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Forced ranking at accounting firms?

Francine dishes on forced ranking at GE and the Big Four:

That is, compared to their peers, they don’t have the right stuff right now and their performance, although fine, is not as fine as the other 90%. So, with a poor rating instead of a positive rating, your choices are slim. No raise, no bonus, no ability to transfer, and a less enviable position at the negotiating table as far as a severance package when you do finally realize you have to leave. Oh, and don’t forget, with a poor rating on your record, there’s no rehire… […] One thing for sure. The standards for achieving success in a Big 4 firm are pretty clear. Conformance, Competence, Collegiality, and Chargeability.

The idea of forced ranking doesn’t sit well with me, as it sounds pretty harsh towards those unlucky few at the bottom. It makes sense that there are the best and worst performers at the top and bottom, and that most are average, but to fire or demote or otherwise retard the careers of those at the bottom doesn’t.

It is nearly impossible judge in this subjective manner whether the bottom few at your firm aren’t better than the average (or top) at another firm? Sort of depends on how good the hiring is at each place.

With new online and automated processes at some firms, there isn’t even the old signing of the review to signify acknowledgement and acceptance or rebuttal to signify disagreement.

At my firm, we use online forms to complete job and annual appraisals. It’s appraisal time right now actually as I would imagine it is at other firms, and I should be hearing about when mine is sometime in the next couple weeks. I’m looking forward to it!

4 replies on “Forced ranking at accounting firms?”

Funny you should mention that – I’ve found that the ‘bottom’ is only cut if 1. performance of the firm as a whole doesn’t allow for retention of poor performs, and 2. there are some truly poor performers.

Note I use the “and” conjunction, not “or”.

That should be true at all better firms, anyway.

Although I’m not a high-up mucky-muck, I can only imagine – from personal experience, now that I think about it – that the need to fire poor performers is a move that often makes the team that made the hiring decision (often the same group) wince.

Sure, sometimes circumstances change, and someone becomes unhappy with their job due to what I would call ‘external’ factors, and their performance suffers.

The unfortunate thing is if they’re letting go someone who never got up to a high level of performance in the first place – they’re unhappy due to ‘internal’ factors, namely, they didn’t really want the job in the first place but took it because they needed the cash until something better came along.

They’ll invariably be looking for ‘something better’ all the time, or will be kicked out because someone notices that’s the kind of mood they’re in.

Happy Canada Day long weekend!

That’s why they call it “forced ranking.” The idea is to force some to the bottom so you can cut. That is the program at GE and that’s the program at some Big 4. The key is that you are compared to your peers (which is always subjective and certainly a function of hiring decisions and favoritism) instead of to objective goals. If they compared your performance to objective goals (MBO anyone?) and most everyone made their goals because it was a good year (such as it has been with the windfall that is SOx) then they end up with too many to support and promote and pay raises and bonuses to, etc…

@Francine: I guess that’s assuming they’re expecting the amount of work to decline or they’re going to be able to poach talent from competitors..?

Neil, The work has already slowed down. The firms are seeing their clients spending less on Sarbanes-Oxley related work with them (bringing work inside or going to to cheaper staffing firms) and pushing hard to reduce fees on external audits. That’s why all the interest in Auditing Standard 5. Unfortunately, the audit firms have not said they would do anything about fees. The Big 4 are reducing staff in order to maintain the high per partner profitabilty ratios they have become accustomed to during SOx, while trying to invest to revive consulting practices and meet the new regulatory requirements.

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