Laboring In The Big 4 – A Labor Day Special Report
This was originally published here September 1, 2008.
It seemed fitting to survey my writing about the relationship between the Big 4 and their employees. I’ve included a link discussing the relationship between Big 4 senior leadership and the average partner, since the average partner is really no more than a glorified employee for all the real job security and authority over firm activities that he has. And the price is high…
One of my first posts discussed the fundamental principles for professional services firms, as taught at the Harvard Business School:
1)Partnership structure is ideal.
2)Small is beautiful.
3)Organic growth is superior to growth by acquisition.
When a professional services firm strays from these principles, they run the risk of sacrificing the values, culture, code of ethics and requirement to put the client’s interests above theirs that is inherent in being a “professional.”
We can see that defying these principles has affected the firms’ ability to be good partners to their partners as well as stewards to the non-partner staff that support them.
We see it when firms struggle all over the world to develop representation at the partner level that is aligned with the percentage of women accounting graduates and those of color and diverse ethnic backgrounds.
When it comes to fair pay, the Big 4 has to worry about whether they’re paying their own staff as well as their vendors fairly. And based on the lawsuits and labor problems, they’re not doing a very good job of it.
They are paying their new recruits a healthy starting salary by most standards, but not when you consider all the unpaid overtime hours. And since there’s no free market in the college recruiting arena, it can hardly be called just and fair.
And when they want to make more money or screw up on planning and forecasting, they just let the employees go and pay them off to keep them from sharing their humiliation and hurt with anyone.
They do have formal performance review processes, but they were implemented in the last few years to respond to the need for a way to paper over the issues they had when business tanked in 2000/2001 before Sarbanes-Oxley and to address the slowdown or perceived slowdown that is occurring now. Borrowing from one of their most notorious clients, the review process is not about judging performance using an objective standard that measures knowledge, client service, and ethics, but about how well you perform compared to a peer group, however skewed and clique-ish that is.
Is this really the way to run a professional services firm?
Francine:
Don’t get me started on GE. Of all the companies in the world, this is the one I hate the most. I see GE as a massive criminal enterprise, a legal “mafia”. If there is an afterlife, I hope the various members of GE’s senior management are consigned to the lowest circle of Dante’s Inferno.
I hardly need to tell you how spot-on correct you are in every particular in this post. But there may be some readers who think you’re biased against the Big 4 firms, and thus looking to make only negative points. To them I say every point posted corresponds with my experience — 7 years now (excluding the Andersen years).
You’ve posted several times now that “small is beautiful” but I think it’s time to just state the truth. Each of the Big 4 is TOO BIG to effectively (let alone efficiently) manage itself. Their size gets in the way, constantly.
Anybody who is looking for valuable experience and accelerated growth should spend a few years in one of the Big 4 firms. Anybody who is looking for a long-term career in one of them should be advised to think twice — or more.
@Anonymous Thanks for your comment. Just a few notes:
1) I am biased against the Big 4, as a business, as a model for providing shareholder assurance of true and accurate financial statements. It’s just not happening. So, all firms being equal, none of them are providing a service to shareholders consistently. The cost of their errors and omissions, aiding and abetting, to their clients shareholders, to their employees, to the capitalist system, to their vendors, to other stakeholders is too high.
2) Yes, the firms are too big. But how can they provide assurance, certified financial statements, to multinational global companies if they are not global behemoths, with offices everywhere to serve their clients seamlessly? See 1). They’re not doing it. The model is broken. The certification of financial statements is worthless. Investors ignore the report because it is a “negative assurance”: nothing is wrong that we could see or that our very precise and limited , to limit our liability, procedures could identify, right now. The audit has not prevented fraud, errors, lawsuits on all sides, lawbreaking by management, restatements, “unexpected” liquidity crises, backdating scandals, subprime crisis, and the kind of giant errors in “judgement” and other woes that we see in the modern pubic company. Give me a $1 billion + revenue company that has escaped these issues in the last ten year, is a well run, honest, ethical company because it is a well audited company and then we will have a place to start over.
I don’t even want to try to refute your misguided allegations. Another frustrated person that didn’t make partner. Perhaps you even sued your former Big 4 employer because you couldn’t cut it in the Big 4.
Yes, it is a challenging/difficult career as a staff member and even more so at the partner level — but you and some posters here are a minority of the thousands that have been touched by the Big or middle tier firms. Even a poll of persons that follow TheAuditors.com is not a fair sampling for the thousands that have been employed by the Big 4 firms. As to the contributions to the capital markets and alternatives to a certification of financial statements by an independent public auditor, I believe client businesses, regulators and shareholders would say that the advantages far outweigh the disadvantages of utilizing the Big 4 / middle tier firms for the audit process.
Obviously you will not agree………….
I take your »Remake« from Sep 2008 as a very prompt and to-the-point reaction to my last 2 replies on this side: (1) Insights from »The Living Company«
and (2) Questions arising from CSR-Reporting and assurance in Europe in near future. Thank you!
I used to be a PwC partner.
I came from PW, which was a good firm. After the merger the firm became too big and took on the worst parts of each firm’s culture – the arrogance of PW and the sleaze of C&L. I was once a partner, but not after the merger, we became employees in every sense of the word.
The firms are horrible at planning, and incapable of honesty. When business would turn down they would never admit to laying people off – “we are simply trimming the weak performers,like we always do”. But in good times, there were no weak performers.
The PCAOB has been the best thing that ever happened to the firms. They used to believe the rules did not apply to them – they made the rules. They are learning that lesson now.
