'I've got nothing to do with accountants. They're just a bunch of beancounters.' This is not exactly a revolutionary point of view.
But the person speaking worked for a Big Five firm. When it was pointed out he was employed by an accountancy firm the reply was equally forthright. ‘No I am not. We are an international firm of consultants, not accountants.’
This exchange showed there is division between consultants and accountants. Consultancy is the more glamorous of the two vocations. Matthew Jones, a TMP recruitment consultant, agrees: ‘Management consultancy sells itself because of what it is. The career is fantastic.’ Accountancy, alas, is seen as its more mundane sidekick. And for many it is regarded as a stepping stone to an eventual career in consultancy.
The work of the SEC
These divisions have been exaggerated over the past year as several of the Big Five have sought to pare off their consultancy divisions in the wake of the work of the US financial regulator, the Securities and Exchange Commission.
A year-long inquiry by the SEC into perceived conflict of interest between firms providing auditing and consulting services to the same company and shone the spotlight onto a practice many considered suspect. It also led some to divest part of their ever-expanding empires. Ernst and Young sold its consultancy operation to Cap Gemini in an $11bn deal.
Last year PricewaterhouseCoopers was set to sell its consultancy practice to Hewlett Packard only for the deal to be scuppered by turbulence in the technology market, which brought down HP’s price. A future sell-off is expected. This February, KPMG floated KPMG Consulting Inc on the NASDAQ in New York at an initial price offering of $1.9bn.
A changing market
With new plaques gleaming proudly, Andersen and Accenture took the divorce option. The market is fragmenting and changing as the consultancy firms outgrow their creators. KPMG’s UK consultancy work brought in £272m last year. In the US, consulting earned almost $1.6bn.
Across the Big Five in the US, revenues from management and advisory services constitute half of total revenues. These are huge markets, representing the success of consultancy, but they have brought huge problems. The speed of growth, and focus it brought on practices and structures caught some out. Predictions of the end of the Big Five made it to the public arena. One area of potential ramification is in recruitment markets.
One career path that has become ‘traditional’ over the last few years is for graduates to work for a large accountancy firm, then switch to the consultancy division after gaining qualifications and experience. Pay and travel opportunities are some of the rewards that go with consultancy.
From accountants to consultants
‘Most accountants, when they start looking around, go into consultancy,’ says Stevan Rolls, UK director of recruiting at Andersen, which re-started growing its in-house consultancy.
But this option is looking less possible within the same company. So has this affected recruitment to the big firms? Some remain confident that even if the glamour side of consultancy is no longer on offer to recruits – at least to the same degree – both the accountancy profession and the companies involved are robust enough to ride any storm.
‘It’s not affected it as much as we thought,’ says Rolls. Because of the reputation of the big companies, seeking recruits is still no problem.’
Shunning the chance to put a Big Five name on a CV because it no longer offers an in-house consultancy would be the act of a brave, or foolhardy, graduate. Rolls says a job with the biggies is still an attraction. But not everyone appears so confident. Researching this story, calls went un-returned. Coincidence? Or maybe it is a sensitive subject, something that could become a problem in the near future, as effects of the SEC’s recommendations are felt closer to home.
There are fears that restricting consultancy options will restrict the numbers and quality of those coming into accountancy firms. In his written testimony to the SEC hearings last September, James Copeland, chief executive officer at Deloitte and Touche, outlined the industry’s fears.
Declining student numbers
‘What about the talent pool for accounting students entering audit? We are experiencing a decline in the numbers and qualifications of students entering at university level,’ he said. ‘Business Week has just reported that the number of accounting graduates declined by about 20% between 1996 and 1999. That concerns me greatly. We have historically been able to offer entrants the chance to move to other areas of practice within our firms.
‘Those areas include significant services that are an adjunct to audit services as well as consulting. Narrowing opportunities outside of audit will lessen the attractiveness of a career with our firm.’ If someone as senior as Copeland is worried, others must be too.
Despite the doom and gloom, this could work in favour of ‘humble’ accountants. Their responsibilities in financial consultancy may increase, as it is unlikely their job will be stripped down to the audit minimum.Kevin Hogarth, national resourcing director at Ernst & Young, says graduate applications in the first year, post the company’s consultancy split, are up by 30%. Part of this is down to E&Y offering more attractive packages to recruits including secondment opportunities, better training, a structured career path and the chance to work abroad.
Attractions offered by consultancy have had to be offered within accountancy to make companies ‘competitive’. ‘We have had to be more imaginative, more creative and more flexible,’ says Hogarth. He says the real test will come in a few years, when entrants qualify. If they choose to remain with ‘just’ an accountancy firm, it may signal a significant culture change within the industry. And who knows, in the future, beancounters may be sneering at consultants…