What is utilization?

Utilization. It is the backbone of all the big 4 accounting firms, but no one really talks about it in the media. It affects everything that you do in the big 4 accounting firms. It affects your ratings, the way you work, the way partners work and the way other people in your group see you. 

What is utilization?

What is utilization. Utilization in it’s most basic sense is the number of client (billable) hours you work over the total number of hours you work in a year. You might be asking what other kind of hours are there in big 4 accounting other than clients hours. Hahahahaha welcome to the big 4. So many of your hours will actually be non client related because that is what the big 4 accounting firms are actually all about. They are about internal politics, billing clients and meeting regulators guidelines. 

Internal Dilemma

It’s hard not to be internally calculating your utilization on a daily basis. If you are preparing an AFS (authorization for services) our SOW (statement of work) for a client and it’s taken you and your team over 10-20 hours, you begin to worry about how much of that you can bill to the client. You know that per firm guidelines you have to bill all of it, but common sense says the client is not going to understand why you spent 40 hours preparing an engagement letter.

When in reality it took your team so long to prepare the SOW, because everybody had to have comments on it. If you start out just at the staff level. It takes the staff an hour or two to prepare an AFS or SOW. The senior an hour to review. The manager a half hour. Then it goes to the senior manager to review. Then it hits the partner.

The partner has tons of comments so that adds another couple hours back to the staff’s workload. Then it makes its way back up the chain. Then you forward that to the senior manager on the audit team to review before it goes to the audit partner. That person has comments. Then you start back at the associate in advisory or tax. You can see how this deteriorates very quickly


Is this the right way?

I know it’s extremely hard to reinvent the wheel at this point, but is utilization the right metric in this day and age? By making utilization the key metric for measuring their people’s success, the big 4 accounting firms are burning out their best and brightest talent. The people that complete their work the fastest are punished with more work.

The reason this happens is because they complete their work in the least amount of time. If they consistently incurred less time while meeting all their project demands they would have way less client hours than their peers. Therefore, they have to go out and seek more work in order to meet their utilization goals.

Isn’t there a happy medium where people can be rewarded for providing great deliverables and sustaining a great relationship with their clients. They should be rewarded with more time off and other incentives so that the best and the brightest stay at the big 4. By default the worst people stay at the big 4. The best and the brightest get burnt out. The people that end up staying behind are the slower workers who banged client codes more and accept the firm politics as they stand. Then the cycle repeats with the next generation.

How does this impact the way the big 4 and the big 4 partners function?

I wanted to close this article out with an overall discussion on how utilization impacts the corporate culture at the big 4. If you have an environment where the ultimate goal is more hours, then that is what everyone works towards no matter what. People don’t work towards a goal of getting better at what they do, communicating better or providing better client service. As a result what do you think happens? Well let me tell you what I believe results from this being an overarching goal. I believe this results in people being inefficient in the way they work. People communicate inefficiently. People don’t want to work too hard on developing others because that would mean they become better and faster at what they do. Partners are ok with this as well since having inefficient team members who struggle translates into many more hours worked. The inefficient person isn’t the only one working more hours. It’s their superiors too. Their superiors and peers have to pick up the slack and work more too.

You might say well if the big 4 don’t provide good service then they will lose their clients. I’ll let you in on a little secret. They are ok with this because at the end of the day their are only 4 of them. You have to choose one of the big 4 accounting firms, and they are ok losing their clients because they will just pick up another firm’s clients. 

In my view, utilization as a metric for measuring staff success needs to be revisited. I understand that the big 4 are a business and need to keep an eye on revenue, but they also need to keep an eye on the toxic culture that results from primarily focusing on utilization.  

2016-08-23T18:34:45+00:00 August 23rd, 2016|Categories: Uncategorized|Tags: , |0 Comments

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