UK Court Decides it Will Leave the Major Lawsuits to the Americans

If you’re a (senior) manager at one of the Final Four horsemen of the accounting firm apocalypse, you may have asked yourself this very question. A reader recently dropped some quantitative analysis on us, writing, “I tried to step past anecdote and see how bad things really were.” This is specifically for the audit practice and is fairly large office, so adjust your expectations accordingly.

Using commonly available data from my firm, I decided to create a quasi-statistical analysis of the likelihood of senior managers making partner in the near future.

There were, as of the date I pulled this data, 843 senior managers in our audit practice. It’s too time consuming to divide these among starting classes, so I’ve made the following simplified assumptions:

Tenure:
9 year – 30% of the population, or 253 senior managers
10 year – 25%, or 211
11 year – 20%, or 169
12 year – 15%, or 126
13 year – 10% or 84

Let’s consider half of year 11 and all of year 12 and 13+ to be “in the pipeline”. That’s 295 senior managers competing for a given number of partner/principal/director (“partner”) spots.

Our tipster used a sample of approximately 200 partners (out of an assumed total of ~1,000) to conclude that approximately 14% of them would retire in the next five years (assuming 30+ years with the firm, mandatory retirement at 62) and assumed a 6% growth rate (which he/she admits, is on the aggressive side).

Here’s an extrapolation of open spots based on turnover and growth:

1,000 partners x 14% turnover = 140 partners turn over due to attrition, or 28 partners per year
1,000 partners x 6% growth = 60 partners per year, ignoring compounding

84 new partners sounds like a lot of partners. That’s because it is. Those in the know put our planned crop of partners at ~50 for 2011. At best, you’re looking at 1 in 4 of those high performing senior managers making partner, based on our assumptions. More realistically, it means that 1 in 6 can make partner.

Maybe you’ll take those odds, maybe you won’t but like we said, if you’re working in an office that is a fraction of the size in our tipster’s pattern, your odds could be worse depending on the situation in your office. Our tipster continues:

These odds are much worse than anyone is willing to admit, and simply making promotion a war of attrition by extending the partner track to 15 years isn’t going to do much to clear up the pipeline, since very few senior managers are going to find an opportunity that presents the chance of making $300k plus within 2 or 3 years. The situation gets even more grim for senior managers in their 9th and 10th year, who have a huge backlog in front of them and a glut of peers who were hired in the SarBox days of senior managers leaving for 30-40% raises and expect the same in their own careers.

Experienced seniors and new managers should very carefully consider the extended consequences of this data, and what it’s going to look like in 7-9 years when they are trying to make partner. The days of 15% growth in our industry are over and aren’t coming back, and the reality is that many Big 4 senior managers simply are not employable in industry at their current salary levels. Think through your career decisions in the coming 18 months very carefully.

As we’ve discussed, the firms know full well that not everyone has the goal of becoming a partner but if you do have partner ambitions, you’re in a pretty select group. The problem is, the odds still seem to be against you. Now with busy season winding down and three of the four firms closing in on fiscal year-ends, this year’s performance (and prospects outside the firm, depending on how promotions fall out) will be weighing heavy on the minds of many.