Management Consulting - Accenture: Origin Of Species

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By Jack Sweeney

The

Origin

of Species

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While New York City sustained an enormous blow some two years ago, it has since lost none of its hard-nosed swagger. Now, that temperament long epitomized by New York’s sharp-tongued citizenry appears to be ebbing somewhat — an intriguing development that many believe is now altering the psyche of Gotham. However, what is defanging New Yorkers, we are told, is not Orange Alerts or treacherous acts of terrorism, but an information resource commonly referred to as 311. It may be too early to access the full impact of the high-tech offering — a kind of public hotline on steroids — but few doubt that 311 is now altering the relationship between the city’s government and its citizens. In effect, New Yorkers have less reason to shout, or at least they believe that their government may have finally gotten the hearing aid it’s always needed. Arecent page one New York Times article discussing 311 ’s growing positive impact quotes New York City mayor Michael Bloomberg as saying, “It is the most powerful management tool ever developed for New York City.” Yet the experienced management C o n s u l t i n g Ja n u a r y / Fe b r u ar y 20 04

problem-solvers, specialized systems analysts, and programmers who were largely behind the tool’s creation and deployment escape any mention in the Times article. So goes the all-so-hidden life of consultants, the invisible knowledge brokers who trace their organizational roots to the early part of the last century — a time when men like Edwin Booz and James McKinsey first distin guished themselves as trusted advisers to both American business and government, and established partnerships grounded by shared values and principles. However, unlike the independent partnerships that came to define consulting during the past century, the consultants behind 311 belong to a more commercial species — one that answers to clients and shareholders in all parts of the world.

Nothing Like It in the Wo r l d Of course, it wasn’t always that way. The purveyor of 311 wisdom has consulting roots that run deep into the past. And if truth be told, its roots run nearly as deep as those of such enduring partnerships as McKinsey & Company and Booz Allen Hamilton. But for the c o n s u l t i n g firm known as Accenture, its American roots became an obstruction in the way of its global future, or at least it seems to have appeared that

way to those who’d prefer to have us believe that Accenture came into being a mere four years ago. This is perhaps a pesky footnote to a much larger and grander tale of a consultancy that arguably, unlike any firm before it, is outwardly exposing to the world at large the impact consultants can have on business, government, and the world’s economies. “How the consulting profession grew up — developing smart people with broad general skills — is not the way it will succeed in the future,” says Accenture Chairman & CEO Joe Forehand, beginning what’s become a familiar discourse on how, in the world of consulting, specialized consultants are now trumping the impact of “generalists,” or those consultants that typically fill the rank-and-file of strategy partnerships. “No one ever thought that consulting — in the industry that we are in — that there were any advantages to scale, and we’re now changing the game through scale,” says Forehand, emphasizing the latter half of A c c e n t u r e ’s one-two punch: specialized skills and global reach. It’s a wallop that has given rise to a new species of consultancy, one capable of supplying governments and businesses around the world with the economic knowledge and infrastructure needed to compete globally. There’s never been anything quite like them on the planet. Within the business world’s sea of knowledge, we are being compelled to think of global consulting firms as the Gulf Stream — a massive and freewheeling current pushing knowledge from continent to continent, from boardroom to board15

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room, from government to government. And, as with the private partnerships that helped establish consulting in the last century, client confidentiality remains the linchpin that undergirds their existence. However, given the demands shareholders now place upon them and the borderless nature of their work, global consulting firms now face challenges — both economic and political — all but unknown to their consulting predecessors.

The Profession’s Lightning Rod For its part, Accenture has unwittingly become the lightning rod for the new consulting species, given its size (83,000 employees) and the number of geographies (47+ countries) it currently operates from. What’s more, its publiclyheld status continues to illuminate the nature of the $11 billion firm’s work and actions through the foggy filter of routine Securities and Exchange Commission filings and government reports. Such filings have led to ever widening press reports noting the firm’s incorporation in Bermuda, its push to privatize governments around

