsuits for negligence and complicity on fraud and malfeasance, and
    • Without completely abdicating responsibility to their true client – the shareholders and investors in the public companies they audit,

    I would start at the top.

    I have tried to stick to criticizing, and specifically criticizing by name, only the top leadership of the firms and those who are publicly named in litigation or regulatory enforcement actions. That approach is taken for two reasons. The first is that I do not have the resources or time to verify claims regarding anyone other than those who professional journalists already write about, who are in the public eye, who have held their actions open to public scrutiny. The second reason is that I have a great deal of respect for the average accounting/audit professional, at all levels, who knows their stuff and does their job in the best way under tough conditions.

    The firms and the profession have an incredibly loyal membership. 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 but the way of life which is a Big 4 job, in particular in audit. It borders in some cases on a kind of “Stockholm Syndrome” response.

    I frequently ask others for an explanation for this behavior. That discussion delves into the realm psychology and, potentially, a quite biased and stereotypical portrayal of the kind of people who choose and succeed in this profession. Not the purpose of this post, but perhaps an indulgence for me at a later date.

    If we focus on actions of the top management and the most strategic decisions of the Big 4 firms, I believe we’ll see some things that could be done differently and more effectively, if only the senior leadership were willing and able. In making the following suggestions, there are two assumptions to keep in mind:

    • I’m not necessarily offering these suggestions for the next tier firms (GT, BDO and RSM.) Their size, model, and client base is so dramatically different from the Big 4 as to make the discussion of their strategy completely different. And I’m not sure these three are all long term players anyway, especially BDO. For that reason, I have most often not focused on them on the blog except when their issues spillover to the industry in general or to the Big 4 themselves.
    • This blog has discussed the general lack of purpose, the worthlessness of the current audit opinion for public companies. Another completely different approach is needed, in my opinion, to protect shareholders and investors in public companies than the current product, especially when the shareholder/investor is the taxpayer as has occurred in the recent investments in AIG, Fannie Mae, Freddie Mac, Citigroup, GM, etc. But for the purpose of this discussion, we will assume the Big 4 need to keep doing what they’re doing, but more successfully, profitably, with their current staff rather than cutting their nose (their staff) to spite their face (maintain partner profits in the short term.) A bigger set of propositions includes government control of audits of companies taxpayers are significantly invested in, utilizing a Service Corp for Accountability and Transparency made up of the professionals the firms are irresponsibly shedding.

    So, starting at the top, at a strategic level, I  recommend significant changes in two main areas:

    • Refocus on the true client – the shareholders and investors of the public firm, and
    • Reform the business development process with an emphasis on meeting client needs, where they need it, how they need it, and with the kinds of resources required to do the work in a quality and risk-managed way.

    Tomorrow I’ll post the details behind these two recommendations.

    is
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    136 Responses »

    1. confused @ 100 —

      Let me suggest that you are, indeed, confused if you think over-regulation is the cause of the problems discussed on this thread or on this blog. First of all, asccounting is not the most regulated industry out there. Take a look at the Aerospace/Defense industry if you want a highly regulated industry. Second, many of the firms’ requirements come from their past failures to meet regulatory requirements, not from the regulations themselves. For example, most independence controls relate to past transgressions, deferred prosecutions, and/or consent decrees. If the firms require more, it is because they are required to do more in order to avoid monetary penalties.

      Finally, all the regulation in the world, and all the controls in the world, don’t prevent all the misdeeds — just ask Deloitte or EY or PwC about independence issues that “slipped” through their control systems, despite hours of mandatory training and all the confirmations and all the registration of personal investments.

      So, if the regulations are not the root cause of audit failures and morale issues, what might the root cause or causes be? May I suggest a couple of areas for your consideration?

      1. Failed leadership. A leadership team more concerned about maintaining current year income than in doing the right thing for the clients. A leadership team more concerned about maintaining their positions than in doing the right thing for the long-term interests of the firms. A leadership team selected not based on demonstrated leadership skills … and with little or no accountability for decision-making once annointed.

      2. Failed evaluation/promotion process. An annual evaluation process that is not only susceptible to undue influence, but actually designed so that partners and other influential people can override the objective evaluations and rankings, often in the name of maintaining the “leverage model”. An annual evaluation process that lacks accountability for the persons giving the evaulations as well as those determining the rankings. A promotion process that rewards conformity and looks and smoothness, and downplays (or downgrades) technical competence and speaking-out for quality and questioning of leadership decision-making. A promotion process that ensures anybody with any leadreship characteristics never makes it into a position of leadership.

      3. A culture based on greed. Unbridled, limitless greed, hidden by a lack of transparency so thick that even most insiders have no visibilty into compensation practices. Aided and abetted by a system that emphasizes individual salary discussions while ensuring the individual employee has little information and even less ability to push back on inequitable situations.

