Apr 17, 2009

On Ernst & Young Feedback Process

I met with my counselor for lunch ahead of FY2009 annual reviews, also known as the round table. Over lunch, we discussed my goals, my self review, and my performance feedbacks from various engagements as a preparation for the upcoming round table.

Since I have made up my mind to leave the firm, I didn't much care for the exercise, but still took care to update these reviews, because I wanted to end my career at Ernst & Young without shame or regret. Nevertheless, I feel that MBA application process was a much more meaningful and beneficial self discovery process than reflecting on my performance as an auditor over the past year. Even if I were to disregard MBA considerations, I still find that Ernst & Young 360 feedback is faulty to the point of uselessness. In my mind, that fault primarily is due to the lack of impact of the feedback.

The firm's feedback and review process results in assigning a numerical rating of an employee against his or her peers ranging from 1 (worst) to 5 (best). The rating is supposed to follow a forced curve and allegedly directly relates to one's annual salary increase. The range of the annual raises depends on the firm's performance. For instance, if the firm announced raises ranging from 3 - 12%, then those rated 5 are most likely to receive the double digit raise. I could care less for at least three reason (again, excluding MBA considerations):

1) I think the firm's raises will suck this year - many may not even receive a raise, and those who do will see only a modest increase. This assessment is based on economy in general, but also based on local market considerations. For example, our office has lost some accounts, and our other clients have pressured for lower fees. This has to translate to either a) layoffs or b) salary freezes. We'll see both.

2) Even if you receive a rating of 5, it doesn't guaranty that your raise will be commensurate. I can vouch for instances in which my % increase as a 4 was lower than a staff who received a 3. I think the actual raise is as much based on one's current base and how much the firm thinks it can get away with, etc.

3) Even if one were to receive a high raise, I feel like the entire game is pointless to the extent that you'll always be a little fish in a small pond. Out in the industry, or for those accountants jumping around, there is always more money to be made. For example, if you were to leave and work for a competitor, you could probably negotiate a 15%+ raise verus the 5% you're likely to get for staying. If you left for industry, you might get something like 30% raise.

Now, enter MBA (with respect to salary). My current base is $62,500. If I figure about a 5% raise (I expect to receive a rating of 5 or 4), then my base will increase to around $65,500. This would be considered generous this year. If I figure two subsequent annual raises of 10% per annum (highly unlikely - in fact, will not happen), then my base would be just shy of $80,000. Now, at the same time in the Fall following graduation, my base will be in excess of $100,000, working less hours and with more prestige and more enjoyable responsibilities. Hmmm ... tough call. So, there it is, a little fish in a small pond. Of course, salary isn't the reason I'm leaving, but it's yet another validation that there is no future for me at Ernst & Young.

Given these considerations, why would someone with the ability to jump ship stay on board? In fact, we find that those who can, do not stay. If Ernst & Young wants to become a great services firm it purports to be, then it must address this weakness.

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