scorecard
boomerang - alumni
females
overseas visit
1 min review after meetings
skills score (competency framework?)
leaving a legacy
"flexi-time"
==
Talent management
Accounting for good people
Jul 19th 2007 | LONDON AND NEW YORK
From The Economist print edition
Surprising as it might seem, the Big Four accountancy firms have lots to teach other companies about managing talented people
BEING
interesting can be overrated. Accountants became suddenly intriguing in
2002 with the spectacular collapse of Arthur Andersen, because of its
involvement in the scandals surrounding the fall of Enron. This added
unwanted colour to a grey profession. Since then the surviving titans
of accountancy—Deloitte Touche Tohmatsu, Ernst & Young, KPMG and PricewaterhouseCoopers (PwC),
also known as the Big Four—have mostly retreated back into the shadows
of public awareness. But interesting they remain, above all for the way
they manage their people.
It is not
just that they collectively employ some 500,000 people around the
world. Many companies are as big as they are. Unlike most, however, the
Big Four really mean it when they say that people are their biggest
assets. Their product is their employees' knowledge and their
distribution channels are the relationships between their staff and
clients. More than most they must worry about how to attract and retain
the brightest workers.
Time is
regularly set aside at the highest levels to chew over how best to do
this. Detailed goals are set: Deloitte's 2010 business plan includes
targets for staff turnover, the scores it seeks in its annual staff
survey and the proportion of female partners it would like to have.
Partners are increasingly measured and rewarded as managers of people,
not just for the amount of money they bring in. People-related items
account for one-third of the scorecard used to evaluate partners at PwC. KPMG's
British firm has introduced time codes so that employees can account
for how long they spend dealing with staff matters. The idea is that
those who devote lots of time to people-related matters are not
disadvantaged as a result in pay rises and promotion.
The Big Four
are by no means perfect. The sheer numbers they employ can still make
them feel like sausage factories. Small firms are quick to take
advantage of that when recruiting. Nevertheless, the big firms'
evolving efforts to attract the best candidates and to encourage and
keep the brightest people provide useful lessons for other companies.
The most
intractable problem is that there are never enough skilled or promising
people to go around. Just as competition for the best of the bunch is
growing, the pool of available talent is changing. In America
baby-boomers are flooding into retirement; in Europe the market is
greying; and in India and China the large number of graduates masks low
numbers of truly high-quality candidates.
There are
added problems for accountancy firms. Job cuts earlier in the decade
created a shortfall of people now. Regulatory changes, such as
America's Sarbanes-Oxley Act, have boosted demand from clients not just
for accountants' services but also for their staff. To add to their
difficulties the Big Four are now aggressively re-entering the field of
advisory services, necessitating a new burst of hiring. Ernst &
Young is not unusual: it hired some 25,000 people in 2006, but expects
to hire 30,000 this year and 35,000 in 2008.
Much of this
recruitment is aimed at hard-to-find experienced professionals,
especially important in the advisory businesses where corporate
knowledge is highly valued. As a result, an old taboo is being broken
and more outsiders brought straight in as partners. Robust selection
procedures are used to ensure that they fit in. Programmes that help
keep the firm in touch with former employees are also being
strengthened so that people who leave can more easily find their way
back (these “boomerangs” account for up to a quarter of those hired by
the Big Four in America).
Former
employees can also act as useful recruiting agents and help to drum up
new business. For these alumni programmes to work “a massive cultural
switch” is needed, says Keith Dugdale, who looks after global
recruitment for KPMG. Few employers are used to
helping people leave on good terms. But in an era of job-hopping and a
scarcity of skills, loyalty increasingly means having a sense of
emotional allegiance to an employer, whether or not that person is
still physically on the payroll.
A similar
change in attitude is needed to manage the careers of female employees.
Each of the Big Four wants to promote more women, who account for about
half of their recruits but around a quarter, at best, of their
partners. Many women drop off the career ladder at some point (usually
to have children or to care for an elderly relative) and find it
difficult to get back on again. Options such as career breaks and
part-time working are part of the accountants' response. “The Big Four
are ahead of most in managing talented women,” says Sylvia Hewlett,
author of “Off-Ramps and On-Ramps”, a new book on the subject (see article).
Gaps in one
country can be plugged with people from another. The Big Four have big
plans in Asia, especially China. Deloitte aims to have 20,000 people in
greater China by 2015, up from some 8,500 now. But like other firms it
is finding that experienced people are thinner on the ground than
promising but untested ones. One answer is to use member firms outside
China to find experienced Chinese émigrés who want to return home,
although they do not always get on well with local employees. Similar
techniques are used to handle temporary gluts of work. Canadian
accountants cross the border in droves during the American audit season
to reinforce their American colleagues' efforts.
Mobility is
seen as a useful way to retain and help employees develop.
International assignments can be critical in attracting new graduates.
