https://francinemckenna.com/wp-content/francine-mckenna.png 0 0 Francine https://francinemckenna.com/wp-content/francine-mckenna.png Francine2008-11-19 15:33:002009-02-19 17:58:47The Messy Business Of Reductions, Cuts, Redundancies, Terminations And “Layoffs”
The Messy Business Of Reductions, Cuts, Redundancies, Terminations And “Layoffs”
I’ve been at the FEI Current Issues in Financial Reporting Conference the last two days. Today, Wednesday, is my first day not buried in fair value, IFRS, fair value, and, oh yeah, fair value. It was enough for me to wish that an unjust, unfair, unreasonable standard of accounting be approved just to break up the repetitive rhetoric.
I will be posting more, including reproducing some of my better Tweets, for you later. In the meantime, for the best of the web in reporting on the issues, go to Edith Orenstein at the FEI Blog. She and I had dinner with Susan Webster and Steve Burkholder from BNA on Monday night. It’s hard to believe four otherwise normal people could talk about FASB, IASB, FAS 157 and FAS 5 for four hours over fries and ‘freshments without going flippin’ loony tunes.
While I was focusing on the conference, my Blackberry was buzzing with more comments, emails and text messages updating me on the reduction in force activities, in particular with regard to KPMG and EY…
As I reported Friday, KPMG issued a press release in advance of what they portray as “very targeted force reductions” and “fewer than 420” professionals in both audit and consulting. I characterized these cuts as “significant” last Friday. That may have been an emotional reaction on my part, given that a few days later, Citigroup announced cuts of more than 50,000 and several others also announced larger numbers as a percentage of their workforce during the past week.
I contacted KPMG and spokesperson Dan Ginsburg made this additional comment in response to my inquiries about further cuts and additional internal communication about the actions:
“Keeping our people informed and aware of firm activities is an important part of KPMG’s culture. This is done through many internal communications channels. In this case, those impacted were advised directly last week, and this week broader communications for our partners to communicate with all of their people are being prepared.”
My use of the word “significant” was an emotional reaction to reports of a large percentage of the “less than 420” being concentrated in only a few offices, thus the use of the term “targeted” in their press release and strong sentiment on the part of those remaining that more cuts are inevitable given low utilization in some locations. I will let yo decide for yourself whether this number is “significant,” the “end of the beginning” or the “beginning of the end” of reductions at KPMG.
At the same time I began receiving comments regarding “significant” cuts at EY, across all service lines. A trusted source has confirmed cuts of 3-5% of the workforce at EY, across all service lines, US only. EY did hold an “all hands” meeting where they announced the cuts.
And in further news at Deloitte, reliable sources tell me that, ” next round of layoffs appear to be coming and possibly starting this week. This layoff will be much more defined and clearly targeted, more specifically at those managers and senior managers remaining that are “on the fence”. Obviously higher salaries and low performers ( “meeting expectations”) will be targeted. It’s an office by office layoff, not been defined by corporate, but by leadership on an individual markets/cities basis. There are partners and directors that the firm has been working on, for months now, to terminate and/or vote out of partnership. …additionally, there are rumors that there will be another round after the first of the year. This targets more specialized groups, such as ERS, that have gotten through YE for most clients and are heading into slower season…”
Thanks to Dan for giving you info before rank and file. No communication has come down from different practice leaders…no firmwide internal communication.
People are scared s-less.
They have not signaled this is the last for a long time. Utilization is sinking faster than the Titantic.
Why is this surprising and so news worthy? Take a look around, everyone is suffering!
People are losing their jobs? In this economy??!! How is that possible?
“It was enough for me to wish that an unjust, unfair, unreasonable standard of accounting be approved just to break up the repetitive rhetoric.”
You should try to be more clear that FAS 157 is not a new standard of accounting. Fair Value has been around since at least FAS 5. Fair Value is not a new concept in accounting, in fact, it is one of the basic tenets of accounting and financial reporting. FAS 157 provides further guidance and definition around fair value, it is not a new standard.
@7:48 Yes, with strong emphasis. FAS157 and fair value should not be the scapegoat for the “crisis.” Fair value is only the bearer of the bad news that these companies had been taking on extraordinary risk, investing in securities of dubious or non readily ascertainable value and counting on them too long to back up profligate lending and executive compensation.
You finally got your man in! You just had to work Johnny D in sometime, if only for your own enjoyment!