the world, and its escalating lobbying fees. More recently, there was the revelation that the firm’s Middle East operation is being investigated by the Securities and Exchange Commission and the Department of Justice for possibly v i o l a t i n g the U.S. Foreign Corrupt Practices Act (FCPA), a law that bars companies from bribing foreign officials to obtain deals. Then there’s the growing offshoring strategy through which Accenture and its global competitors such as IBM Business Consulting Services and Cap Gemini Ernst & Young are adding knowledge workers to cheap labor locations around the world, a strategy that critics charge is putting American jobs at risk. (Accenture expects that its offshore capability will ultimately create new jobs in the U.S.) And as if that weren’t enough to keep Accenture in the political hot seat, there’s the consulting firm’s push into e-democracy services — a label for the firm’s Internet voting push involving offerings facing heightened scrutiny within this national election year. Such technologies, a growing number of critics c h a rge, are vulnerable to hackers capable of manipulating votes, thus

undermining democracy. Adding to the hubbub around Internet elections was the revelation in Newsday last year that Election.com, one of Accenture’s premier e-government partners, had sold controlling power to an investment group made up of unnamed Saudi nationals. Last June, Accenture bought out the Saudi investors as part of a deal under which it acquired Election.com’s public assets. Not more than 60 days later, Accenture had expanded its list of edemocracy clients to include the U.S. Department of Defense, as part of an effort to design and build an Internet voting capability for thousands of absentee uniformed services personnel. “The Pentagon’s program was adopted with disturbingly little publicity or debate. The public is entitled to know more about how it will work, and how it will be protected,” read the lead editorial in the Sunday, January18, edition of The New York Times. No doubt Accenture would prefer that the Pentagon speak for itself on the subject of Internet elections, but the firm remains steadfast in its efforts to make the technology more secure. So far, Accenture appears to be coping

“Unless you are willing to fire those people who — while delivering results — care nothing about the values of an o r g a n i z a t i o n ,

then you will not be sending the right message to the organization.”

— Accenture’s Forehand

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Ja n u a r y / Fe b r uary 2 004 C o n s u l t i n g

The Last Elected C E O

A Talk With Accenture’s “A p p ro a c h a b l e ” L e a d e r

It’s been more than four years since Joe Forehand

low-cost “offshore” markets?

became the final partner ever to be elected CEO of Accenture. In the years that have followed, Forehand has overseen the conversion of the Andersen Consulting partnership into the publicly-held entity we know today as Accenture. With the conversion complete, change still remains a constant at the firm, where Forehand is leading Accenture’s 83,000-member workforce to the outer edges of business transformation outsourcing.

Forehand: If you look at a lot of what’s happened, and how

CM: Is the growth of outsourcing services within Accenture likely to undermine the types of consulting opportunities it offers your people? Forehand: Consulting is a very important part of our future, always will be. If you look at what matters a lot to people, it’s being on a winning team. Being on a winning team is hugely important when it comes to attracting the best consultants away from our competitors. ... If you look at the transformation of outsourcing, it involves what may be the highest form of consulting — in fact, some of our people call it “extreme consulting.” It’s about being able to take the hardest, toughest challenges our clients have and doing the front-end transformation needed to meet them with an outsource model. And then, if you also look at the career opportunities we have and where we’re creating new businesses around business process outsourcing, our people have the opportunity to be the chief operating officer or the VP of sales for some of these businesses. This offers a combination of consulting and operational experience that will make them much better consultants. CM: What part of Accenture’s workforce should we expect consultants to make up in the future? Forehand: It’s a little hard to be real precise with that. We have three growth platforms: our business in high-value consulting, our whole technology services, and the services workforce or outsourcing, which we are increasingly growing as we take on client employees and re-skill them to be a part of our front office as we grow. But I could see, over the next three to five years, where it — if you look at just the type of work we do, there could be a roughly equal split between the two (consulting and outsourcing services). And we’ve moved from where outsourcing was about 15 percent of the mix over the last couple years to now it’s where it’s above 30 percent, and I think you’ll continue to see that trajectory over the next three years with the continued growth in the outsourcing type of work. We do see this as not just two separate lines of business entirely, because outsourcing stimulates consulting demand. And even though our revenues often times are counted as outsourcing, oftentimes consultants may be involved in the transition and transformation.