      In a nutshell, confused is where the partners want you to be. It makes it easier to maximize your productivity while minimizing your ability to evaluate what’s really going on. Reading this blog helps you move out of confusion. Talking to other people helps move you out of confusion. Reading article and books helps move you out of confusion. Listening to the internal firm messaging? Not so much.

      In my opinion.

      — Tenacious T.

    2. @99 – not selective memory at all. You are right – vlookup and sumif are laughable as advanced skills. Take a look at Forensic – you might find what they do and the culture to be a bit different.

    3. @101 – your message is the same all the time. I see you have put a ton of thought into it and done a lot of research. I respect that and will admit outright that I have not studied up as much on many topics as you have. I also respect your thought process. That said, it seems that you leave out some important aspects to the story as you draw your conclusions. Consider the following:

      1) Greed – yes it has issues, but it is what the American culture and capitalism are based upon. I have a socialist streak in me, but when you come down to it, there is truth in the capitalist model in which greed provides motivation for innovation and progress. I do not see the B4 being based on greed any more than any other firm I have worked for – and I have worked in several industries for large, medium and small firms. I think greed alone cannot be the problem. I suggest you look at greed when it lives in an environment such that you advance your own wealth only by suppressing others — that kind of greed is the problem, not all greed. If greed exists in an environment of teaming where all succeed together and the success of one is the success of all (including the engagement team, the practice, the firm, your clients, the stockholders) then it isn’t really that bad.

      2) Review process – the B4 process is not unique and has not failed. Some people who participate in that process may have failed. Objective reviews are not a realistic possibility — it just isn’t possible. The very definition of review involves opinions made by some people about others — and those opinions will involve some degree of subjectivity. The way to remedy that is to include many people in the review process, to require reviewers to defend their positions, to seek out peer review, and to be sure to value many types of skills. Some practices and some regions surely do better at that than others. I have seen other comments where you have explained what you have done to assist people in the review process — those behaviors are part of the process and that is the way it should be. I know that I disagree with many promotion decisions made at my B4 – but have had that experience at many other companies as well. I cannot accept that the review process (even as you have described it in several different posts) is failed.

      3) failed leadership — this comment is identical to the greed comment. I think that the issue is that at least at my B4 the leadership do not really reward effective teaming that produces quality product. I have seen these failures on several levels. In some cases they do not want to have a team member utilize others with their specialized skills (manager or peer review) because they do not want to put more names on the bill to the client. This same behavior causes scheduling and morale problems because people get stuck on a particular engagement and we do not cross-train so that we can effectively use available staff as appropriate. Another situation I have seen is rewarding individuals rather than teams in such a way as to almost encourage people to sabbotage each other. That statement is stronger than what occurs – but what does occur is people do not contribute to the team unless there is individual reward.

      Your comment on conformity and rising to the top only if you fit the mold. Again – this is the nature of business. If you feel your business model is working then you want to promote those that fit the model and that would be those that look and act like you. So, the premise you are really proposing is that leadership should consider that their model isn’t working – and as such they should consider looking for people with different viewpoints. I would agree that this is not only a good thing when the model is failing – but is healthy diversity at any phase of the business’ lifecycle.

      In terms of leadership not rewarding people who speak up with different views or challenge the work product — my experience is that those who challenge do get ahead. I have seen what you refer to – but it isn’t the majority of the people I work with. The key is to speak up and have a healthy disagreement – but in the end, if you lose the argument you must let it go. If you have the discussion several times in constructive and healthy ways — things will eventually sink in (assuming you are actually correct). Always give the loser a way to save face too.

      I am certain the things you observe do happen. I just cannot agree that you are placing the blame entirely in the right place. Change is evolutionary, and you can have an impact over time.

    4. @103 and @101

      Great discussion.

      I would give one little piece of information to support the conformity principle at the firm I think is the worst. Professionals from PwC visit this site on a daily basis more than any other identified host IP address, but you hardly ever see them comment. I have had more personal attacks (they don’t get posted) and negative reaction from that firm and their professionals than any other. I also have more sources at high levels there than at any other.
      Just sayin’
      Francine

    5. Anony @ 103 —

      We’re going to have to agree to disagree.

      It’s important to distinguish generalities from individual examples. When I say the evaluation and promotion process has failed and has been designed to fail, that’s simply my overall opinion based on many years of observation and participation. Your posting of some vague counter-examples — “some practices and some regions surely do better at that than others” — doesn’t really do much to change my opinion of the overall process. Counter-examples only undercut general characterizations if they represent a significant part of the transaction population. If not, the generalization is still valid even though there are one or two exceptions.

      (I just made that last bit up, but doesn’t it sound authoritative? Can you tell I used to write expert reports for the partners?)

      And, as I’ve posted before, the fact that evaluations and rankings are manipulated is a shame–it’s not a good thing. If I learned to work the system to help my protege(s), that doesn’t mean the system was well-designed or served the needs of the partnership and the staff. But we’ll just let that one go. My other opinions are also not changing based on your posts, but I respect your tone and I’m glad my thoughts sparked your comments.