Not his best look, but I wouldn’t kick him out of bed for spilling his beer.
D&T Layoffs hit SF today numbers aren't available yet but it doesn't look good.
KPMG layoffs are still percolating throughout the country.
Very nervous in NE if Citi gets sold or broken apart. $100M client…
Protiviti laid off folks on Thursday in SF. Not sure as to official numbers. As with other firms, communication to staff was poor.
i hear you anonymous 9:39:00 AM CST…citi is not a good omen…the atmosphere around the office (and a non-banking engagement at that) was tense, nervous, and simply put…unconfident
It is kind of strange that these public accounting firms are effecting their layoffs the week before and during Thanksgiving. From an image perspective, it seems better to have the layoffs now, rather than before Christmas. After the new year would be better, if the firms can afford it …
What to do? Get rid of the senior managers and managers and protect the college recruiting pipeline. See how the DT source made specific reference to managers and senior managers? At the very least, if the layoffs do not occur, it will have resulted in some forced attrition. No loss to leak this news.
Query how many newbies are saved (temporarily) with the layoff of each senior manager and manager? Clients beware of paying high rates to public accounting firms for inexperienced staff and golf playing partners who will supposedly “manage” these staff.
Finally, by spinning this as targeted layoffs on a office level takes pressure and scrutiny off the partners on top, who probably mandated the layoffs. How brilliant because it makes the regional partners look bad.
Someone is clearly making big bucks to strategize the layoffs.
First, we should call these terminations, not layoffs, because these people will not likely be invited back. Second, these terminations are tragedies for the impacted people and their families – I really don’t believe that anyone enjoys getting to the conclusion of layoffs. What is distressing is that there are repeated instances of terminations, which means the revenue projected that were reset some time ago, or the forecasted employee “turnover” rate has not been met. In these latest cases of terminations, it is probably a function of almost zero turnover; whereas that forecasted turnover is probably 10% to 20%; and the historical average is usually in the 20% range. The fact is that Big 4 personnel are not leaving for different jobs, because those jobs are not available by and large. Therefore, these latest terminations are now targeting people with acceptable performance ratings (i.e., they are meeting expectations) – and this reality has of course made the entire workforce have high anxiety, because most reasonable people think the economy will continue to get worse. Partners are not safe, as low performing partners have been asked to leave in virtually all the firms as well. For the “survivors”, we should be doing all we can to help those have been terminated and also communicated in a candid and forthright way to the people that remain with the Firms. This is a bloodbath, and the implications will be felt for years. To the prior poster today, the fact is that no one “looks brilliant” for numerous reasons that I think are obvious. Usually all the leaders look dumb because a) communication is never crisp, and always lags the rumor mill, b) people will always think the partners are protecting partner income c) the repeated terminations over the last few months either indicate that the ability to forecast is difficult or the people doing the forecasting are weak/naive, or perhaps a bit of both.
Anon of 11:09, I like your post but feel the need to quibble a bit.
1. “Partners are not safe” may be true but until the employees see actual partner attrition (other than year-end retirements), your statement will not be believed. From my first-hand conversations with partners, worst thing I’ve heard is that units were taken away.
2. “People will always think partners are protecting partner income” — well, yes. Only because every single action taken supports this belief and I have personally heard Sr. Partners say it. Example: “Next year’s budgets are predicated on five extra utilization points per client-serving staff, even though we are holding the utilization goals steady. We need to drive this increase so that partner income goals will be met.” When the partnerships stop protecting the partners through words and deeds, staff might start to feel their interests are relevant to the partnership.
3. “The ability to forecast is difficult …” — I’d like to be charitbable and agree, but I’m not convinced. Two points in response. (a) FY 2009 budgets at my Big 4 firm (Advisory LoS), put in place in May 2008, showed an EXACT 10% reduction in client-serving staff from FY 08 year-end forecast headcount. Hmmmm. Interesting, no? Consider the implications…. (b) The same FY 2009 budgets showed an 8% increase in top-line revenue, while utilization targets were held steady. Some budgeteer must be smarter than me, ’cause that math doesn’t seem to work. Obviously the revenue delta was driven by rate increases. Yeah, right. The economy is tanking, we need to increase utilization, so let’s increase standard billing rates. So I agree that the budget process is “broken” (to put it mildly) but it also appears to be driven by leadership’s need to show steady partner income, regardless of external factors.
