Auditor Independence
Deloitte Digs in Heels
It wasn't too long ago that Andersen Consulting rocked the consulting sector by announcing its plan to go it alone and split off from accounting firm Arthur Andersen. A little more than two years later, KPMG, Ernst & Young, and PricewaterhouseCoopers are each now evaluating organizational changes and transactions that many expect will hasten a split between their consulting and accounting businesses — thus bringing the era of Big Five consulting to an end. Or will it?
Absent from the rash of recent "Big Five Consultants In Flux" headlines is Deloitte Consulting, the ever-steady Big Five competitor known better perhaps for its amicable work/life culture than for trendy deal-making.
"For the moment, we don't object to the label 'holdout,' because we remain in line with our enterprise values," says Deloitte & Touche CEO James Copeland. As the chief executive of Deloitte Consulting's parent company, Copeland's words carry weight across Deloitte's consulting, accounting, and tax triumvirate.
Triggered in part by the marketplace's growing attraction to the Big Five's pool of intellectual capital, the discussions surrounding different Big Five business transactions have been amplified as the Securities & Exchange Commission increases its focus on auditor independence issues, according to Big Five consultants.
"At this point, nothing has happened. These are proposed transactions, and I think everybody needs to breathe deeply," explains Copeland, who believes Big Five accounting firms could do extensive damage to themselves and their clients by hurrying to divest themselves of certain consulting capabilities without fully assessing the impact on the audit side of the house.
"It is possible that this divestiture trend will gain momentum, that it cannot be stopped — and I'm concerned about that," says Copeland, who suggests that auditors who act brashly and give up their consulting competencies will ultimately end up having to partner with a consultant to complete audit requirements. Deloitte's CEO says that consulting work performed in such areas as tax and derivatives accounting is a required competency for completing audits.
Career Paths
Origins of a Business Healer
There is much in common with ministering to the sick and being a management consultant, says Manuel Lowenhaupt, 44, a principal with Deloitte Consulting's Boston office for the last three years.
"Instead of one patient, I have hundreds and thousands of patients at one time. Being a provider of care to a large organization or an individual has the same skill requirements, the huge amount of challenges and excitement."
He should know. Lowenhaupt is a physician who spent 10 years running a group medical practice in Boston. While doing that, he discovered that the traditional medical office model was not the most effective. He built in some efficiencies that lowered office overhead by 50 percent. When word of his accomplishments began to spread, his peers asked for help. Before he knew it, Lowenhaupt got really busy working as an office management consultant for group practices and hospitals in the Northeast.
"At the same time, I cofounded a software company, Boston Medical Systems, because I really wanted to take advantage of technology in running practices. I was terribly disappointed with what the vendors had available," says Lowenhaupt.
Unfortunately, juggling multiple careers was slowly burning him out. He asked himself what it was that caused him to lie awake at night. "I took a shot at consulting and never looked back," says the good doctor, who has also found time to teach at MIT, the Boston University School of Medicine, and Harvard University, where he had received his degree in medicine.
The Client Diagnosis: MICROSOFT
A Giant's Quandary
As everyone knows, Microsoft Corp. now faces an onslaught of New Economy rivals as it
contemplates breaking up its organization to satisfy government regulators. Consulting recently asked Clayton Christensen, associate professor at the Harvard Business School and former consultant with the Boston Consulting Group, to diagnose the software's giant's growing strategic quandary.
CM: When Microsoft moved its focus from
the desktop to the Web, many viewed this as an organizational feat. Do you agree?
Christensen: Microsoft's embrace of the browser and its Web strategy was a sustaining technology in terms of my model. Microsoft's best customers were buying a Netscape browser, and by Microsoft integrating its browser with the rest of its product line, the move strengthened its business model. So from a managerial achievement point-of-view that was very impressive, and it was a sustaining technology for Microsoft. My model would predict that even though they are often late, the leading companies always end up on top when sustaining innovation is concerned. What's disruptive for Microsoft is Java, Genie, and Linux. These really smell like disruptive technologies, and I think these will get Microsoft.
CM: Should Microsoft be taking steps to respond to these disruptive technologies?
Christensen: Yes, but frankly I don't know what they can do. In a lot of ways, I think the train has just passed them by. If you look at the e-commerce infrastructure that companies are putting into place today, there is nothing Microsoft there. The operating systems are all modular, and the Web-based IT systems are really going to be the core backbone of the next-decade systems, and Microsoft doesn't play there. So, if I were Microsoft, I don't know what I'd do.
Career Building
Mainspring Clients Prefer
© 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.