re: The Auditors - 20 August 2009

CHICAGO -- A recent post in Francine McKenna's re: The Auditors Weblog offers interesting perspective on some of the extraordinary steps Deloitte is taking to minimize the impact on partner income during the current economic crisis.

The article and comments are a must read for procurement professionals. And this is in no way limited to Deloitte, as the comments clearly bear out. It offers a behind-the-scenes view of the actions large and profitable strategic providers of consulting and advisory services are taking to weather the economic storm, and the related downturn in business and soft market for fees.

The factors noted in McKenna's report are important to consider in negotiations with firms and in structuring master agreements and statements of work. The consequences of negotiating what may appear to be a good deal could have dramatic consequences that are difficult to identify, assess, address, and recover from.

As the consulting services procurement leader at a Fortune 50 company put it in a recent interview:

"In this economic climate we can be more aggressive on pricing. But when the economy turns around, and it will at some point, we need to be thinking about the potential ramifications of our actions if we go down that path. So we don't want to be too aggressive on pricing with the firms to the point where they get even with us later. At this point we are only looking for market rates."

According to McKenna on the consequences of one firm's internal personnel actions:

"Looks like a staffing firm to me. Do clients realize they may also see higher or compressed billing if they're not on flat retainers? They will also see fewer people working longer hours in order to reach the utilization goals. Also more higher level staff will be looking for chargeable hours or perhaps doing staff work in order to attain those and therefore having less time to review work or, worse, end up reviewing their own work. Better scrutinize those invoices.

The reaction to these announcements by those in the firm I know has been a combination of disgust, bemusement, and resignation - not the actual kind, but the intellectual and spiritual kind, which is worse for a professional and for morale."

re: The Auditors - Deloitte: Can You Still Do Those Things You Do?