Accounting for Good People

Surprising as it might seem, the Big Four accountancy firms have lots to teach other companies about managing talented people.

By giving people more control over their career development the big accounting firms are starting to recognise that an overly aggressive “up or out” approach is a risky strategy when skills and bright people are in short supply. “Not everyone will be a senior partner,” says Doug Jukes, KPMG’s lead partner for people management. “But they can still be extremely valuable to the firm.” Deloitte is in the process of boosting the status and pay of principals, a grade between director and partner for senior people.

Even so, a partnership remains the goal of the ambitious. KPMG has a programme called Compass, which identifies 11 career milestones on the path to becoming a senior partner, each of which triggers development activities. PwC runs Genesis Park, a five-month residential course for a hand-picked group of would-be partners from around the world.

People are expected to keep learning and networking after they have been made a partner too. Mr Hurstel, at Ernst & Young, worries about how to keep long-serving partners happy and energised, especially after the Enron scandals have eroded their godlike status. “Great armies have the capacity to restore their wounded,” he says. One of the programmes he runs is called “leaving a legacy”. It is designed in part to help prepare partners for life outside the firm, perhaps as board directors, but also to help them pass on their expertise.

The scale of resources pumped into talent management by the Big Four may be beyond most employers, but many of their ideas could still be copied. Building programmes that keep the company in touch with former employees, offering more flexible career paths to women and making people management an explicit part of the incentive system for senior staff are all useful tools for employers of people who think for a living. A more intriguing question is whether the organisational structure of the big accounting firms also has lessons for other companies.

More room at the top

Being a partnership confers some advantages. It is not just that a large number of senior people are available to help train and encourage junior ones—what Deloitte’s Mr Wall calls an apprentice model—but that more people can succeed. Whereas success at a typical company means climbing to one of a few top positions—and probably elbowing others aside in the process—partnerships provide a broader top to the pyramid. Between them, the Big Four firms had more than 30,000 partners in 2006.
Partnerships are also flexible: if someone is good enough, the number of partners can be expanded to accommodate them. They are also consensual in style, which is important when managing clever, self-regarding people. The principles of joint ownership help to encourage networking and co-operative behaviour. “It is easier to persuade people about the importance of talent management in a partnership,” says Mr Baird.

But partnerships also have their downsides. Decision-making and innovation can be a lot tougher when so many other people have to be consulted. And in big partnerships people cease to know each other personally. For the Big Four, these problems are reinforced by their unwieldy federations of individual member firms scattered around the world.

According to Lowell Bryan, a partner at McKinsey and author of “Mobilising Minds”, a new book on getting the most from people, the ideal corporate organisation would blend elements of the typical company, the armed forces and professional services firms. An expanded “partner-like” group of senior managers at the top of the company is one of the features that he thinks could usefully be borrowed from professional services.

Cynics may wonder if the Big Four’s focus on talent is only cyclical. Will expansion in their fast-growing advisory businesses make them less concerned about nurturing people in lower-margin audit work? Would an economic downturn quickly send head-counts plunging again? The size of workforces at individual firms, and in the business lines within them, will continue to ebb and flow with demand. But the supply constraints faced by employers are more rigid. As the battle in the long-heralded “war for talent” is joined across industries and countries, it could be worth keeping an eye on how the Big Four are quietly leading the charge.

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