Just How Difficult Is It To Be a Recovering Alcoholic in Public Accounting Anyway?
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Why Is Utilization Such a Big Deal at Public Accounting Firms?
As it’s only been a few days since we learned about the death of Pan Jie, the PwC auditor who died in Shanghai, many people are questioning everything, from high pressure culture within the Big 4 to this most recent contribution from the mail bag wanting to know why utilization is such a BFD:
Been reading all the comments on the Shanghai PDub girl perhaps overworking to death, and everyone seem to have the same opinion on the same thing: overworking, but undercharging. And, this topic of utilization has really been troubling me since the first day I joined public accounting. So can someone care to explain why utilization is such big deal at the Big 4s??
I really don’t get it. Because ultimately, in my opinion it is purely a [key performance indicator] that is on paper, and is not a real depicting of a company’s financial performance. From when I last checked, the concept of OT pay is no longer applicable. So it’s not like by charging more hours, the firms are not paying me more and thus impacting their bottom line. Of course, if I need to bring on more people to the team to complete the audit, it may impact the bottom line for that engagement. And, also maybe there are the out-of-pocket expenses that you need to consider for employees beyond 8 hours. But I am sure [out-of-pocket expenses] during busy season will not break for audit budget. But besides that, everything is pretty much fixed, from the audit fee, staff’s salaries, expenses, etc. So I really don’t get this utilization game that management is playing.
Is my mind too simple, or can someone explain it to me?
Here’s my take on utilization – it partially factors into how firms determine if they’re getting their money’s worth out of employees. Say you’ve got two employees that are effectively the same (hours, performance, etc.) except one takes all five weeks of their PTO while the other doesn’t take any PTO. The difference of two hundred hours – on paper – shows that one employee is one creating 200 additional hours of value for the firm versus their co-worker who does not. If both of these individuals met their utilization goals for the year, then there’s really no issue. But if the five weeks of PTO taken by the first employee causes them to fall short, a friendly HR professional or performance counselor will have an easy decision as who should be crowned a top performer at evaluation time. Regardless of firms saying “we want you to take vacation” they want you to meet utilization goals first.
As for budgeting, depending on the engagement you may have wiggle room and you may not. If you’re serving a small client, regular late-night dinners could easily blow the budget and zap the realization, especially if you’re billing all the hours you’re working. So if you’re trying to make utilization goals but have a tight budget, you may have to cave on either charging all the hours or starving to death. Not an easy choice and is one reason why serving small clients can be a double-edged sword.
So essentially I agree with you, utilization is primarily a performance indicator and not much else. It simplifies the ability to determine someone’s value on paper. Low utilization indicates that you suck at your job or no one likes you. High utilization means you’re a workhorse and a team player. When it comes to cutting the weakest link, the decision is pretty easy. I admit that I’m far removed from the latest trends in determine valuable employees so veterans of the utilization game and people in the know are invited to chime in with theories on utilization and its usefulness (or lack thereof).