      Not to be socialist or anything, but isn’t the Hegellian dialectic a wonderful process to participate in? (Y’all can google that for CPE credit, I think.)

      Finally, as I use a consistent nom d’net it’s easy to say my “message is the same all the time”. Yet I don’t know who the Anony posters are, so I have no way to know whether we’ve engaged in discussion before, or not. If I repeat myself, it may be because I don’t know if the poster has read any of my previous comments.

      Enjoy your weekend!

      — Tenacious T.

    6. @TT – I have discussed with you before and I know you would prefer I provide a handle. I am not ready for that. But I have volunteered before that I am not an accountant — I am in forensics. I do believe that there is a huge difference between the audit practice and forensics. For example, in forensics it is desirable that you challenge and question things. That is what we do (and our lay off list would include the people who do not challenge upward). I think the reason I cannot yet agree with you is that I have experience at 8 non-B4 firms (not even in financial businesses per se)… and the issues you raise are no different anywhere. It is always true that the review process involves subjective evaluation and that playing politics influences that process. I do not play politics well – BTW. You refer to your “learning to work the system”, whereas I view that you have learned how to play politics when it is something you believe in or something that serves you in some way. Both reasons for doing this are fine…and it just shows that the system works because it allows you to participate in this way.

      I realize my counter examples are vague. Let me say this about teaming… I believe that in an effective team multiple people work with each other and share knowledge about the work and can become somewhat interchangeable (thus allowing managers to schedule assignments easier). While one person is providing support, brainstorming, and QA – the other is doing the bulk of the work. If we team well, we have many people working across many engagements. But at my firm each engagement becomes encapsulated. They do not want too many people’s names on the bill, they believe that the manager in field A is competent enough to QA the technical skill that may be in a completely different area (example – an accountant QAing a technology person for example). As a result, the individual leading the engagement is rewarded rather than a team that has a responsibility beyond the one engagement.

      I believe that this isolation of credit by engagements leads to the type of greed that causes you to have your opinion. I am trying to be too philosophical I suppose… but greed by definition isn’t the problem. It is that the greed in combination with individual competition results in people looking out only for themselves and their engagement — rather than the longer term practice development and overall quality across engagements. Honestly – I think it is the reward system which credits individual utilization and managed revenue that causes people to focus on these shortsighted goals which is the problem. Why not reward managers that run a team and keep the team busy over many engagements throughout several years — that encourages long term team development. The way it is, people are rewarded for keeping several people busy on a particular engagement and so they have tunnel vision on individual engagements. This does not encourage developing staff — it encourages managers to play favorites using only the ones they do not need to train. This does not encourage career development as managers just want the person to do the same thing as they did it well in the past and they don’t care if the person is happy long term as their job will end before they have to address this issue.

      My experience may be different because we have jobs of various durations – many that are smaller. We have jobs from $10K to $110M… some may just be 20 hours assisting an audit team, others 1000s of hours over multiple years. I think audit jobs are longer on average, and more predictable.

      As you think my examples are anecdotal and that this is not enough to sway your years of experience… I generally feel the same about most of the posts on this blog. I am not questioning your experience, I am asking you to look one step deeper… is it the greed that is the issue or is there something else that is the root cause of these behaviors.

    7. @fm — interesting about PWC… I would have expected you to say Deloitte. What I don’t understand though is are you saying:

      1) PWC folk don’t post due to pressures from above that they need to conform and thus cannot even engage in this discussion
      2) PWC folk attack you personally and are so entrenched in defending the B4 and minimizing you that their stance shows conformity
      3) both
      4) neither

      Regardless – I did not expect that it would be PWC. On the other hand I have seen many complements on the blog of how PWC is forthright with their employees. So maybe they conform for good reason (i.e., PWC has it right – so it is worth conforming and defending).

    8. @107

      3) Both
      But actually I’m looking for more input and feedback on the phenomenon.

      You missed the part about all my informers and off line support from current and former PwC. They have it no more right than anyone else, in my opinion. But what they do do well is provide incentives for employees, more than others not to talk. That may be a carrot or a stick. That”s what I’m curious about.
      Francine

    9. @fm – still interesting. I know nothing about PwC — so do not assume I am making any comment as such. But my wild a** guess is that companies really don’t care much about something like blogging… and would not give any specific incentive to blog or not to blog. But companies do have a culture and they may succeed at creating a culture that encourages this behavior. The only cultures I can think of are successful brainwashing (I don’t believe that though as a company that large cannot possibly win the hearts of all the employees and any company larger than say 10 people certainly has many unhappy employees), or a culture of secrecy (seems more likely)… actually I cannot figure why that pattern would happen at all. I don’t believe that any B4 would have happier employees (as I said earlier — take any company and you’ll get the unhappy), I don’t believe that a company that large wouldn’t have people interested in blogging, and I don’t believe a B4 can create any incentive plan to stop their participation. So, I don’t get it either.

