Nestled behind London’s St Thomas’s Hospital, the Ernst & Young headquarters is currently practising some intensive care of its own.
After posting a 43 percent growth in management consultancy fees for 1997-1998, the firm is bracing itself for a tighter financial year to come.
Despite the strong performance of the management consultancy division last year, Ernst & Young and its chairman Nick Land grabbed the headlines for very different reasons. The firm’s audit division finally reached a settlement over the tortuously lengthy BCCI scandal, while admitting no liability. Media attention shifted from the work of the consultants to the work of the auditors – a common problem with multi-discipline firms.
More recently, E&Y has been successful in a more positive profile raising activity. About a month ago, you couldn’t switch on the television or read a newspaper without a mention of the highly-popular Monet exhibition at the Royal Academy. The exhibition still has two months to run and media attention shows little sign of waning. Good news indeed for Ernst & Young which has invested a substantial amount of money securing sole sponsorship of the show. Andersen’s recent advertising campaign may have reached for the stars, but E&Y has taken a more cultural route.
Seeking a broader scope
So while the firm’s name rides high in the public’s awareness, what goes on in the engine room? We caught up with managing partner John Kelly halfway through the firm’s financial year. Kelly’s office is a few steps away from the firm’s “knowledge and learning room”. The room, though empty at the time I visited, seems to embody the firm’s focus on the sharing of ideas and allowing the space for creativity and innovation. Such ideals are what brought Kelly into consultancy in the first place. He started his career at Unilever, but soon felt that the industry focus was too narrow and wanted to move into an area that allowed for much broader scope across industries.
“I didn’t really want to move into another multi-national. I’d attended quite a few consultancy workshops offered by the Big Six at the time and opted for Coopers & Lybrand. The firm was able to offer me financial management and business appraisal, a business I’d been trained for – but it was able to offer that across a broad range of industry sectors.” After seven years at the company, in a number of predominantly UK-based roles, Kelly was offered the chance to take on C&L’s consultancy practice in Malaysia. On his return, Ernst & Young offered him a role as partner in charge of the performance improvement practice; it was an opportunity he was quick to snap up.
The communications business
As managing partner since 1997, Kelly retains full profit and loss responsibility for the UK, but is also actively involved on the boards of the company’s Japanese, Indian, European and Asian practices. This can present a problem.
Kelly bemoans the amount of dead time spent in travel. “Communication drives any business and I find that effective levels of communication can be difficult when you regularly have partners ‘on the road’ and out of the office. There are, of course, ways to get around this, voicemails and e-mails are fine. However, you do lose a lot of face-to-face time.
I admit that it’s something we have to get better at. We have to work smarter.”
Kelly seems to admit something that other consultancy chiefs seem to balk at even hinting at. Consultants’ working practices are under much examination. Time spent away from home, time spent out of the office and hours spent on a project are all factors that are being examined by an industry aware of the often excessive demands made on its workforce.
“This is a very significant issue. Firstly, you need to understand the problem and be very specific about it. We’ve held a number of focus groups among our staff in order to find out what they perceive the problems to be. Our consultants are asking us for clarity on what is actually being asked of them. If, say, they were sent on an assignment to Sweden for six months, they want a firm idea of what the terms and conditions of such an arrangement will be. We’ve had to put in place an International Mobility package that clarifies the arrangements for long-term assignments.” Many firms have created similar support methods for consultants, but it seems that tangible help for consultants is still a little woolly across the board.
E&Y has also tried to tackle the problem from a more practical point of view. Kelly explains how a firm can be a little more “hands-on” when it comes to dealing with a practical problem that a consultant may experience while working abroad. “We are piloting a ‘concierge service’ that helps when something out of the ordinary occurs. For example, if a consultant is working abroad and a problem arises at home, be it a plumbing problem or something a little more serious – we can facilitate action in the UK so that the consultant doesn’t have to worry about making emergency trips home.”
Kelly goes on to explain that the real solution to the overall problem must be reached with a full and frank conversation with the client. He is convinced that, in tandem with clients, the lifestyle issue can be solved. I put it to Kelly that this is just wishful thinking. Won’t clients want the maximum amount of time from their consultants and not be too concerned about the problems that they experience as individuals?
After all, they are paying for a service – why should they care about the personal problems that an individual might have?
“I strongly disagree. Clients are concerned with this problem. Predominantly, our consultants work in teams alongside the client. If excessive demands are being made on our consultants then it is likely that those same demands are being made of our client’s staff.”
Before becoming managing partner Kelly headed up the Performance Improvement division at Ernst & Young. Bringing those skills to bear on a client’s business is the bread and butter of the consultancy profession, but how easy is it to bring those skills closer to home and implement change in the very organisation you work for. Does he treat Ernst & Young in a different way than he would a client?
“The real lessons I learnt at PI were identifying the real signs of growth and how to cope with it when you experience it. You can’t cope with growth of any description unless you have put strong teams into place to deal with it. Growth management and team selection/ building were the really valuable lessons I learnt from my time in that division. This practice is growing very fast. Naturally at a time of growth things get stretched.
My biggest challenge over the next year or so is ensuring that things are not over-stretched during our globalisation push. Key organisational priorities like managing our people and providing value must be maintained during growth.” Coping with the stretch is something that Kelly himself has to deal with on a more personal basis. With his wide-ranging responsibility across the world, is there not a danger that the time he can spend on UK-related matters will become diluted? “Not really. Frankly the Japanese and Indian parts of the business do not take up that much of my time, however our European clients account for one of the greatest parts of our business. You simply cannot have a blinkered view anymore. My experiences across the world do not dilute my focus on the UK, they enrich it. Our clients are operating in a very intricately global way. We need to reflect that.”
Dealing with the forecasts
Although the firm enjoyed a substantial growth period last year, all predictions for the coming year are much more conservative. Kelly admits that although the firm is still planning for some growth he is not expecting it to be one of the company’s golden years.
“We’re certainly expecting it to slow down. We are still growing but I have seen it start to slow. In the UK, the manufacturing sector has experienced much pressure and we do expect that to continue. However, the financial services sector and the telecoms industry are still very bullish. After such a boom, it’s only natural for a period of absorption. I do not expect a 40 percent growth for the coming year.”
Despite this period of absorption, Ernst & Young is, along with the rest of the market, still planning an aggressive recruitment campaign. It is looking to take on around 500 new recruits this year. The firm is one of the few major consultancies that has never been obsessed with only taking on MBA graduates. Kelly is far keener to maintain a balance between ex-industry candidates and graduates with wide-ranging disciplines. “More important than the candidates’ background is their ability to show curiosity and initiative. That’s what we want to see.”
It appears that Ernst & Young has two major issues to deal with over the next year. The slowdown in the company’s predicted growth must be cause for concern as well as the sheer organisational shift towards becoming a truly global organisation. There does seem to be an air of calmness at Ernst & Young as it faces these challenges and Kelly doesn’t seem to be a man who is intimidated by them.
As he told us, “Consultancy has become a long-term proposition for clients.
Short-term contracts are becoming rarer and the trend seems to be towards the continuous relationship.” Perhaps the short-term worries of certain contracting market sectors and the re-organisation of what was, historically, a collection of individually-focused country units are small beer when put into perspective. Kelly is playing a much longer-term game.
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