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Andersen shake-up sends message to industry

George Shaheen's abrupt departure from Andersen Consulting to the online grocer sends chills throughout the staid consulting industry, where key executives who once dismissed the start-ups are now joining them.

George Shaheen's abrupt departure recently from Andersen Consulting to online grocer Webvan sent chills throughout the staid consulting industry, where key executives who once dismissed the start-ups are now joining them.

It is perhaps Shaheen, the no-nonsense chief of the $8.3 billion management consulting powerhouse, who is the most glaring example yet of an industry in flux--its key leaders trading suit and tie for the lure of stock options that accompany a start-up challenge.

Shaheen, 55, said last week he was leaving Andersen after 11 years at the helm of the services giant to run online grocer Webvan, perhaps a fitting opportunity for the son of a grocer. As a young man, Shaheen spent weekends working at his father's grocery store in Peoria, Illinois.

But Shaheen, who started at Andersen fresh out of college in 1967, was seen as a controversial fixture at the consulting firm--as Andersen's culture personified. His departure has led many to question whether the perks and camaraderie of privately held consulting partnerships such as Andersen, KPMG, and PriceWaterhouseCoopers, are still enough for these career executives.

"It really does send a shiver in the hearts of the Big Five model to see a guy like George, the solidest rock, leave," said Bill Martorelli, who follows the consulting industry at Boston-based Hurwitz Group.

"The brain drain [from the Big Five] is limited so far, but will hurt traditional companies," added Stan Lepeak, a Meta Group analyst who is writing a report examining whether the loss of key executives at big consulting firms marks an exodus or an anomaly.

"As a firm, [Andersen] should be concerned about this," he said. "As partners, they have to be worried."

Although the Internet stock bubble could burst at any time, the lure of getting rich in several months--instead of waiting 8 or 12 years to make partner at Andersen--is a major lure, said Lepeak. Shaheen, for example, is expected to collect a $500,000 annual salary at Webvan, though he will likely add millions more by owning 5 percent of Webvan via stock. On top of the monetary gains, Shaheen, like many high-caliber executives on the move, has the opportunity to try something new.

Rudy Puryear, who left his post as Andersen's global e-commerce chief to join little-known services firm Lante in June, said Shaheen's departure lends even more legitimacy to the start-up path, which he admits is a risk that's not for everyone.

"When the head of e-commerce and the head of Andersen leave you see there are significant opportunities outside Andersen," he said. Still, with 65,000 employees and 1,200 partners still in the field, Andersen clearly is "far more than [just] one leader," he said.

Meanwhile, industry executives, including Puryear, say resumes are flowing in from Big Five consultancies to pre-IPO firms, such as Lante, and dot-com newcomers including Proxicom, Viant, and Scient, which are now establishing growth plans and financial backing to perhaps make them the next Andersen or EDS.

Life post-Shaheen
Despite the loss of Shaheen, industry observers said Andersen remains a stable, well-oiled machine replete with strategy and focus that Shaheen built in before his departure.

"It's business as usual," said an Andersen insider who insisted the company isn't "reeling" from Shaheen's departure.

This wasn't Shaheen's first chance at leaving during his 30-year tenure. Described as a charismatic, brash leader, Shaheen was among the industry's most-courted executives, most recently passing over the chief's job at $16.9 billion services giant EDS, only to land at Webvan months later.

"He'd plow forward straight ahead--no B.S.," said Tom Rodenhauser, head of Consulting Information Services in Keene, New Hampshire. "He could work a room. He did what he had to do. He was always, always moving. The guy was brilliant in running a consulting firm and building it up."

Along with Puryear, Shaheen is credited with revamping Andersen to tackle the Internet economy. Over the past decade, the company has tripled its staff, increased revenues from $1.6 billion to the $9 billion expected in 1999, and pulled away from the shadow of the company's less profitable tax and accounting arm, Arthur Andersen. The two companies, which separated in 1989, remain embroiled in arbitration over terms of their split.

Today, analysts joke that the only thing Andersen doesn't do is build hardware. The company is bigger than rival strategic consulting firms McKinsey and BCG combined. It competes not only within the Big Five, but also against high-level strategy firms such as McKinsey and outsourcing and systems integration giants including EDS, Computer Sciences, and IBM Global Services.

Who's next?
Whether Andersen will tap its new chief executive from among the older, more seasoned managing partners, such as Jack Wilson or Jim Fisher, is now the key question, industry observers said.

Puryear said Andersen could also opt for a younger Andersen candidate who could provide more long-term stability. Considering that the firm's partner model allows for early retirement at age 56, opting for a choice member of the inner circle could leave just two or three years to lead before that person would likely step down, he said.

"They might get someone in the 40- to 45- [year-old] range who has a good 10 years to provide continuity of leadership," Puryear said. A replacement, who will be recommended by Andersen's 12-member oversight committee, is expected to be named in November at the partners' meeting.

Regardless of which Andersen executive is picked, Rodenhauser predicted Andersen will "plod on" without Shaheen.

"It's a supertanker that's just going and going for another 500 miles," he said. "But they're going to lose a lot of people. There are lots of Shaheen disciples."