CM: Going forward, are we likely to see a larger portion of Accenture’s solutions workforce become distributed to other C o n s u l t i n g Ja n u a r y / Fe b ru ar y 20 04

buyers are saying, “As certain types of technology skills get more mature, we want to pay a price of X,” often this is less than what that price point is in the U.S., for example. However, it’s important to understand that as we look at our workforce of 83,000 people, we see that only 5 percent of these people are located in “of fshore,” lower-cost locations. ... A lot of what’s been going on is that the more complex consulting projects — which is where we excel — have in the last couple of years not been what clients have been buying. And that’s been part of the reason for some of the decline in consulting. However, we’re starting to see the size of consulting projects get bigger as companies come out of the downturn. And it’s important to realize that when you get in and look at some of the bigger change programs, the IT content of a typical large-scale project that can go offshore is still relatively small.

CM: But you still have to price competitively? Forehand: Yes. Recognizing that, to be competitive, we have to be able to provide a price point for certain types of skills and a price point at which we can be competitive. There are countless examples of how we’ve won pieces of business today where 80 or 90 percent of it is sourced within the U.S. But having 10 or 20 percent of it sourced in a low-cost country is enough to be the competitive edge to give us an advantage in landing work. So I look at that on the contrary: The ability to have some of that capability gives us the ability to be much more competitive for our U.S. workforce. We hired 800 people just within the U.S. within the first two months of our fiscal year. So we view us as now coming out of a cycle from what was truly an abrupt jolt to the whole industry to where we are formulating new jobs.

CM: Certain competitors of Accenture pride themselves on leadership training. What can you tell us about changes in Accenture’s approach to developing leaders? Forehand: This past year, we began holding three-day leadership development seminars for our newly-promoted partners. And we have made a sizable commitment — going back over a year ago, now we have some 1,500 partners who have gone through this. They spend three days with all of our leadership, and each of our leaders has teaching assignments. I teach a part of the class, about two hours on just how we developed the things that we believe are important in terms of leadership. We go through sessions on our core values, business ethics, a whole host of things related to how you increase your effectiveness with clients. Things like how to work better in teams, as a partner leading teams. So this has been extremely successful with our newly-promoted partners — to get hands-on within a leadership type of environment and to find out what’s important to maintain us and them at the top. 17

C ove rSto ry How Accenture’s Consulting Shrank (in millions) % Incre a s e

$2,095

( -1 % )

$2,126

Consulting O u t s o u rc i n g

45%

$1,166

$804

Q1 2003

Q1 2002

Source: Accenture Q1 Reports (Period ending November 30, 2003)

rather well with the extra wattage illuminating its activities. Such scrutiny should perhaps be viewed as a rite of passage, given the ambitious trajectory Accenture management has set for the firm. Still, the firm’s footing at any given time is only as certain as the values its consultants espouse, and to its credit, Accenture’s management doesn’t hesitate to speak up when asked how the firm is making sure its people continue to abide by the firm’s values. (See Forehand interview, page 17.) “Unless you are willing to fire those people who — while delivering results — care nothing about the values of an organization, then you will not be sending the right message to the organization,” says Forehand. “We have had to work harder at instilling our values, because they really now need to be built deep into the organization. This is no longer a club of a couple of thousand people, but an 83,000-person organization in over 47 countries,” he explains, while contrasting Accenture with the “clublike” partnerships credited with having established the consulting profession.

The Immaculate Conception The firm’s challenge has been compounded by the fluidity of its structure, a series of altered states each now representing a chapter in an evolutionary 18

tale filled with leadership endeavors. It’s a tale whose most recent chapter a rguably begins with the exit of F o r e h a n d ’s predecessor, Georg e Shaheen. As the CEO of what was then known as Andersen Consulting, Shaheen opts to become the CEO of illfated grocer WebVan, thus giving the consulting profession an episode of biblical poignancy. Having helped galvanize Andersen’s consulting army behind a plan to split off from Arthur Andersen, Shaheen courageously leads Andersen’s consultants to the edge of the Promised Land, only to be tripped up by the temptation of dot-com riches. For his indulgence, Shaheen is barred from ever tasting the fruits obtained by the firm’s windfall divorce from Arthur Andersen, and Accenture’s subsequent IPO. The divorce windfall came as the result of a somewhat controversial a r b i t r a t i o n decision that guaranteed Andersen Consulting its freedom after it forfeited all rights to the Andersen name and forked over to Arthur Andersen $1 billion — a sum many times smaller than was anticipated. Strangely, Accenture’s management continues to argue forthrightly that since the arbitrator’s decision stated that Accenture was not owned by Arthur Andersen, Accenture cannot be characterized as having broken off or spun off from Arthur Andersen. What’s more, Accenture management argues