The Europeans are right. The firms need to be broken up – make them spin off tax and consulting and become pure, heavily regulated auditors. Give the second tier a better shot at work. We need more firms serving public companies. Audit rotation would not hurt either.
I’ve learned so much working at a Big 4 firm. No one makes me do it; I enjoy the challenge and the Clients that I work with.
@Bob
You are one of the fortunate ones.
@Jack Meof
Thak you for your comments. It’s great to hear from someone who has been there and your feelings about PwC mirror the impression I got of the firm in just my short year-and-a-half working there in 2005-2006.
Since PwC had sold whatever real consulting and technology expertise to IBM and anyone who didn’t want to go to IBM had left, the “consulting” firm I found when I joined was a faux operation. No one I met had ever run a project longer than a year or bigger than $10 million in revenue. Nothing like the professionals in systems integration and government consulting I had known at KPMG Consulting and Bearing Point.
PwC “consulting” has bounced back via buying revenue with acquisitions and GRC work. But they are still the same arrogant PwC. And no one running the firm knows how to run a consulting business. If I were in a decision-making role in a company I would never choose that firm, in spite of the fact there may be some great professionals in some practices now.
@George Smithgolf
Sorry to disappoint you but I was a Managing Director for BearingPoint, the KPMG Consulting spinoff. I started at KPMG in 1993 and worked my way up from senior consultant. I was the first ever female MD for that firm in Latin America and I had responsibility for $60 million in revenue and more than 50 people all over Latin America. I never sued anyone. I believe in meritocracies and I was always ready to prove what I could do if given the opportunity. I succeeded within the structure but that was another time. The Big Four are no longer meritocracies.
Since you clearly have not read any of my background or any posts other than what you want to criticize, I will probably not respond to those criticisms much anymore. You do not want to do the work of knowing your opponent.
Francine:
I appreciate your responses and I’m just trying to get out in the public that there are other contrarian views. I am a retired Big 4 Partner myself.
Also, FYI — Do you realize that Jack Meof is a spoof. His pen name is JACK ME OFF. What an idiot.
Just so no one is confused, I’m saying Jack Meof is the idiot.
@Bob
Hang in there. The experience, the lesson in ethics and personal and professional growth will be well worth the hard work.
@George Smithgolf
Most people use an alias on this site. I have never had more than a few who could post under their own names. Unless what’s said is offensive I take it as it comes. (Ha.)
Francine,
If you had a Facebook-like interface, I would press the “like” button on your comment about PwC’s consulting business.
I worked for the “Consulting” practice in Singapore, and the practice was run by an ‘up for retierment’ British internal auditor who knew nothing about consulting, and in my opinion, was good only for a bit part in the ‘Jeeves and Wooster’ TV series.
Jokes (and personal grievances) apart, the consulting practice ended up being an extended Internal Audit / GRC practice, with not a single Director / Partner having any solid industry or delivery experience.
The work environment, dead-weight partners and the constant infighting and lack of direction made the firm lose the few talented professionals remaining, and also drove away all the talent acquired through the BearingPoint take-over.
I believe the Big 4 are kept alive by regulation alone – innovation, creativity and diligence are long gone.
“but not when you consider all the unpaid overtime hours” this also applies to non exempt staff, i.e. EA’s TA’s. The average EA supports 5 demanding partners and TA’s well they have become the “clerks” of PwC mainly performing tedious general office tasks often delegated by newly hired associates so now you have TA’s doing the work usually performed by other departments such as reprographics, facilities, messenger services, etc. in order to drive up the numbers for utilization and productivity for TA’s. TA’s are forced to work at cllient sites for lenghty periods (YEARS) and offsiite early am and late evening PwC events (somebody has to point the partners/clients in the direction of the restrooms and fetch coffee) and to ensure you comply with your involuntary nomination of working offsite, you’re told “you have no choice, either you accept this assignment or you will be terminated”. Why not hire a tempary worker? Why should they when they assume and rightly so because the average EA/TA is 40-50 years old and has been employed by PwC 20+ yrs and lacks confidence and their goal is simply to try and hang in there until retirement. Because of this the
EATA management is confident that they can “convince” “force” the EA/TA’s to comply with whatever new rules they decide to adopt at any given time. Such as no OT EVER! It’s the norm at PwC to work through lunch and extended hours and NOT expect OT payment. They have become cocky, inconsiderate, cold and callous. I’ve heard from several EA’s & TA’s that this practice is illegal but somehow PwC is able to justify not paying it’s admin staff OT. It has become apparent that EATA’s are now targeted for termination, so why not cut to the chase and offer a generous package for voluntary resignations? They would be surprised how long that line would be.
McKenna your insights are keen and amazing as ever. In addition however, the comments your writing elicits are always testament the general acumen of your readers–generally. As a former consultant matriculating through Arthur Anderson (through the bitter and frankly desperate end), KPMG/BearingPoint, and finally Deloitte yes it has devolved basically a pyramid scheme and “clique” to boot.
The really sad point you touched on regarding the performance review process is that because the metrics are fluid and subjective the idea of raw “performance” such as pure chargeability being able to spare you being pushed down and out by the cabal is a dream. The game is too often rigged in favor of those who are favored which in turn perpetuates the internal maladies that create the dysfunction.
@Crowdpleaser
Thanks for your comments. Let’s hope this last stop is your best stop. Do good work. No matter what happens you’ll win friends and influence people and that lasts a lifetime and outlasts any particular firm affiliation.
Cheers,
fm