Profile - Thinking ahead at Andersen

Andersen Consulting is in bullish mood at the moment, having celebrated a 26 per cent increase in revenues for 1996. It has also seen off some shadowy threats to its peace of mind. Questions over the future of its sometimes thorny relationship with sibling Arthur Andersen have been, if not resolved, then postponed to the satisfaction of the consulting arm. A threat to redivide a recombined entity into five business units has evaporated, an outcome possibly linked with the announcement by Lawrence Weinbach, the plan’s sponsor, that he would be stepping down as chairman of Andersen Worldwide.

However, expectations at the firm’s recent analysts briefing in New York that it was about to announce a major cultural upheaval were disappointed.

In fact, Andersen managing partner George Shaheen seems very content to carry on as usual, at least as far as the firm’s governance is concerned.

He also dismissed questions about whether the firm might float, with the easy grace of a man who rises early each morning to thank God he has no shareholders to answer to.

Shaheen rather touchingly decribes the behemoth that is Andersen Consulting as “an owner-operated business”. But it is clear that he views Andersen’s partnership structure as a strength. Shaheen’s commitment to a reinvention of Andersen every couple of years is the key to a strategy that depends on continually anticipating the future and so remaining one step ahead of the market. We expect another reshaping of the business in September, though whether this will be the final unveiling of the shadowy Andersen 21 project is not clear.

The “Arthur” relationship doesn’t seem to be much of an issue to the Consulting boys, who view their erstwhile partner-in-crime as just another Big Six firm-a grouping which they no longer consider themselves part of. Arthur’s forays into consultancy have created no competitive issues – Andersen has bigger fish to fry.

The firm is heavily committed to the extremely fashionable notion of “thought leadership”, which Keith Burgess, managing partner of the business integration and competency practices, defines as “the invention of an opportunity for client success”. These, though, are not “innovative ideas in a vacuum”, but mediated through Andersen’s “Business Integration Client Service model”. This, in effect, defines Andersen’s move beyond its systems integration roots to a model that embraces people, strategy technology and process.

“We’re creating a major new framework,” says Burgess, “the Andersen Consulting view on the best way of producing an enterprise transformation, regardless of where our people are or what industry they are working in.”

This commits Andersen to a hefty research effort: “We thrive on our ability to create ideas, to invent concepts then model and test them,” he says.

“We have formal processes designed to increase our total knowledge capital: client experience, experiential research and issue-based research (IBR).”

Issue-based research occurs in pockets round the world. Andersen has created the Institute of Strategic Change in Pala Alto. Topics studied include global enterprises, the impact of information and technology on organisations and knowledge management.

“We don’t invent the ways of change or the issues,” says Burgess. “We look for opportunities where clients can take advantage. Likewise, we don’t invent IT but how to take advantage of it.”

Thus Andersen has set up Cstars-centres for strategic technology – in Palo Alto, Chicago and Sophia-Antipolis, France – to expose clients to the application of technology through workshops and seminars.

“Inventing something and delivering it are quite different,” says Burgess.

So the other side of the coin is to set up a global knowledge exchange, creating what he calls “communities of practice” across the organisation.

Where this comes together is in the 12 Business Integration Centres, such as the Smart Store in Windsor, the Davinci Project (looking at global, “virtual” organisations) in California and France, and the Financial Ideas Exchange in New York. These highly expensive showcases are playgrounds where clients can watch roleplays and critique potential advances in electronic commerce, intranets and so on.

This reflects both Andersen’s increasing focus on industry issues and the demand from clients for more accurate prediction of the outcomes of assignments.

“Clients are asking us to think more about the results we’re achieving for them,” says Jack Wilson, managing partner, industry markets and packaged knowledge. Clients are more sophisticated in their use of consultancy, more demanding and rigorous: they want to know what our effort is worth as opposed to how much it costs.”

Wilson dubs this putting of the “end-game” first as the “value opinion”.

“We’ve watched the value opinion gain speed: the competitive battleground will be to create specific value and associate that with our efforts,” he says.

Andersen is now starting to apply value measurements to all its business activities: “We’re associating business results before the change journey has begun, says Wilson. “Our ability in calculating our clients’ return on investment becomes our trump card.”

This process is facilitated by Andersen’s organisation into 17 industry groups. “These are discrete, client describable groups,” he says. “We’re better able to talk to clients in their own language. In future years we’ll have even more granularity.”

Through the industry groups, Andersen attempts to identify the change drivers in an industry and select areas where they can have the greatest effect. This leads to the creation of so-called “market offerings”:

“We organise our people into solution teams aimed at a set of problems and target clients,” says Wilson. “These are not products but the way we package our people and abilities.”

An example of one of Andersen’s 100-plus market offerings is ISOil, a bundled set of organisational designs and technology platforms (based on SAP software) aimed at replacing the multiple systems that have grown up in oil and gas supply companies with an integrated organisational and IT solution. Prepackaging the offering helps the prior identification of benefits.

This kind of anticipation is becoming increasingly important to Andersen’s business. “It’s not our job to say to clients: here’s what we’re good at, do you want anything?”, says Wilson, adding that Andersen has invested $120m in market offerings. “We have great ideas – even the crummy ones sound great!”

The next step after the value proposition is value billing. Wilson predicts as much as 40 per cent of Andersen’s fees will move to contingency pricing.

“Don’t reward me for my efforts, reward me for my results,” says Wilson.

“It has nothing to do with how hard I work.”

Another aspect of Andersen’s current portfolio is an increased stress on human performance – though with a typically Andersen twist. Terry Neill, managing partner of the change management competency, is putting a “hard” edge on what are traditionally “soft” issues.

“Clients say you can’t measure human performance,” he says, “but then, you might think accounting is an exact science, until you see two rival firms of accountants in a takeover situation. The myth we have to break is that human performance is more difficult than the others. In many ways it’s easier: every sports coach understands that human performance outcomes are measurable, on the scoreboard.”

Neill believes that we are seeing the creation of a new discipline, melding management and social sciences and combining them with experience and research.

“Changing 2,000 people is at least as difficult as changing 2,000 computers,” he says. “We’re building a new profession: the legitimate change agent, combining both high cognitive competency with high behavioural competency in making change, who understands both business and human relationships.”

Neill estimates as much as 60 per cent of business costs are tied to “the human component”.

“Chief executives often say people are our greatest asset, but very few of them manage that way,” he says. “Repeated panic downsizing has imposed enormous costs from which they will never recover. There’s the damaged loyalty of those who remain, and the impact on outsourced employees, abandoned to the fate of some organisation they don’t know.”

Ironically, the latter is becoming one of Andersen’s greatest challenges, as the firm absorbs increasing numbers of employees through its outsourcing activities.

“The workforces we acquire have very deep skills,” says Joellin Comerford, managing partner of business process management. “What we’re struggling with is making this work: when we bring people in our task is to work very hard to get the best out of them.”

As the proportion of non-IT outsourcing grows, so does the range of cultures that the firm has to deal with:

“I don’t think we have been particularly good at explaining our culture and values,” she says. “We’re getting there, but we have to assimilate cultures faster.”

Andersen’s process management business has grown massively in the last three years, but it is too early to say what effect this influx of people will have on its culture. The market is so big that it is conceivable that growth in this area might outstrip the rest of Andersen’s activities.

Now that would be a cultural change.