just as fervently that the defunct Arthur Andersen should not be characterized as having any parental link to Accenture. Today, nowhere is Arthur Andersen mentioned in the corporate history on the firm’s Web site. But if George Shaheen is the biblical equivalent of Moses in Accenture’s tale of creation, the accountant Arthur Andersen is undeniably Adam. You only need to examine the executive bios on Accenture’s Web site to discover that its CEO “joined Accenture in 1972.” 1972? (Think: Nixon vs. McGovern, Munich Olympics, Pet Rocks.) While it would be another 27 years before Andersen Consulting was officially divorced from AA, it would be another 15 before the name Andersen Consulting was even coined. In fact, when Forehand joined Arthur Andersen, consultants resided in what was known as AA’s management information consulting division. Forehand’s is not the only fuzzy bio. While Jackson Wilson, chief executive of Accenture’s new business process outsourcing business, “joined Accenture in 1975,” Stephan James, Accenture’s chief operating officer, “joined Accenture in 1968.” For its part, James’s bio should perhaps be considered a historical a r t ifact, given that it appears to confirm Accenture’s existence as far back as the Johnson Administration. No matter. While Accenture’s past may be foggy, its vision of the future has never been more clear. Or so those who praise the leadership of Accenture’s CEO tell us. Ja n u a r y / Fe b r ua ry 20 04 C o n s u l t i n g

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Accenture’s Watershed Chapter 1999 33 years after joining Arthur Andersen,

Andersen Consulting CEO George Shaheen jumps ship for dot-com grocer WebVan. Joe Forehand is elected head of Andersen Consulting.

2000 Arbitration windfall: While a divorce settlement for Arthur Andersen and A n d e rs e n Consulting gave AA all rights to the Andersen name, it requires Andersen Consulting to pay AA $1 billion, a meager sum at the time, considering that Andersen Consulting had an estimated market value of $25 billion.

Arthur Andersen CEO James Wadia resigns after arbitration outcome is announced. Accenture initiates a vast reorganization that will roll 40-plus partnerships into a holding company.

2001 Andersen Consulting launches a $175 million rebranding campaign to establish its newly-minted name — Accenture. Accenture incorporates itself in Bermuda. Newly-branded Accenture raises $1.67 billion with its initial public offering. Arthur Andersen comes under scrutiny as Enron investigation heats up.

2002 Arthur Andersen is found guilty of obstruction of justice, relinquishes its permits in all states where it was licensed to practice public accountancy.

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The CEO Partner Always Joe, never Joseph, Forehand is shorthand; that is, Accenture’s CEO prefers none of the longhand protocol or divine detachment his predecessor was known for. It’s been said before and bears repeating that George Shaheen was the managing partner of a partnership, who thought of himself as the CEO of a corporation — i.e., he thought of the partners as his employees — while the ever approachable Joe Forehand is the CEO of a $11 billion corporation, who thinks of himself as a managing partner: He views his vice presidents as more or less his partners. Just how this ironic management twist has impacted the firm’s ability to instill values in its people is anyone’s guess, but clearly the firm has needed to enhance the reinforcement of its values as certain cultural mechanisms found within the Andersen partnership are no longer present. At the same time, people’s actions can seem to be more transparent within a corporate organization where lines of reporting have been more rigidly drawn. Following the arbitration’s outcome, Accenture’s first order of business was to create a vehicle to take public. To do this, the newly-branded Accenture had to undergo a vast reorganization that would roll 40-plus independentlyowned, local country partnerships into a single holding company. “When you move to become a global corporate entity, you can assume that the mother ship is going to be charged with a lot more knowledge of its global activities than when it was a loosely knit set of partnerships,” says Timothy Dickinson, a Washington attorney who specializes in FCPA cases. Dickinson says that any firm experiencing vast structural change such as what Accenture has recently experienced will want to be extra vigilant of those people residing in geographies where firm busi-

ness is conducted through joint ventures and other shared investment models. To date, Accenture’s people appear to have little doubt what industry they belong to. For their part, the firm’s consultants frequently speak of their career goals not just within the firm, but in a larger context relative to the consulting profession. “There’s a sense that we do things better than other firms,” says an Accenture senior consultant, who asked us to not to use his name. “Accenture’s people development programs are what have kept me here the last few years, and going forward it will be all about gaining experience. I don’t think that other firms can offer all the sorts of opportunities Accenture now does.” Several Accenture consultants echoed similar comments about how they perceived the firm stacks up with its rivals. Moreover, they praised the firm’s leadership and the emphasis that has been placed on the firm’s values.

