Last Friday’s post by Caleb surrounding the Bonus Watch at Deloitte sparked a handful of intuitive comments from GC readers.
In case you didn’t read the post and subsequent commentary, Commenter Anon51 responded to the question “what do readers suggest firms do to retain practitioners” with the following:
1. treat every team member with respect
2. you can’t just force your team to work harder year after year with fewer people and a smaller budget
3. pay 4-7 year people more, pay new hires less, so it seems there is an incentive to working harder
4. reward your people with an extra day off without having to utilize vacation time, especially after a really busy month/audit
Point 3 is bolded because it resulted in the following comment from Guest:
“That’s a really good idea, and I’m not being sarcastic. There is no reason why new hires fresh out of college need to make $59k ($55k + $4k sign-on bonus), when they would happily work for $50k. Then, a $5k bump every year would be a reward, with maybe a higher bump during promotion years…Pay disparity is a bigger issue than actual pay.”
Well said, Guest and Anon51.
I’ve said it before and I’ll say it again – the Big 4 are constantly in cahoots with one another with regards to hiring benchmarks. So I propose that TBig4PTB get together and reassess their starting salaries. Behold, a template for all Big Wigs to follow:
1. Decrease starting total packages (salary + sign on) by seven percent. Lower the bar from the get-go.
2. Now is the time – blame the decrease on “a firm wide strategic response to the economic risks of being a major player in the professional services industry. Unofficial response – did you see the DOW sink like the Titanic the other day?!”
3. Spread gap created by initial decrease in salary over the next two years. This will create an artificial sense of accomplishment and praise.
4. Send internal emails stressing the “increase in raises for well deserving employees.” Everyone cheers.
5. In three years college graduates will not know the difference; this “decrease” becomes a non-issue.
Guest’s comment that “pay disparity is a bigger issue than actual pay” can become a non-issue with very little effort. Is this fair or ethical? Mehhhhh. I personally think it would be a slap in the face to those of you who have busted your humps and sacrificed career and personal opportunities all in the name of KPDeloitterhouseErnstMG. But it certainly wouldn’t be the most desperate attempt made by one of the firms in recent memory.
Raising morale – hardly. What are your thoughts?
Can we have a show of hands who takes a list of employers published by Time Warner seriously? Fine. To hell with you; for this particular exercise we’ll assume that the list is 100% accurate.
Here’s the breakdown for the Big 4 on the CNNMoney’s 100 Top MBA Employers, Where MBA students say they’d most like to work:
#12 – Deloitte
#44 – PricewaterhouseCoopers
#45 – Ernst & Young
#75 – KPMG
So Deloitte dominates when you look at the Big 4’s performance. To put it in a little bit of perspective, Deloitte ranks ahead of The Blackstone Group and Morgan Stanley while the rest of the Big 4 rank behind the State Department.
Is this possibly due to the fact that they are the only firm to keep their consulting (not Advisory) practice in-house? Do they simply do a better job of selling their firm? Or is it possibly because male-patterned baldness is not discriminated against in leadership positions?
Or maybe we’re making too much of this. All the firms have a spot on the list and Google beats everybody’s ass with extreme prejudice, so is this one of those “it’s just a thrill to be on the list” moments, which results in the fliers all over your office and in the halls of Career Services at B-schools?
But forget all that for a minute. What’s really surprising (or perhaps not) is that the expectation of MBA graduates whose preferred field is public accounting are expecting an average salary of $59,176 for their first job after graduation. That amount is less than those for academic research ($79,590), education/teaching ($76,138), government/public service ($77,943) and “Other” ($92,110). Oh, and it’s behind “Auditing/accounting/taxation (corporate)” at $64,841. The average salary for preferred fields is $90,990.
Five years after graduation, those same graduates expect to make $92,075. Again, dead last. The average salary being $157,324.
Whether this says more about the state of the accounting profession or the firms that court those seeking accounting focused MBAs, we’re not really sure.
But in the grand scheme of things, it might just say that Deloitte’s position on the list may be – gasp – meaningless.
100 Top MBA Employers [CNNMoney]
EU Crafts $962 Billion Show of Force to Halt Euro Crisis [Bloomberg]
With the Euro under pressure, the European Central Bank has hatched a plan to “offer financial assistance worth as much as 750 billion euros ($962 billion) to countries under attack from speculators.” EU countries are chipping in 440 billion in loans, the EU’s budget throws in 60 billion, and 250 billion from the International Monetary Fund.