      Let’s go a step farther — and I do not know this to be true — it seems that Deloitte posts the most. Why is that? Is that phenomenon any more or less a curiousity? Is it even true?

    10. First up, I’m posting from Australia, where aspects and characteristics of the firms may display local variations.

      Second up, I was in consulting at both (which Deloitte called “consulting” and PwC called “Performance Improvement”) rather than audit. Again, “contents may vary”.

      However: trying to keep it as non-inflammatory as possible, going from Deloitte to PwC, from “Manager” to “Senior Manager” (actually the same thing as D didn’t do “Senior Managers” in consulting then) I found:

      — All the time I spent at Deloitte working with Consultants and Seniors on how to do the work better, I found myself spending with my “Sales Coach” at PwC.
      — The Senior Consultants that worked on my jobs at Deloitte called me by my first name when they answered my calls. The guys at PwC answered the phone “yes, boss?”
      — The Gen Y-ers at Deloitte wanted to know what I could do for them when they were working for me (got pretty depressing). The Gen Y-ers at PwC would complain if there wasn’t some way they could spend all night doing all my work for me (depressing from the start)
      — The consulting partners at Deloitte were career consultants and technologists. Half the PI partners at PwC had started in audit
      — At Deloitte my peer (senior) managers were my friends. At PwC they were anything but.
      — The Senior Consulting partner in my office at Deloitte stood up in front of the firm and said “any Manager or Director who asks anyone to eat hours will get no better than an MSE rating this year” (a “4”). At PwC I told Seniors and Consultants to book the hours they worked. They looked at me like I was nuts.

      I lasted a year at PwC but it was that year that showed me what Big 4 partnerships were “really” like. At PwC the stakes were higher and everyone really played for keeps. No tears, and no bitterness. The place just wasn’t for me. But while I was there, it scared me rigid.

      I could have been seeing stuff that I had missed at Deloitte because I had good relationships there. Maybe they were really the same. They could have been and I just missed it.

    11. @110 – sounds like a culture of fear. I didn’t think there was anything, even fear, that could change the Gen Y-ers in such a dramatic way. Wow.

    12. The most views are probably coming from PwC as they try to monitor the lay-off situation more closely. We’re the only firm that hasn’t done significant layoffs and everyone knows they are coming.

      Out of my starting class, one has left and two have been let go. Rumor is at least one more is going to be let go. That’s only 20%, which is what I believe is the historical rate. But in this environment you can’t continue to support that number. Audit fees are being slashed, as firms come in with unsolicited bids of 40% fee reductions in some cases.

    13. @111

      One of the most interesting things I’ve observed is that Gen Y and Millennials that are at the Big 4 (top schools, top grades, been told they are great for a while) do not fit the stereotypes most repeat when talking about those under 30ish.

      They may be constantly with IPods in their ears, never satisfied, always questioning, thinking they can take over the world and very connected to each other and the world via the internet, but they are still accountants and auditors. They’re generally risk averse, surprisingly often politically and socially conservative while embracing green and doing social good. (Man do they get excited about those service projects at the firms, although I think it’s more to show how good and what a team player they are than out of sense of altruism because most of them would not go to with me to a White Sox game or bar on the south side of Chicago unless it was the St. Patrick’s Day Parade.)

      At PwC, I also noticed this fierce competitiveness to be the one staying the latest, taking on the most extra admin projects in the “Great PLace to Work” committee meetings and very ready to show off any or all closer connections with a partner such as living near them, taking the train with them, having had lunch or a coffee with them or being spoken to less than perfunctorily once or twice. They would stab each other in the back for extra hours and none of them wanted to take any interns on their projects the summer I ended entertaining and keeping busy the majority of them in our office since my assignment was an inside one. Why not take on interns? They took away their billiable hours and they might look smarter. I heard it with my own ears.
      Francine

    14. @fm – I have witnessed all those behaviors in the under 30 crowd. I find the volunteering for the social committee stuff intriguing… and didn’t notice the pattern until you mentioned it here. I know my generation doesn’t care about those things at all. I thought their generation was thinking it was a perk and really liked the events. I also notice the “whats in it for me” attitude. As a performance manager I have had to have these talks over and over again. While I agree with looking out for #1, I try to explain how they should blend the “whats in it for me” with the “whats in it for the firm” attitude. You don’t get something without giving something. The idea of paying attention to both sides of the equation is hard to explain to them. I have gotten a couple of them to turn the corner… and they are going to do real well.