4. “The fact is that Big 4 personnel are not leaving for different jobs, because those jobs are not available by and large.” — um, no. I just “separated” (of my own volition) and now work for private industry. Now what I’m saying is not true for all industries and for all geographic regions, but I can tell you that my company is DESPERATE for qualified employees who have knowledge, experience, and a good work-ethic. Our workforce is graying and most employees will be retired in 5 years or less. We are searching and trying to create an employee pipeline for succession planning, with only limited success despite the economic situation. Almost anybody who can succeed in the Big 4 can find a job … perhaps not at the same salary, but not at minimum wage, either. If Big 4 employees are not attriting it’s not because the jobs aren’t there, it’s because they’re too busy to return the headhunter calls or to do the internet searches.
In my practice, when we protested the overhirings, we were told that it was necessary so that the firm could starve out our competitors and clients. Plus, there is constant political BS about how bad it sucks to work at any other place, other than where you are. Now that the economy has turned, these same people are trying to pat themselves on the back and say that the layoffs are due to great working conditions and employees not wanting to leave. Spin, spin, spin, and find someone else to blame.
Recruiters are targeting the public accounting firms more so than ever. They smell blood and can’t wait to cash in. The partners are concerned that the negative publicity may result in the loss of the top performers first (those that can leave), while the low performers will remain. In certain offices, people are being reassured that everything is fine, even though the newspapers and utlization numbers say differently. If you are a partner in this situation, please have the decency to be honest and give your employees the opportunity to make the choice that is best for them and their families, even if it means losing your top performers. If you don’t, don’t get upset when these employees start posting negative comments about the firm b/c (1) they don’t believe you and take it to the internet or (2) they have lost their jobs, after being reassured that they won’t. It is clear from the internet postings which of the firms have trust issues with their employees. People who “meet expectations” generally don’t expect to be terminated.
To the last few posters – First of all, anyone in these Firms are subject to possible termination based on the environment. Any partner that tries to assert otherwise would only be believed by people that are naive. Second, Partners are being terminated, as I know this first hand from two separate firms. Lets remember these Firms are structured as partnerships, and partners expect to make a reasonable return on their investment and effort. If partner earnings are too low for a number of consecutive years, then the partnership falls apart. In this scenario, performing and utilized partners are placing high pressure on decision makers to weed-out the low performing and/or non-productive partners to mitigate dilution. Due to the sensitivity of partner terminations, no Firm will be broadcasting these events, and there will be no public display for the staff to enjoy. In summary, just because staff think such terminations are not happening does not mean much. Third, the ability to forecast is very difficult in this environment is beyond difficult – you may have never been part of a proposal or been in charge of negotiating a fee – the fact is that well over 50% of annual revenues of a typical audit practice have to be “sold” during that year – in other words, backlog is well less than annual revenues. If your forecasting ability is better, then you should be going to Vegas or playing the stock market and stop wasting your time on this blog. Lastly, the fact is that there are not that many jobs that are considered desirable replacement jobs. People do in fact have time to return phone calls for interesting opportunities -to suggest otherwise is to deny basic human behavior. Typical Big 4 people were the top of their class and have high expectations. All these people will eventually recover, but compromises will be made along the way.
At most firms, there is a majority vote (say, 2/3 partner vote) required to force out partners, although it is rarely exercised. Restated, there are other ways to force partners out, which includes bleeding down their units such that it hurts the partner financially to continue to work for the firm. However, there must be restrictions on the number of units that can be taken away in a given year. Therefore, the partner in question must have an idea (some warning) that he is being forced out. This gives the partner the opportunity to plan to transition into his next role. With employees, there is not much warning or transition time, as some are told to pack up and leave the same day. If the partner is not producing, it makes sense that he should be asked to leave, unless it could be somehow argued that the partner in question was set up to fail.
From my conversation with recruiters, they want those who are certified, high performers. It’s a tough market and it’s always easier to sell a CPA, CIA, and/or CISA.
I would like to say there are a number of non-performing partners at my firm. I often wonder why they get to stick around.
EY San Jose (South Bay) said they are going to reduce by 3-5% but according to what was presented to us back in early Oct, we are the one of the highest utilization in the nation! If Bay Area is being hit that hard, I can’t imagine my colleagues in other locations..
