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Deloitte has announced today that Joe Echevarria will become the new CEO and Punit Renjen (who is oddly well-coifed for a leader at Deloitte) the new Chairman Board of the firm effective June 1. None of this is really news to anyone that frequents this site since we reported who the candidates were back in February. Joe takes over for Barry Salzberg who will assume the global CEO position and Punit will assume the Chairman role from Sharon Allen who is retiring.
[caption id="attachment_29175" align="alignright" width="150" caption="Renjen"][/caption]
This officially marks the end of the Deloitte election process that we brought to light after a partner reached out to us over concerns that the process is seriously flawed (or in that partner’s words, “broken”). Whether or not the rumored poor turnout had any effect on the timing is not known but the results remain the same, much to the chagrin of many partners at the firm who share the frustration of a unrepresentative election process.
Both guys seem genuinely pleased with the result, “I am deeply honored to be elected by my partners and principals to be CEO of this great firm. As the largest professional services organization in the U.S., we have an obligation to lead,” said Echevarria. “Excellence in all of the professional services we provide constitutes the foundation of our success. As markets were shaken and major players disappeared overnight, we’ve made a clear choice to focus on superior performance, innovation and growth across all our practice areas. Great firms are growth firms.”
And Renjen, “This is a great privilege, and I deeply appreciate the partnership’s confidence in me,” he said. “I share Sharon Allen’s vision for Deloitte – to be the ‘Standard of Excellence.’ Setting this standard demands effective governance, transparency, accountability and uncompromised quality. I am committed to leading the board in providing valuable oversight and strategic guidance to management, and also to representing our exceptional organization and culture with external stakeholders.”
Congratulate your new leaders, green dots; these are the men you’ll be receiving a monstrous number of emails from for the next four years.
Last week we shared the Deloitte U.S. Leadership candidates with you but at the time we hadn’t confirmed that the thumbsup/thumbsdown had begun. This week, a source confirmed for us that voting had, in fact, started last week but no one should get too anxious about hearing the results:
The vote continues at least until the Firm achieves a 50% voting rate from all the partners. This is typically a struggle, and many voice messages and e-mails are sent rounding up at least the 50%. This is part of the problem (and a bit pathetic). Nobody believes their voices are heard, so they don’t care to vote. Or, if they vote NO, they fear retribution.
As we reported in January, the retribution of a “No” vote is something that many young partners may fear and you can presuppose that many veteran partners who are a little preoccupied with a little something called “busy season clients” aren’t exactly concerned with casting a vote in an election that is all but decided already. All this adds up to a pretty sad voter turnout, sayeth our source:
Ok – so then, among that paltry 50% voting rate, there needs to be a 2/3 approval for each candidate in order for them to win election. So – if you do the math…we have about 2800 partners. Only 1400 need to vote for a quorum, and only about 940 need to approve each candidate for them to get into office. So perhaps only about 33% of the partners end up approving of the people that run the firm.
Unfortunately – nobody focuses upon this fact. Unbelievable. And now we have a non-CPA being put up for the Chairman’s spot of an accounting firm. It’s insanity, really.
Oh, right; the non-CPA chairman controversy. For those of you that are unfamiliar, Punit Renjen is the CEO of Deloitte Consulting. Mr Renjen has been on the job for just over a year and by all accounts has done an acceptable job and it doesn’t surprise us that he’s up for this position. The fact that he, in all likelihood, will become the next chairman of a Big 4 firm, bothers a lot of CPAs. Despite the bellyaching of those on the audit/tax side of the house, what’s not up for debate is that Deloitte Consulting is the second largest practice, according to the this year’s revenue data. But what’s even more important, consulting is the fastest growing segment, with double digit growth in FY 2010. So if Mr Renjen’s ascension to the chairman position bothers some in a CPA puritanical sense, we can appreciate that. But from a numbers standpoint, it’s probably overdue and is definitely not surprising.
As previously discussed, making partner at a Big 4 firm is no small feat. It takes years of work, some political savvy and luck. When you finally get a seat at the big table, you discover that everything leading up to that point was simply the beginning. Now that you’re calling the shots, you have big responsibility, be willing to resist temptation, and try to keep employees happy. Not an easy task but that’s why they get paid the big bucks, right?
But forget all that. Partners, as we know, are owners. They have an equity stake in their firm and have a say in how the firm should be run. Or do they have that say? One Deloitte partner, a twenty year veteran of the firm, reached out to us recently to express their concern about the upcoming election of new leadership at the Green Dot:
I’m an audit partner with Deloitte. Don’t want to bore you with the fact that I love the firm, and I am a die-hard D&Ter. But, all firms have their faults, right? Even Deloitte. While we tout and sell “Good Governance” strategies – our own governance process is severely BROKEN.
What many may not know is that Deloitte has an election year happening in 2011. Yes – Sharon Allen is off to retirement [Ed. note: PARTY! – Oh sorry, this is serious], and so is Jim Quigley. No tears for them…they have very rich retirement packages that will keep them wealthy for decades to come.
We’ve already been through our “Nominating Committee” process, where all the partners are able to be interviewed by committee members and submit nominations of individuals that they would like to see in different leadership roles. The elected individuals are the Chairman, the CEO, and a CEO “Alternate.” The CEO “Alternate” is there in the event that the CEO elect is also elected as the Global CEO (which will typically happen).