      That said — I also mentor a 30-something (so funny I called him that — when I was 30 something that show was on TV). Anyway, he is all over “whats in it for me”… and really sees everything others do as hurting him. The victim mentality is a challenge for me to work with. Actually I get it – but you just have to move past it and take responsibility for your own career. But this guy and a few others are all about where can they travel to, how fancy can the hotel be, I must fly first class, what’s the fanciest restaurant and most expensive bottle of wine, etc. Worse than that though is that it translates to how can I get others to do all the work and I get credit for it. And if the other person actually does get recognition — why am I being treated so badly. These behaviors are often observed in the 20 somethings.

      I like the angle you take on explaining that group — it is showing them more in a brown nosing way than just a self-centered way. If that is the case – their brown nosing techniques are pretty good… they play the politics well. It is the self-centered part that is harder for me to work with.

      So I realize we are generalizing – but it i fascinating to see the generational differences. My generation had its own challenges — thinking we could change the world and being idealistic.

      Your mention of competitiveness is interesting to me — I continue to think that the individual competitiveness (internally competing within our own engagement teams) is the worst problem at the B4 — and is the root cause of much of the other things noted all over this blog.

    15. @114

      A narcissistic personality is a narcissistic personality, no matter what industry. That’s why in the presentation I made at MACPAS on careers, I mentioned that one of the issues firms are facing is that top students went into accounting during fat SOx days because they thought it was the hot, high paying, easy job they can do for a few years, go get an MBA, and then make big bucks as a consultant or investment banker. The problem is not some generational thing, it’s that they just don’t have an interest or aptitude for the job, nor do they have 6the right temperament. It’s all opportunism with no feel for the vocational aspect, the service to the public interest aspect. http://retheauditors.com/2009/06/careers-in-uncertainty-mckenna-speaks-at-maryland-cpas-business-expo/

      I actually buy into the “paying your dues” approach to this profession. That’s why I liked KPMG Consulting/BearingPoint. It was a meritocracy. I paid my dues, worked hard as an experiencd hire, and became their first female MD in Latin America. The problem is that the way the firms are run now, there is not only not a guarantee, but there is a pretty high likelihood that you will get screwed for working your tail off unless you “brown-nose.” It’s something between just plain sucking up and pure self-centered cutthroat behavior. It’s delusional “me, me, me” behavior that is exhibited everywhere and in all industries by spoiled brats at every age. My advice is to set parameters then kick their tail out if they insist on being professional pigs.
      Francine

    16. @fm – I think KPMG advisory is much like the meritocracy you say consulting/bearingpoint was. This is probably why I commonly disagree with many of the posts here. I agree with your post @115. I just do not have the power to “kick their tail out” and it is frustrating when the partner who does is not in agreement with my views. I know I am not always right — but I do notice that while our office managing partner is generally fair, he is also sometimes swayed by non-meritorious behaviors (such as a good flirt).

    17. […] back and taking it anymore.  Clients exerted pressure, budgets were cut, teams were made lean, and reductions in force occurred, in bigger numbers at the others until now, but at PwC all along. They cut worldwide, like a […]

    18. Hey Guys

      Thanks for the useful information.

      I am a first year at a Big 4. I have a feeling I might get laid off/fired due to my first performance rating which was below average. However, I have been a high performer my whole life and was top of my class in college. Its hard to understand exactly how depressing this situation is when you have prided yourself on always doing your best and being one of the best. I should mention my low rating was not due to work quality/skills but more related to politics/a few people disliking me and/or my personality.

      My question: What are my options if I do get fired? Is it even possible to get a job in industry or something else? I just cringe when I think about this……………

    19. I forgot to specify that I am in audit and should be done with my cpa exams by the end of this year.

    20. @ 113

      Francine – First, I find your blog fascinating and even though I don’t always agree with every one of your posts – I still enjoy reading them on a daily basis. I just wanted to say that even though I live a few blocks from Wrigley, am generally satisfied with my Big 4 job and gave up my thoughts for world domination years ago – I’d go with you to a SOX game or bar on the south side any day.

      I also find it hysterical that after about 5 posts the topic you “blogged” about becomes a memory – perhaps why I keep reading everyday….

    21. @iPod Staffer

      Thanks for reading. It’s not necessary to agree with me. In fact I find debate and honest disagreement intellectually stimulating. I don’t know everything. I’m just one of the few who knows as much as I know who’s wiling to say it under my own name.

      Good to hear you’d be willing to come to a Sox game. After the game last night, I have high hopes. Maybe a re: The Auditors Sox outing? Only the dedicated readers have to show up.

      There are a lot of people who only read the comments and not the posts. That’s ok. Whatever entertains, informs, helps. I’m here for you.
      Francine

    22. I’m beginning to turn. Generally I feel the posters to this site are skewed in an extreme way that is inappropriate. But the comment has been made many times that the employees are suffering for the sake of maintaining partner comp. I don’t mind that we should all share the pain of the recession — partner comp decreasing, employee benefit reductions and layoffs, etc. But our partners are taking a 25-30% cut in comp and now there is honest talk that we have to protect it from decreasing any farther. The reason given is because if it goes lower we will lose partners.