The funds will be available to those countries that experience a financial crisis similar to Greece. Portugal and Spain have debt to GDP ratios of 8.5% and 9.8% respectively, exceeding the EU’s mandated limit of 3%. package approved last week, receiving 110 billion euros “after agreeing to unprecedented austerity measures,” triggering riots in the country.
Dubai Holding Hires Debt Advisers [WSJ]
Dubai Holding Commercial Operations Group, a part of Dubai Holding (not to be confused with fellow Dubai conglomerate Dubai World) has hired PricewaterhouseCoopers to help them with a teenie debt restructuring project. DH’s debt issues come about after Dubai World is still working to restructure the $14 billion in outstanding debt that it has with its creditors after a slight panic late last year.
UPDATE: KPMG and Deloitte are getting in on the fun as well, as the Financial Times reports that they have been engaged to advise Dubai Group and Dubai International Capital, respectively.
You Complete My Audit [CFO]
Had your auditor for awhile? If you want to crack the top 100 of longest auditor-client relationship, you’d have to be putting up with the same firm for over 50 years. According to the CFO’s analysis of Audit Analytics data, the longest auditor-client relationship belongs to Deloitte and Proctor & Gamble who have been together since 1890. PricewaterhouseCoopers’ longest relationship is with Goodyear Tire & Rubber, starting in 1898; Ernst & Young with Manulife Financial, 1905; KPMG and General Electric go back to 1909.
Of the 100 companies that have stuck with their auditors the longest, 97 of those companies were with Big 4 firms:
• PricewaterhouseCoopers – 34
• E&Y – 25
• Deloitte – 24
• KPMG – 14
Straight Talk about Brutality of White Collar Crime from a Convicted Felon [White Collar Fraud]
GC friend and forensic sleuth Sam Antar recently had some a two part interview produced that from his recent speaking presentations at Stanford Law and Business Schools. Part one is below and you can see part two over at WCF.
From an accountant familiar with E&Y:
We got two voicemails today, one from head of Banking and one from the Vice-Chair of people, both talking about compensation. I think the underlying fear is that we don’t have enough people anymore in our practice because they keep stressing all the things that the partners are going to do besides compensation to boost morale (like have a lunch with staff sometime around cinco de Mayo).
The last month and a half has been a bit, shall we say, tough on the E&Y and the troops. That being said, the news that Ernie would beat P. Dubs raises may or may not have got some people to relax but it appears that the firm’s leadership is still on the offensive to keep spirits high.
After discussing it with our resident HR expert, the problem with these little wine & dine events is that at this point they are too little, too late. People don’t want they faces fed. They want answers. They are crawling the walls with anxiety about three things:
1. What raises will be.
2. If there will be a bonus pool.
3. Who is getting promoted.
And they want to know the answers ASAP. Raises have been triple-reassured at all the firms and people want to know that number; they want to know if there’s a bonus pool.
Everyone at the point of promotion has made up their minds about what they will do if they get promoted or not. Plus everyone who is not up for promotion is talking about who will get promoted, who won’t and the reactions that will result (e.g. storming out of the office or a nervous breakdown).
The reality is that these things take time. The fact that PwC put a number out there was impressive (and some have said, desperate) shows that partners are aware of the anxiety and they’re trying to get people to relax.
Deloitte is up first, as their fiscal ends 5/31 and we’ve heard that there has been generosity passed around there but it will ultimately depend on the the merit increases. We hear their all hands webcast is coming up soon and that discussions are occurring this month so it won’t be long.
No amount of margaritas, $100 bonuses or NHL playoff hockey tickets will change the fact that people have worked it out in their heads about what they will do when they get the news. And once that news is known, people will act fast. We would encourage everyone to be patient, try and be rational etc. etc. but we also know that’s an futile request.
Multiple sources have told us that Bob Moritz has put a number out there for comp adjustments during the firm’s webcast today :
Sitting in the Bobby Mo Firmwide Townhall Webcast. Raises: 5% to 8%.
But don’t start high-fiving just yet:
PwC expected to be 5% to 8% raises this year, but still a “quarter to go” per Moritz on today’s townhall webcast.
Early reports also are that internal firm services (IFS) will be getting 3-5%.
Thoughts? Your move, KPErnstDeloitteMG.
In part one of our discussion, we discussed audit firm failure and why the business model is not sustainable in the current form. We will now look at questions about what the aftermath of a Big 4 firm failure could look like and what some various paths could be:
Why isn’t a “Big 3” audit firm situation sustainable?