We’ll jump in here to make a quick point: our tipster reiterated to us that (s)he loves Deloitte and the motivation for reaching out to us is due to his/her commitment to the firm. (S)he even admitted that reaching out to GC seemed odd but clarified it to us this way, “It is akin to someone that loves their country and wants to improve upon it because we know we have the right to speak out and improve our country. Right now, our election process at Deloitte is broken.”
The thing that angers many partners – but few voice this concern – is that the Nominating Committee Process and the “election” of the Firm’s leadership is a farce. The “independent” Committee comes up with their recommended candidates after hearing the soundings of the partners. I should add that Committee is selected by the Board and Management. There is no “election” to approve the Committee. Then the Committee comes to a conclusion on ONE set of recommended candidates, and the Board approves that recommendation (shocking). Then, the partners get to vote “YES or NO” on the “slate” of candidates that is advanced. This “election” occurs in late February/early March. The leaders must be installed in June. So what if the partners said NO? What would the leadership team do then?? Guess what – they don’t care! Because they know the partners always say YES! It is so painful. And nobody is willing to challenge this process. Because – you have three camps of partners. (1) the camp that doesn’t care and never will because it “doesn’t affect my daily life; (2) the camp that is so rich in the number of units they have, they wouldn’t upset the apple cart because they make too much money to want to risk it even though they know it is wrong, and (3) the younger partners who fear retribution of having their “heads cut off” for speaking up.
Jumping in again – we spoke to a former Deloitte partner, who confirmed the broad details of the process and also the widely-held notion that the election process is a “farce.” This former partner also confirmed this is a feeling held by many partners, especially the freshly minted ones. In addition to the fear of retribution, he said that younger partners also feel apathetic, being of the mindset that the “nominating committee won’t listen to me” and they are being given “lip service” by leadership. Further, for many young partners, simply joining this exclusive club is exciting enough that few pay attention and, oh yeah, they have TONS of work to do. As for the “gray-haired partners,” our source confirmed their attitudes as well, saying that there would be little motivation to speak up when they are “riding out their careers” or have a lot vested with the firm already.
The thing is that these leaders represent our firm, manage our firm, and control our collective destinies. They also rig the elections. And they then tout, continuously, the importance of the “Sense of Partnership.” The truth is that Deloitte is not run like a partnership. Yes, the partners have capital at risk, we are owners of the “Firm.” But, we are not appropriately represented. We lack a true collective voice. We keep quiet for the “good of the Firm.” And, we are now going to embark on a new “BOLD LEADERSHIP” move that is being done to passify all the various interests of our firm (Consulting, Audit and Tax). The thing is – we don’t attempt to have our partners select the BEST leaders – but simply the leaders that a select few believe fit a set of criteria that are BEST for us ignorant partners. It’s a bit like the government telling us what is good for us.
It angers me. And, I wish that I could wake up every Deloitte partner and have them realize this. But – if I did this – I’d likely be fired. So, I’m sending this to you to see if you can help WAKE up our Partners!! They should VOTE NO to the nominating committees recommended leaders. We need to take back our firm, much like the American voters took back our country.
An anonymous Deloitte partner who cares deeply about our Firm and our culture.
Our “anonymous Deloitte partner” speculated that 75% of partners share his/her feelings on this. What’s been the catalyst to all this frustration? Well, the former Deloitte partner we spoke to said that it’s a partly the nature of the governance process itself but it has been made worse by how leadership handled layoffs and the economic crisis during 2008-2009. As you may remember, Deloitte leadership admitted that the May ’09 layoffs were handled poorly last spring, however, morale amongst partners remains extremely low.
Just to add a few more things from the “anonymous Deloitte partner” – when we asked about the details of the nominating process, the response we received was that while it was a “cordial” and that the partners that serve on the committee feel as though they are doing “God’s work,” but ultimately it is a “falsehood.” The former Deloitte partner confirmed this, who told us he had a friend who served on the nominating committee who joked with him about flying around the country, “listening to crap,” throughout the exercise.
When we asked about the firm’s leadership considering a more democratic process (i.e. partners are nominated by vote), that doesn’t appear to be on the table because another firm does it that way, “In situations where our CEO has been asked about the process, Barry Salzberg stated that our firm doesn’t want a divisive culture where certain partners get their feelings hurt in a race for the CEO spot or other positions. ‘That’s not part of our culture. That is what PwC does, and we don’t want to do that.’ ”
Stepping back from all this (we realize it’s a lot), if we were a run-of-the-mill Deloitte partner, it be pretty difficult to see this as an equitable process. As we said at the outset, being a partner means having a say in how the business is run. Granted, when you’re talking about a firm as large as Deloitte, there has to be centralized leadership but wouldn’t you want a direct voice in determining who that leadership is and not simply up or down on a list of names handed to you? It sounds like a lot of partners at Deloitte are feeling shut out of this process. Maybe some don’t care but many new and aspiring partners probably do (Millennial attitude and all) and this lack of true representation will certainly make some think twice about their long-term careers with the firm.