      Now if things still looked bad I could understand this argument more. We need the partners with the good networks who can sell work. But in the past 6 months our work load has done nothing but increase. My team, while slow for May has been running pretty flat out since Dec. We are tired and overworked. It is taking a toll on us — physically, morale-wise, and so forth. And the next 3 months appear to be getting even busier. Due to attrition we have less staff, but we have several new hires come Oct. This may not be enough.

      So here’s my beef — if the world was still looking dismal then I understand tightening the belt further with cuts in our perks and expense policies. But given the light at the end of the tunnel is there — why not take the hit in partner comp and let the employees feel good about the effort they are making to save the day? Why anger them when they are the ones who are saving the day now. At a certain point the partners should be pleased to see the recovery coming along and take the hit and lick their wounds.

      That said — it could be that our practice area is going gung ho and the other ones are still in a poor position. But then where are the staff that are not busy — why aren’t they coming to help us? We help other practice areas a lot.

    23. The comments on this site are frequently unrealistic, perhaps. But inappropriate? Why, because we owe some kind of loyalty not to advocate for our interests in a public forum?

      It seems you still see the firm as some kind of team. That you’re all on the same side. Perhaps if you recognized the reality that this business is every person for themselves you wouldn’t be surprised you’re being overworked or that cuts continue despite the end being in sight. I’m certainly not surprised that would happen. Knowing these firms, I’d expect it.

    24. @123 — come on… give a person a chance to express themselves and stop trying to play amateur psychologist. As for the word appropriate — certainly anyone can have their own opinion and express them on a public blog. Maybe a better word would be “flat out wrong”. most comments on this blog do not take responsibility for themselves and blame others before they realize that they themselves are not perfect.

      As for the rest — there are NO layoffs coming in my team. We have had a lot of attrition. We will likely have a couple go for performance issues — and I am very aware of who these people are and why… and it is performance and not an excuse. We ARE hiring. The reason our employees are sometimes feeling mistreated is because the audit teams are struggling and whatever rules the partnership makes for audit are the same rules that apply to the other practices — even if the other practices are not having the same issues.

      As for being overworked — here’s the deal… it is a good thing to be needed and wanted… it is a good thing that my team has the appropriate and necessary skills to move the firm forward. It is a matter of time before we get things under control again. We need to stop the people from quitting and hire more… that simply takes time. And for your information — we have not had lay offs in my practice in my office.

      My complaint is simple — the tone is treating us like we are children. But what is the problem there — most of the employees in the firm probably behave like children. The number of people I see who waste company money and do not spend company money wisely is outrageous. So, the fact that partners have to put out rules to try to train people on how to watch their expenses is to be expected. But for those of us who actually do spend next to nothing compared to others — having the firm tell us thay are going to dictate how we are to save the money and take the decision making out of our hands is just not a good thing.

      So, while I would like to see the partners take the hit and look to a good year next year… I would also like to see the employees make wise decisions regarding expenses — and most of them still do not. I can also blame the firm’s culture for encouraging employees to think that they are entitled to a life of luxury when it comes to living on the firm’s dime (or the client’s dime). this is a complaint I have had of employees for a long time. But why does it surprise me that people treat money this way — this is why we are in the recession afterall… because most people have no idea how to manage their money and they allowed people to steer them into major debt that they cannot pay off and so on and so forth.

      Maybe I wasn’t clear about why I am a bit frustrated — it is due to recent announcements regarding expense policies that are finding new and different ways to save money. I don’t mind cancelling the Xmas party. I don’t mind paying for only one of the PDA or cell phone (should be the case anyway), I don’t mind that we cannot use a car service anymore (again we never should have in the first place). But taking away lunch reimbursement while on travel, and telling us that we cannot make proper decisions on flights (that they will just give us the cheapest one regardless of carrier and time) — these things take away our ability to maximize the savings to the firm and benefits (i.e., frequent flier miles) for us. But I know too many people who simply do not book flights in a smart way — so I guess I see why they did this.

      So your comments are just wrong — I am not overworked because the firm has laid off the people I need. Further — I am not surprised at any of this… and I know that partners will protect their comp. So do not assume my earlier post has anything to do with being shocked or surprised. Thanks for your post — it reminded me why I will side with the firm or the partners over most of the people posting on this blog.

      And for your information — if everyone in the firm is not on the same side — then that is a problem. Being on the same team doesn’t mean you don’t watch out for yourself… that is always true. But the only way to get out of the business mess we are in is for people to be on the same team. As long as you work for a firm you are part of that team — you can either be a constructive member of the team helping it out, or you can hide and hope to stay along for the ride, or you can fight against the team. If you are fighting them — you might as well quit. But know that the next place you go will be the same story.