It appears http://www.greendotlife.com, the unofficial and collaborative forum for Deloitte folks, has been taken down. While it was getting its share of spam and “noise,” there were some revealing things in there regarding the layoffs at Deloitte, recent hires, how Deloitte works or does not work from insiders’ perspectives, Deloitte culture (good and bad), and some other things that probably should have gotten their (and others’) ethics people excited. Interesting timing – the site’s disappearance over a holiday weekend. May no doubt fuel existing rumors of the next large round of layoffs occurring just before/after the December holidays.
At 1:18 pm, what kind of revealing things? Anything particular that you can share? Maybe those people will start posting on Francine’s site?
Layoff before Christmas? How seriously cold.
I have worked for the most incompetent partner in the world at PwC who hid his incompetence by working a lot of hours. Firms should really consider getting rid of these partners instead of the rank and file that bring a lot more to the table.
Some public accounting firms put a lot of value on people who live at work. It doesn’t seem to matter if not much is accomplished while these people are at work. Giving up one’s personal life to hang out at work until all hours of the night seems to translate into dedication in the minds of certain leaders.
On the other extremely are those who never work and beat their staff to death working for them. If things are done correctly, the partner/manager takes full credit. If there is a glitch, the partner/manager ensure that the staff are set up to take the blame.
These kinds of leaders spend a lot of time talking about themselves and their accomplishments. Those on the receiving end of the BS may be just too polite (and busy) to call BS. Who needs the drama?
One thing is certain; it is never boring. However, isn’t spending time with friends/family or going on vacation interesting as well?
@8:49:00 Think of the model of the fraternity or sorority. Hanging around with people you may not individually like but who belong to same “group”. Focus on service projects which may be well intentioned but are as much PR as they are true giving sprit. Culture of covering for others. Sacrifice and humiliation endured in order to be selected to join and ascend to elite status and then pass judgment on others. Eerie…
In my experience, the notion of people “living at work” is usually (not always) more about the person and less about the Firm/Company one works for. Every company has the few people that are “alwsys there”, hardly ever take vacations and can delegate worth a darn. Real managers who benefit from that behavior have a responsbility to coach such people, but this usually is just lip service when the eval is completed well after the project is completed. The dirty secret is that none of the Firms pay for overtime for even the staff, which I think is plain wrong. When I started in the then Big 8 years ago, we were compensated for overtime. One of the reasons this is wrong would be for a project where the Firm bills by the hour worked – so what happens is the client gets billed for ALL THE HOURS, but the Firm only has to pay for a fixed number of hours – yes, you got it – variable revenue but fixed costs, with all the OT as pure gravy. Don’t get me wrong, I love pure gravy, but how about sharing the wealth with the kids? I feel the same way about about unused vacation time, which is now a “use it or lose it” scam. Anyone, although I bring this topic up often, my views are are dismissed as the rantings of a rogue individual.
Francine, your analogy is absolutely right on point. For those of us not willing to endure the BS, there’s little chance of being “invited” to join the fraternity (partnership). Sadly, it is not about substance anymore. Even under the Obama administration, there is little hope that the fat cats (abusers) will ever be held accountable. At first glance, KPMG’s position in the Canadian valuation case is comforting.
DT is laying off again. You won’t see much traffic on Francine’s blog this time because the firm learned its lesson from the August layoffs. HR is there to do the dirty work.
Just in time for Christmas
In my department, the terminated were the one’s set up to fail. For example, many large projects/clients need a fall guy. If the projects do not generate the revenues marketed by the partner, someone on the team is blamed so that the partner does not look bad. Even if the partner is at fault, he will never allow himself to take the blame. Blame is shifted onto a dispensible person. In order to receive severance packages, these people are under duress to sign legal documents that limit their right to further action against Deloitte. If you were about to lose your job in this economy, you may sign anything to get your severance. This is what they are counting on. Consult an employment attorney now so you know what to do when it happens to you.
Thanks to this blog, I was prepared for the layoff that would inevitably come my way. I found out this morning via conference call from EY that I was being let go due to “economic factors.” Funny, because just a few months ago, Turley and others said the firm is in a financially secure place to weather the economy. Ha!
My satisfaction at reading your comment is bittersweet. I’m sorry you have lost your job. But I’m glad that the info on the blog prepared you in any way. I am glad to help in any way I can. Don’t forget to connect with me on Linked In. I have a lot of search professionals who specialize in audit and accounting who are also connections.
11 laid off in the last 2 weeks from deloitte audit in connecticut.
#34, what’s the split for that across the offices?
3 in stamford and 8 in hartford is what i hear