Andersen revamps ensconced policies

Andersen Consulting overhauls its policies and extends profit-sharing to the rank-and-file.

Evan Hansen Staff Writer, CNET News.com
Department Editor Evan Hansen runs the Media section at CNET News.com. Before joining CNET he reported on business, technology and the law at American Lawyer Media.
Evan Hansen
4 min read
Andersen Consulting plans to overhaul its policies to make it easier to become a partner and extend profit-sharing to the rank-and-file, according to sources within the firm.

Many key details of the new plan have yet to be hammered out. For example, it was not decided how much money non-partners stand to receive under the new system, or what criteria Andersen will use in dividing up the surplus.

The new structure, which will begin Sept. 1, 2000, was approved at a partnership meeting last week, sources said.

The company's move--a bold departure from tradition within this staid firm--comes amid a struggle to retain talented consultants who are jumping to start-ups Consulting firms take stakes in start-ups that offer stock options that privately held Andersen and the other Big Five firms cannot provide.

Tom Rodenhauser, an industry analyst who heads ConsultingInfo.com, said this is simply a move Andersen made to attract and retain employees. But the new structure won't necessarily change the way the established firm operates day to day.

"I suspect Andersen is sticking its toes in the waters," said Rodenhauser. "It's going to be rolled out, but very cautiously. In some cases, it will help on the recruiting front...They want to give the appearance that they're providing something that's comparable to stock options or ownership of the firm, which has been proving to be very attractive traits coming out of the dot-coms and Internet start-ups."

The new plan was approved just days after the firm appointed a new chief executive. On November 1, Joe Forehand was named to replace longtime leader George Shaheen, who left Andersen in September to head online grocery start-up WebVan. According to one source, Shaheen was said to have opposed offering non-partners a share in the company's profits, a potentially sizable sum. The company, with 65,000 employees, has just 1,200 partners.

An Andersen spokeswoman confirmed that the company plans to make changes to its employee promotion and compensation structure, but would not comment on the specifics.

Shaheen did not respond to requests for comment.

In addition to approving a new compensation plan, the firm agreed to change the role of associate partners.

Currently, managers must achieve associate partner status before they can be considered for full partnership, a process that can take anywhere from 8 to 12 years, but ensures huge compensation.

Under the new structure, managers will be voted directly into the partnership.

The role of associate partner, meanwhile, will become a non-partner track position open to employees who do not want to take on the responsibilities of partnership.

The promise of a new pay package could be a sign that Forehand, a 27-year Andersen veteran, will not be shy in imposing his vision on the $8.3 billion company.

One source in the company said Andersen employees had expected the move, but said people "were surprised it happened so quickly."

Bill Martorelli, an analyst at Hurwitz Group, said even if Andersen's partners are up in arms about the changes the company is making, the changes makes sense. "This is a top-heavy partnership structure. They're obviously going to be at a disadvantage [when recruiting]."

Even before last week's compensation vote, through which rank and file employees will be assigned compensation "units," Forehand made clear that recruitment and retention of talent are top priorities for him.

"We probably hire more people around the year than most of the other enterprises," he told CNET News.com following his appointment. "We will continue to have very aggressive programs of getting the best and brightest talent."

Forehand faces a tough task.

Andersen's overall growth rate is expected to fall to the mid-teens this year, compared with 20 percent growth last year. As Year 2000 concerns prevent business software makers from launching enterprise work, analysts predict overall business will slow.

In response, Andersen and its competitors--PricewaterhouseCoopers, EDS, Unisys and Ernst & Young--have all been touting revamped missions and shifting their focus to the Internet and e-business. In early June, Andersen launched a $10 million global ad campaign in an effort to make the industry aware of its major push to become a serious Internet player.

The industry also faces a potential brain-drain, exemplified by Shaheen's decision in September to take the reins at WebVan after 11 years at the helm of Andersen.

Although the Internet stock bubble could burst at any time, the lure of getting rich in several months--instead of waiting a decade or longer to make partner--is a major lure.

The temptation is not limited to the highest ranking executives. According to one Andersen manager, everyone within the organization is eyeing ".coms" as an alternative career track.

"It's a tough market, [management] is trying to spice it up," the source said.

It remains to be seen whether the carrot that is ultimately offered will be enough.

"People want to wait and see what these units [given to the rank and file] will be worth," the manager added.

News.com's Kim Girard and Melanie Austria Farmer contributed to this report.