Ratings, Raises and Promotions – Forced Ranking In The Big 4

This was originally posted  Going Concern.com on August 12, 2009.

…there’s definitely collusion/shenanigans going on amongst the big 4 for compensation along with extending dates for promotions. Ratings manipulation is also going on along with unfair treatment of those that tried to go above and beyond….”

Both Deloitte and KPMG admitted last fall that job cuts were made for economic reasons, removing the taint of “performance issue” from that wave. It’s a small thing, making up for over-hiring, under-managing risks, and sucking in new recruits only to cut them loose a year later.

But layoffs continue and are occurring in greater numbers at all firms. Are there still so many “performance problems?” How can a “business” that only hires top graduates, puts them through one, sometimes two, internships, an extensive interview process, and programs such as “Mass Career Customization,” still have so many “not performing” or “not a fit?” They’re trying to solve a leadership problem on the backs of their employees. For example, they hire, acquire, and over staff practices where there’s no long-term commitment and no shot, such as PwC’s return to systems integration.

Quelle timing!

Big 4 rates are high to pay for their mistakes and their overhead – mandatory training, generous benefits, empty offices, lobbying and political contributions. They’re higher because they theoretically sell a different product – better, better trained, supported by a global network of specialists, utilizing best practices and state of the art tools and methodologies. So who do you cut when “all the children are above average?”
The answer is: Compare everyone’s performance to each other, instead of to objective criteria.

It’s called “forced ranking.”

“Forced ranking is the antidote to inflated ratings and the failure to differentiate…While conventional performance appraisal systems may allow managers to inflate ratings…a forced ranking system ensures that distribution requirements will be met.”

“Distribution requirements” put someone at the bottom of the list each time. No raise, no promotion, maybe even layoff.

So what’s the downside?

“Forced ranking pits associates against each other…someone still must be ranked low, despite meeting performance plan goals…a dysfunctional and hyper-competitive workplace…demoralized staff and a mistrust of leadership. Discrimination lawsuits…”

The cut-throat, GE-style culture is now embedded in the Big 4. But is that good for their clients? Does it result in better quality audits? Not if you’re the one left behind doing more with fewer people for the sake of achieving partner payout targets. But, “It can’t happen to me because I’m not a loser.”

Until it does.

“Jim’s better than Bob but not as good as Anne.” In a nutshell, that’s forced ranking. Unfortunately, if they don’t get better at forecasting, engagement management, and mitigating audit failure risk, most professionals will end up at the bottom of that totem pole at some point, through no fault of their own.

62 replies
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  1. Tenacious Truman
    Tenacious Truman says:

    @Deloitte @ 50 —

    The reality is that the 1st years are not receiving a rating based on their performance. See posts 29, 33 & 34 in this thread. As to the propriety of lawsuits, see my post # 31.

    — Tenacious T.

  2. @Deloitte
    @Deloitte says:

    Here’s something I just heard:

    Staff are being downgraded to 3s even though they were high performers and producers because D will stop approving initiative $s for anyone who is not 1/2 rated. The example used in the conversation where I just heard this was “tuition reimbursement”. So, if you don’t make 2 you’ll find it impossible to get tuition approved. It also puts a lot of people in positions where the firm can let them go if they want which might be harder to accomplish if they were 2s.

    In the same conversation it was mentioned that the bottom was dropped on compensation so that most staff are now closer to the top of their bracket and as such no longer in a position where constant yearly increases are allowable. Basically maxing out salaries. I was told that if you look at your comp letter (out the 3rd – today’s the 1st) you’ll find that your percentage is higher than last year even though the $ figure is considerably lower.

  3. @DT4now
    @DT4now says:

    An early promote to senior manager took place…very odd in these economic times. upset a ton of people. morale is extremely low with no communication from p/p/d. looks like they are trying to reduce headcount by having people leave on their own accord. it is working.