      Perhaps if you realize that there is a company culture and a company strategy — and that all companies have such a thing… then you will realize that people who are out for themselves are the problem. You need to align with the company in a way that also meets your personal needs and goals. If you cannot do that — quit, you don’t belong there… find a firm where you can do that.

    25. @124, I agree with what you say about the sense of entitlement exhibited by people who live on the firms (and ultimately the client’s) dime. I well remember a senior manager saying to me “There’s more than one way to make a bonus: you just have to run a project. Or work on the right one.”

      But you know what? This sense of entitlement was set by the partners’ behaviours. When the partner came to the project we were out late, guzzling pricey wine and living it up “Having fun and celebrating” etc. When I made manager I saw what happened with the receipts from those good nights, and how the client *always* ended up paying. And all around me I saw the analysts and consultants learning how things were when you work at the big 4: money to burn.

      So — no wonder that people don’t manage their expenses well. In my experience the tone is set at the top.

    26. @125 — I agree and I think I noted that in my earlier post. The expense entitlement is at least partially and probably primarily set by the tone of the partners. I have seen partners who do not set that tone though. And… I have seen staff set the tone for themselves. I prefer not to give examples as that will give me away entirely. But it is not a one way tone for sure. We have 4 partners — 2 are always preaching and practicing frugality… and have done that before and during this recession. 1 simply doesn’t care and is probably somewhere in between. the 4th is generally a big spender… and I never approved of that. So, I see your point and I think the old school, good old boys, do set the entitlement tone at the top. But our newer partners do not do that. I can also discuss 2 other partners for whom I have managed jobs — they too are frugal. So, in my experience the tone is more frugal than excessive on the spending.

      That said — people should be responsible to themselves. This means that just cause the partner is doing something wrong doesn’t mean you have permission to do so as well. I could not look myself in the face if I did a lot of the excessive spending that some people do around here. And using the partner’s behavior as an excuse for your own bad behavior can only go so far (and that is not very far at all). So while I agree and understand your point on tone at the top — I can’t say that I accept this gives permission or excuses staff from their behavior.

      For similar reasons — can we blame the mortgage broker for steering so many people wrong. If a mortgage broker approves me for a $2M loan I am smart enough to know that I should not take out such a loan. Was this broker wrong — yes. But I would blame myself if I had taken the loan out. The analogy is similar. If a partner approves that I use a 5star hotel costing $500/night when there is a quality hotel nearby for $150/night (not a dive) — then the partner is wrong, but I am just as wrong (or worse if the partner did not know all the options and all) if I take advantage of that approval. It all comes down to the two wrongs not making a right thing.

      If we, the employees see problems with the partnership (as are so often stated on the blog) then it is our responsibility to rise above it and do a better job than they do. This is how change is effected… not whining and blaming.

    27. @125 and @126

      I agree that ethical and appropriate behavior starts with the individual. I could leave it there were it not for the fact that we are talking about licensed, accounting professionals who are supposed to operate under a code of ethics, especially with regard to relationships with clients, that goes above an beyond what any specific firm or partner in the firm requires. And then there’s the fact that the partners are the owners of the firm. As owners, their example goes a long way towards setting the tone for what is and isn’t appropriate especially for less experienced professionals who may not have a view to agreements and understandings and billing arrangements with clients.

      Finally, if all of the firms had not been caught at one time or another with their pants down overbilling clients for T&E, especially government clients where it’s a big no-no, http://retheauditors.com/2007/08/ibm-pwc-settle-kickback-allegations/
      I would be more forgiving of the “well, everyone does it” and each partner can set their own tone, approach. Add to that my experience where passing through inappropriate expenses to clients because the clients themselves can;t expense them any more, think strip clubs, and ‘Houston, we still have a problem.”http://retheauditors.com/2007/09/enron-the-beginning-of-the-end-of-accounting-scandals/

      Francine

    28. @fm — I agree that experienced professionals, and especially those in this field, should set a good example. I agree that the employees have a responsibility as well, and I see how improper training (from those experienced ones) may set them off on the wrong foot. I would hope their parents and teachers gave them a better start before they even got to the working world though.

      I do not doubt that the strip clubs and outright improper expenses can and does happen — although I have never seen it. Maybe being female I wouldn’t. I was invited once, but I am confident that was on personal expenses. I did not go.

      The only thing I have seen is expensive wine, expensive restaurants and expensive hotels — where there were better choices to be made. And even at that — I have seen this rarely and usually on the firm’s dime not the client’s. I still think people do not spend company and client money properly — but I haven’t seen it as outrageous as you have.