Do the Right Thing “We’ve had a consistent message that, if we do the right thing for our clients and we do the right thing for our people, then the stock price does not have to be thought of as something that matters,” explains Forehand, who also cites the firm’s efforts to enforce a lengthy code of ethics specially tailored to be infused throughout a culturally diverse organization. For its part, the firm management also cites its independent positioning as helping to deter potential conflicts. “We’re not carrying any kind of a proprietary solution or technology that anybody has to be suspicious about in terms of what our motives are. We have alliances, certainly, and that’s a part of doing business,” says Forehand. Still, rivals argue that this positioning has been undermined by Accenture’s 19

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Accenture’s 2003 Revenue by Region (in billions)

$.79 E u ro p e A m e ri c a s

$5.35 Asia Pa c i fi c

$5.67

(2003 total net revenue, $11.82 billion) Source: Accenture Ltd.

willingness to accept marketing and remarketing fees from different technology partners. Such rivals point to the induction of Microsoft CEO Steve Ballmer as an Accenture board member and to Avanade, a consulting joint venture between Microsoft and Accenture. Meanwhile, rivals within consulting’s strategy encampment routinely charge that Accenture isn’t any longer a consulting firm at all. It is instead an outsourcing company, they say, that offers clients consulting services. Why, even Forehand has on more than one occasion commented, “You really can’t call what we do consulting any longer.” Another pesky point? Or is there a pattern here? It’s a consultant; it’s not a consultant. Its roots run deep; it has no roots at all. It’s an American success story; it never was American. It’s independent; it’s not independent. Clearly, the consulting firm poised to define consulting’s New Age faces a 20

definition challenge all its own. “We’re not an easy enterprise to understand,” begins Accenture’s chief operating officer, client services, William Green (bio note: Green “joined Accenture in 1977”), when asked whether the firm will be further escalating its Capitol Hill lobbying efforts. “We’re a very well known company within the United States. There are not many people who don’t know someone who has worked for Accenture, or was a customer or something like that, so we’ve had to go through an education process — that’s how I’d describe it.” Translation: We are well known; we are not well known.

The Story of Creation The “education process” Accenture has undertaken has undoubtedly been made more challenging due to the complexity of the firm’s story of creation.

“Being a public company is not mutually exclusive from having core values and doing the right things for clients,” says Forehand, underscoring once more his mantra to ignore the stock price. Indeed, Forehand’s thought gains support when you consider that one of the more strident examples in recent memory of a business falling victim to values erosion involves a partnership — Arthur Andersen. Besides avoiding legal entanglements related to AA’s collapse, Accenture’s deliberate efforts to obscure its shared lineage with AA may be rootedin a fear that future clients will view it as being more susceptible to such values erosion. After all, Shaheen’s hasty exit seemed to underscore a theme all too familiar to Arthur Andersen: It’s about the money. Be that as it may, Accenture’s clients appear to routinely find value in the firm’s one-two punch. “We were very pleased by the expertise the people from Accenture brought to the table on this project, and the commitment they made to us,” says Gino Menchini, New York City’s commissioner for information technology and telecommunications, who oversaw the 311 project for the city. “We have had a number of city governments from around the country, and even from other countries, that have either met with us or called us about 311, and they want to know how we did it, and what worked well, and what didn’t,” says Menchini, who remembers speaking to government o fficials in Chicago and Baltimore before moving forward with Accenture. In a way, 311 is about new beginnings. For just as 311 is arguably helping New York cut the corners off its hard-nosed past, it is helping Accenture turn the page and reveal to the world a new species of consultant. C Ja n u a r y / Fe b rua ry 20 04 C o n s u l t i n g