The accounting firm of Arthur Andersen was founded in 1913 by Mr. Andersen and a partner. It does not
appear the firm will be around to celebrate its centennial.
The Andersen bad-news stories did not start with Enron. They have had a rocky management history dating back nearly 50 years.
A bit of history.
According to a Harvard Business School paper by Scott Landry and Ashish Nanda, Andersen got into the management consulting business all the way back in 1954. Almost from the beginning there was what British author C.P. Snow once called "A Conflict of Cultures" between the accountants (the audit partners) and the consultants.
By 1988 the conflict had grown to the point where the consultants demanded - and got - the right to rename themselves Andersen Consulting to separate themselves, at least from a marketing standpoint, from the audit partners, both under a new company named Andersen Worldwide.
Again, drawing from the Landry/Nanda paper, "By 1990, in only its second year as an independent entity, AC had become the world's largest consulting firm with revenues in excess of $2 Billion, 157 offices in 45 countries, with 20,000 professionals."
That same year the audit partners billed about $2.3 Billion. Ten years later - when the two firms finally separated, those combined revenues had grown to $16 Billion.
For the rest of the decade of the 90's the spats became fights. The fights became battles. The battles became a war.
On August 7, 2000 an arbitrator handed down the decision which allowed Andersen Consulting a divorce from Arthur Andersen by making a $1 Billion payment and adopting a new name. The audit partners had been demanding a break-up fee of $14 Billion.
Andersen Consulting chose Accenture which is (according to the South African magazine, Future Company) an amalgam of the phrase "ACCENt on the fuTURE" and budgeted an additional $100 Million to pay for the re-branding campaign..
According to yesterday's Wall Street Journal, the accounting/consulting firm of KPMG is in heavy negotiations to buy all of Andersen Worldwide's non-US operations. "The rival consulting firms said that the deal under consideration would combine their operations in Europe, Africa, Asia, Latin American and Canada."
The same article (by WSJ reporters Neal E. Boudette, Marc Champion, Richard B. Schmitt and Robert Frank) said that yet another accounting/consulting firm, Deloitte Touche Tohmatsu, is negotiating to purchase Andersen's "U.S. tax and consulting businesses, but not its beleaguered auditing operations."
So, what happens to all those Arthur Anderson auditors and consultants?
It is useful to remember that accounting and consulting firms are what are known - uncharitably but correctly - as body-shop outfits. A sign of how well they are doing is how many bodies they are hiring and utilizing.
Delta Airlines, as an example, recently dropped Andersen as its auditors. Someone will pick up that account. Whoever does, will likely hire most of the people who have been working on the Delta account because someone has to do that work and, it makes sense to have people who know the books already.
The overwhelming number of the day-to-day auditors, accountants, and consultants who have been working on Andersen's major clients will remain in place even if these practices are sold or transferred to a different company.
This is one of those rare instances where the subordinates come out on top; their managers will likely be replaced.
Meanwhile, Accenture has now grown to 75,000 employees and has annual revenues in the $11-12 Billion range. Reuters reported yesterday that Accenture "expects quarterly earnings near the high end of Wall Street estimates due to strong growth in Europe, the Middle East and Africa."
One on the way up. One on the way out. The Accenture partners are no doubt having a little nightly toast to the troubles of their former partners.
Arthur Anderson was in business for the better part of a century. Accenture will not get to its second anniversary until August. Beware, around the ides of March, the dangers of celebrating your opponent's bad fortune; no matter how deserved you might believe that bad fortune to be.
Now Hear This II: An e-mail from Captain Ron Henderson:
Rich:
I am flattered that you liked my speech. I really had no idea it would get the play it has, or even
that it would ever leave the ship. I just spoke what I felt, and what I hoped would motivate and inspire
the great men and women of this Aircraft Carrier, who toil so hard in support of the American ideal,
far from home.
You inspired a bunch of people right here, Skipper.
See a link to the Harvard Business School paper (or, if you missed Capt. Henderson's call to action
to his sailors from Friday's Mullings) go to the
Secret Decoder Ring page.
If you are working at a lobbying firm, a government affairs office, a coalition, or a PAC you should take a
look at this page to see how advertising in Mullings might serve your organization very well:
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