By Joanne Sammer
Only 12 months ago, the biggest concern facing the Big Five consulting outfits was finding a way to work through the economic downturn.
Having seemingly foiled government efforts to prevent the audit houses from selling consulting services, they appeared to be rolling up their sleeves and getting focused back on business matters.
For top managers within such firms as Deloitte Consulting, PricewaterhouseCoopers, and Andersen, the conventional thinking seemed to be that the entire auditor independence issue would blow over, and things would continue to be business as usual.
Then came Enron. In just a few weeks, the Enron meltdown, the serious questions raised about the independence of its audit firm, Andersen, and the role this played in the company's collapse created a tidal wave of market forces that are bringing fundamental and long-lasting changes to both the consulting and accounting industries.
Public firms like The Walt Disney Company and Apple Computer, Inc., which were facing shareholder questions about auditor independence, began making pledges to stop hiring their audit firms to do consulting work. Suddenly, it was not just Arthur Andersen on the hot seat. Within a two-week period, PricewaterhouseCoopers and Deloitte & Touche announced they were separating their consulting arms from their accounting/audit operations, while also promising not to sell certain consulting services to their audit clients.
Some have observed that these developments are a good news/bad news proposition for the Big Five. The bad news is that making major and at least somewhat unexpected organizational changes is clearly a distraction for these firms. However, those changes are not necessarily unwelcome. "My sense is that all consultants have always wanted to be independent of the accounting side," says David Maister, author of First Among Equals: How to Manage a Group of Professionals (Free Press, April 2002). "This gives them a chance to be in charge of their own destiny without negotiating with other parts of the business. We are going to have a lot of very happy consultants."
The freedom to reinvent their firms as they see fit is a compelling if arduous task, to be sure. After all, a change in the fundamental ownership and operating structure of the business — whether through an IPO, merger, or spin-off — can create the momentum for changes to other parts of the firm. "There is suddenly the political power to make big management and strategic changes that might have been much harder when it was business as usual," says Maister. This can include changes to everything from internal management and compensation to operating policies and how the firm is organized.
At the moment,
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.