    29. @128

      Any kind of extreme profligacy is inappropriate, especially on the audit side. It doesn’t fit with our image as accountants, financial professionals, trusted, independent and objective. As a partnership it may be flouting IRS rules. Spending money on a T&E basis on partners personal peccadillos rather than paying them out in partner profits that are taxed as partnership distributions is cheating the tax man. Excessive partying and activities that cause discomfort and feelings of pressure for some members of the staff put the firm in a precarious legal position and open it up to liability, which is not good for anyone. Finally wasteful spending translates into higher overhead, higher fees and eventually the kind of reactive cuts and layoffs we are seeing now. Don’t tell me that there wasn’t a lot of high on the hog living during the golden days of Sarbanes-Oxley.
      Francine

    30. @fm — I agree that this translates to higher standard fees/overhead. I agree the B4 standard fees are way too high. As fo high on the hog living… I haven’t seen it at the level you portrait. I have seen an annual conference with more partying and wasteful spending than I prefer to see. Other than that — it has been minimal in my practice — in ALL years. I can’t tell you there “wasn’t a lot” of it. I can just tell you that what I have seen in 8 years isn’t warranting the criticism you have given. My experience is in a small group in one B4. And even at that — I still do not approve of the amount of it I have seen. And, other than an occassional expensive meal… I have never seen it while doing client work — only for internal events. Some of those are partner funded as far as I know.

    31. The fact that we are discussing such different experiences re partner behaviour, profligacy etc, shows that in this, as in so many other things, individual partners set the tone without reference to anything but their own moral compass. And these are as varied as their abilities to grow hair, or pick a nice tie.

      A lot of the people learning the ropes are kids still fresh out of university, who’ve done nothing much but grind through books their whole lives and are now having their own moral compasses set by the “real world” they encounter around them. Add to that the fact that, as we all must acknowledge, the majority of B4 partners get to be partners because they can sell work and deliver profit (and not much else).

      We can all probably remember ethics briefings and ethics initiatives at the firms we work(ed) at. We all probably have different opinions about the degree to which they were “just lip service” and once again that comes down to the behaviours of the partners we worked for. They’re just people, and their personal set of ethics wasn’t the reason they made it. Surprise surprise really.

      As Truman notes all over this site — it’s about greed. Greed is the oxygen of the firms. If it makes you feel a bit sick you need to get out. Just my opinion!

    32. @131 — don’t really disagree with you. Would like to add though that those young college grads should have had their moral compass firmly grounded by their parents and their teachers and their church/synague/mosque leaders and their girl/boy scout leaders and the adults in their neighborhood and their friend’s parents… and you get the picture. The have been in the real world for nearly 20 years. In the working world they just get a new perspective on things.

    33. @132.

      Sure. I think we agree. Everyone has accountability for their own actions. You express the sort of values that I like to live by. And I admire you for (presumably) espousing those values within a Big 4 firm where they’re not exactly fashionable, even now (in my experience, and from what my friends still inside say).

      BUT. Those grads we’re talking about arrive (with whatever values their upbringing has resulted in) in a “working world” that is particularly all-consuming — the working world of the “Big 4 firms”. In this world the firm *is* the world and you spend at least 10-11 hours a day there, being fed continual rah rah about how great and valuable and significant PwC/EY/Greendot/KPers is. You are surrounded by people who outwardly espouse this groupthink and rigid set of norms.

      As one of those grads you will notice the massive disparity between your salary and charge out rate. You will note your utilisation % and do some quick math. And when the Grange Hermitage starts flowing you may make an erroneous conclusion about who’s paying. You get used to a certain lifestyle. I read above about other peoples’ experiences with profligate and not-so-profligate partners. My experience: the latter was 1 in 20 of the former. And people didn’t like working for them because they didn’t turn up with a big team dinner once a month. Perversely, legendary dinners, paid for by clients, actually help the providing partners become more successful because they become the partners everyone wants to work for. Because they throw great team dinners.

      5/6/7 years later you make manager and you realise who really pays for all of that (if you didn’t before). You figure out what’s been going on. And then you make a choice. One choice might lead you to partnership. And you know what it takes to be successful, and attract the “best” people to your jobs.

    34. @133 — yes we agree. I think I may be an anomoly, but I came to the B4 in my 40s and have had many other jobs before. I am a performance manager – and as I guide the young college grads I encourage them to observe what happens around them and listen to all sides of the story and arrive at their own conclusions. I include opinions of co-workers and the corporate group-think in those things they should observe and evaluate and weigh against their own moral compass. If we don’t do this then we aren’t helping the next generation to think for themselves and to grow into adulthood. I have been told that the young college grads appreciate this attitude.

    35. I can relate to one of your points.

      I was hired this past summer at a next tier firm to start fall 2010. But will not recieve my salary untill September…

      they have me over a barrel

    36. I was recently given an offer at PWC in their audit department. I also received an offer as a financial analyst at a digital media company. The financial analyst company pays $10,000 more, but does not have the PWC name. I ultimately want to wind up in corporate strategy / M&A, not accounting. Do you think that an audit job at PWC is a better way to get my foot in the door to the financial sector or should I start at a no-name company doing something more aligned with my ultimate interest? Please note that there is little upward mobility at the media company.