According to Pierre Hurstel, Ernst & Young's global managing
partner for people, new entrants want to work abroad: that's the
biggest change in recruits in the past five years, he says. Recruiters
at PwC are authorised to
promise the best candidates on campus language training and an overseas
visit at the end of their first year. International assignments can be
pledged after two to three years. High-minded young people also want to
work for companies with a decent ethical reputation.
Retaining
good people is the biggest challenge. Turnover rates at the Big Four
have historically been high—roughly 15-20% leave each year, compared
with as few as 5% in some other industries. The cost of this is
“astronomical”, says Jim Wall, Deloitte's managing director of human
resources. Mr Wall reckons that every percentage-point drop in annual
turnover rates equates to a saving of $400m-500m.
Even so, the
accountant's goals are more nuanced than simply increasing retention
rates. None of the big accountancy firms wants churn rates to fall too
far, if only to keep the performance bar high. Mr Wall thinks a 10-12%
turnover rate would be about right; Richard Baird, PwC's people chief, reckons that 12-15% is comfortable. Rather, the Big Four want more of their most talented people to stay.
The biggest
staff exodus comes after three years, once recruits have been certified
as accountants. Many never intend to stay any longer, aiming instead to
parlay their qualifications into a new job and a fatter pay cheque
somewhere else. That presents the Big Four with a particular problem:
how to identify future stars among the mass of raw recruits. The
trouble is, most talent-development programmes start at a later stage
in people's careers.
One strategy
is simply to persuade people to stay longer, which provides more time
for employers to spot and seduce the best performers. The Big Four can
point to research conducted among leavers that many would like to
return and that even more wish they had stayed longer. Leaving after
six years rather than three, say, means that people tend to go into
better jobs with higher pay—which can also help the effectiveness of
the alumni network.
Driving
talent-management practices deeper into the organisation is the bigger
priority, says Tony Osude, of the Association of Chartered Certified
Accountants. Talent-spotting has traditionally been left to a
middle-management layer of audit supervisors until people get closer to
being a partner (partly because employees tend to be invisible to many
of their superiors, working as they do in small teams at the offices of
the client).
The effect
has been to underutilise one of the big organisational advantages that
the Big Four have: a large pool of partners who can help coach less
experienced staff. That is changing. Rather than seeing junior staff as
expendable drones, the Big Four's talent bosses want partners to view
them as future assets. As well as tying reward schemes to the better
management of people, the behaviour of partners is being changed in
smaller ways. Deloitte's British firm asks partners to spend a minute
with their staff immediately after client meetings to provide feedback
so that they fulfil more of a training role.
Changing the
way partners behave takes time and will not solve every problem. Audit
work is not the world's most fascinating job and junior staff have
limited influence over their assignments. But they can be given a
clearer idea of how their career might shape up and greater control
over it. Ernst & Young spent years asking partners to identify the
skills needed for a gamut of roles, each of which carries a rating from
one for beginner to five for a master. Using this, staff will soon be
able to view not only a profile of their skills but also what
capabilities they need to acquire in order to move up into more senior
positions. Many of the training and development services are delivered
electronically.
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.
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.
Women and work
Breaks and ladders
Jul 19th 2007
From The Economist print edition
Female employees need different career paths
THE
Big Four look embarrassingly male at their most senior levels. Although
around half of their intake is female, that proportion shrinks rapidly
as people climb the career ladder. KPMG wants
women to account for a quarter of partners by 2010; Deloitte is aiming
for a figure of 31% for its female partners and directors by 2009, up
from 26% now.
|
 |
One day, someone will invent something to do this at home |
To get to
even these relatively modest targets, the firms must grapple with what
Sylvia Hewlett, of the Centre for Work-Life Policy in New York, calls
women's “non-linear career paths”. According to her research, 37% of
all professional women drop out of work at some point; even more will
spend time working flexibly. Getting back into employment is not easy:
only 40% manage to find full-time jobs. And those that do suffer a
swingeing loss of earnings: a 38% fall for those who have been out of
the office for three years or more compared with those who have stayed.
Smart
employers are toying with ways to keep the door to “off-ramped” female
staff ajar. The big accounting firms offer formal career breaks that
allow staff to take unpaid leave from work. Booz Allen Hamilton, a
consultancy, and Lehman Brothers, an investment bank, run programmes
offering interesting project-based work to women who are not ready to
take on full-time positions.
Flexible
working can also improve retention, through options such as part-time
work, compressing work into fewer days and seasonal schedules which can
fit in with school holidays. Flexitime and home working are popular and
help explain why more than 80% of the women on maternity leave at the
Big Four return to work, which is a higher proportion than in other
industries.
Child care is
not the only issue such schemes address. More and more people look
after elderly relatives—Ms Hewlett points to China, where women from
the one-child generation will look after not just their parents but
also their in-laws.
 |
 |
Copyright © 2007 The Economist Newspaper and The Economist Group. All rights reserved. |
Recent Comments