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Shamed For Its Culture, PwC Australia Decides to Try Out Merit As a Reason to Promote Someone to Leadership

PwC headquarters building in Melbourne Victoria Australia

Confronted by multiple reports of a culture that puts profit over people and rewards partners who bring in business regardless of how toxic the partners are, PwC Australia’s new CEO Kevin Burrowes — who is in his position because the last CEO had to resign in shame — is taking a unique approach to promotions. Rather than recognizing those individuals who play the game best, the firm is pivoting toward using merit as the ultimate measure and has six new leaders to prove it.

From AFR‘s write-up on the leadership shakeup:

Mr Burrowes told The Australian Financial Review he wanted to end the “boys’ club” method of appointing partners to senior leadership roles as part of extensive reforms to the way the firm operates.

“I’ve already announced that senior roles and positions inside PwC Australia will be merit-based, it won’t be me appointing [in a] ‘boys’ club’ approach,” he said last week ahead of the reports being made public.

“That’s something I successfully introduced in PwC in the UK, it works really well. It’s about merit, it’s about partners putting themselves forward. That will bring different voices into the room, it will bring different challenge into the room.”

Although we’d all like to believe Kevin had the revelation that PwC’s existing good ole boy culture sucks while sitting on the toilet one night it’s more likely the move is inspired directly by the recently released Switkowski report [PDF], an investigation into governance, culture, and accountability at PwC Australia commissioned by the firm itself. That report identified several key shortcomings, culture issues that encouraged if not directly led to ex-partner Peter Collins eagerness to leak confidential government information back to the firm. According to the report those shortcomings are:

  • Lack of independence and external ‘voices’ within the governing body
  • Excessive power conferred on the CEO
  • Disproportionate focus on revenue growth and market leadership as the strategic imperatives
  • Decentralized business model without sufficient visibility of the enterprise view
  • Complexity and fragmentation contributing to ineffective structures and processes
  • Unclear responsibilities and accountabilities creating gaps and risks
  • Overly collegial culture inhibiting constructive challenge

Under “Overly collegial culture inhibiting constructive challenge,” the report notes:

Historically at PwC Australia, partners have built and relied upon a high degree of trust in each other, with a preference for maintaining harmony. In practice there is not a lot of constructive dissent, with relationships and loyalty being key to career progression. In recent years, the emphasis on growth coupled with high levels of trust and reluctance to challenge created blind spots. It may also have contributed to a willingness of partners to tolerate poor behaviors of ‘rainmakers’. Against this backdrop, the overplaying of collegiality creates risk.

PwC Australia partners and staff are high achievers. This tends to be associated with a lack of comfort in accepting the fallibility of humans, and a reluctance to reflect on what is not working well. PwC Australia exhibits a ‘good news’ culture at the enterprise-level where “good news gets communicated and bad news gets held back”. The Review found there is a general hesitancy to delve into uncomfortable conversations, to learn from mistakes and to be prepared to hold others to account.

Readers of Going Concern and soldiers of Big 4 both past and current know exactly what is meant by “overly collegial culture” and know the issue is not unique to PwC. It’s just that PwC got busted doing bad things because of it and now they have to do something to address it in an excessively public manner.

Australian Financial Review detailed PwC’s culture problems as identified by the Switkowski report even deeper (words with funny Aussie spellings have been Americanized for our audience):

  • Leaders ‘tolerate aberrant behavior’ from those who bring in big revenue.
  • Operations drive competitive behavior and a financial focus.
  • Trust in partners leads to ‘overconfidence in decision making’.
  • Networks and relationships ‘weaken cognitive diversity’ in top roles.
  • Fears about reputation and advancement inhibit people from speaking out.
  • Focus on good news and avoid discussion of failures.

And there it is. As explained by the Switkowski report:

While there has been a significant and successful focus on aspects of diversity and inclusion at PwC Australia in recent years, this has largely extended to social diversity as opposed to cognitive diversity. When leadership positions are assigned to people that senior leaders know and trust, with less priority given to capability-based criteria, the cognitive diversity at senior leadership levels may suffer.

When cognitive diversity is lacking, dialogue and decision-making is less conducive to dissenting voices and constructive challenge. It appears this has been the case at PwC Australia. It was commonly reported that there needs to be a greater diversity of views, particularly amongst the senior leadership groups.

In other words, “diversity” as we commonly understand it to mean in race/gender/sexual orientation isn’t so bad at PwC, it’s the diversity of thought at the top that is a problem. This again boils down to those most adept at playing the game being the ones who ascend the leadership ladder.

The new leaders, on whom a tremendous amount of pressure to disrupt the culture now exists, are:

  • Louise King, Technology, Media and Telecommunications (23 years at PwC)
  • Guy Chandler, Energy, Utilities and Resources (5 years at PwC)
  • Brian Man, Retail and Consumer Industry (almost 5 years at PwC)
  • Nicola Lynch, Health and Education Industry (14 years at PwC)
  • Barry Trubridge, Financial Services Industry (almost 9 years at PwC)
  • Troy Porter, Private Equity Industry (almost 30 years at PwC)

Best of luck to them and to Kevin’s toilet as a source of good ideas going forward.

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