  4. Krupo
    Krupo says:

    “A professional is a member of a vocation founded upon specialised educational training”

    Just a quick throw-back to the semantics argument: one thing that is overlooked that the staff are essentially professionals-in-training. Apprentices, if you will.

    This explanation makes sense, as it reflects reality. People are being trained to become professionals, which entails enduring the “educational training”/”hell years” regimen.

    I continue to celebrate my old profs who taught us the phrase “hell years” and warned us about it. I somehow managed to dodge the worst of it and still get my CA and a pretty decent grounding in this profession as well. A rare case? Yes. But an answer to my astounded ex-colleague who I saw in the food court and gasped “WHY????” when I told her I’m still with the same firm that fired her three years ago…

  5. ex-dt3
    ex-dt3 says:

    Cheers to you Krupo. Even though I left, I still resepct the profession and am constatnly amazed at the arrogance of many staff (That’s u big 4 5th yr with a whopping 4 yrs of work experience out of college @45). Just posted to the Do What You Do thread similar topic. I’m confident a lot of the Big 4 cuts were necessary, get rid of the dead weight, jr’s not worth their pay. I understand there’s a resurgence of ex Big 4s being recruited back. Some Old School??? Could drive some normalcy to the practice. Not a bad strategy: Toss some seasoned practioners with credible experience back in the tank with the guppies, see who gets eaten, who sleeps with their eyes open and who steps up to the profession.

  6. milton freidman
    milton freidman says:

    revenues are down and the big four don’t need as many people as before. the business is not a charity. good people have to be terminated, and there are different ways to do that. relative ratings is the usual method, but also the needed skill. with financial institution consolidation, there is less of a need. i can’t see how any of the big four behavior is illogical or surprising.

  7. Tony Rezko
    Tony Rezko says:

    @60- libertarianism is applied autism. Noone really questions your basic points (who said the Big Four was a charity?). The illogic comes from the cold rationalizations of emotionally stunted leaders who choose to ignore long-term impacts on human capital (a concept they understand where your namesake taught). It’s just that you greatly oversimplify and excuse a lot of dull behavior.

  8. BST=Low Morale
    BST=Low Morale says:

    The manipulation of the ratings has become obvious even to the administration staff at pwc (EA/TA’s). After receiving the ratings many felt betrayed, shocked and confused. Questions such as “my partner thinks I’m great, I get excellent feedback, go above and beyond, work late, work through lunch, take on more partners, more responsibilities, etc, etc, but my rating is a 3 “meet expectations” which resulted in 2-2.5% salary increase. Why? Answer – even those most of you are 1’s, you can’t get a 1 rating, pwc has a certain % of employees that will be rated 1’s and that’s it. It’s a # game. Morale took a deep dive after ARC and I expected a small exodus of EA’s/TA’s to resign but they did not. As other posters have mentioned, PwC brainwashes it’s employees into thinking pwc is the best and they have it made in heaven and should be on their knees every night thanking their higher power that they have been given the privilege to be employed with such a wonderful, 1 in a million company. Sadly, the EA’s/TA’s who have been with pwc for many years buy into this mindset and no matter what will not leave even for more money, less stress, etc. They simply complain. I am concerned that Tax will soon adopt the “Business Support Team” model that Advisory created about a year ago. The admin managers speak very highly of the model and how well it’s working, I guess they have not REALLY looked at their staff or received feedback from them. EA’s are overworked with 4-5 inconsiderate partners that don’t take into consideration that there are others besides them, heavy workload due to growth of the advisory practice. TAs who were at one time EA’s are now placed in a pool where assignments are assigned by the TA coordinator and the asks are becoming increasingly more tedious and moronic. The original idea behind the creation of the BST was to have TA’s support managers and directors. Request for a assistance would be placed in a database by the manager or director and assigned to a TA. TAs are now used as floaters when EA’s or other TAs are absent (from other LOS), assigned ridiculous, tedious, data entry work and the most tedious of all – must log into a newly created database every task that is assigned and completed daily. It’s unprofessional!

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