11. Talent

Arthur Andersen was, or tried to be, the best in the world to work for (the best place to work) when no other company was thinking that way. However, it was that only for the best people (the best people in the best job).

The bid for Talent, so much talked about in companies, was real at Andersen. The best people was found after a strict selection process, they were thoroughly trained, they were given respect, responsibility and trust from their first day, they were generously paid and evaluated with rigor periodically. The best ones wished to become partners. Those who did not reach the required level were invited to leave the Firm, helping them to find a new job with the best reference: to have worked with the best and learned and absorbed a culture of effort and quality in service.

Anybody working at Arthur Andersen would know that he was in a very competitive environment between the professional elite, that he had the opportunity to show his professional quality and was evaluated on that basis. Respect for meritocracy was practically total.

Though on one side that caused tension, on the other side it reaffirmed the pride in belonging and the superbly high rate of efficiency. Every “Arthur” knew he belonged to the best, was surrounded by the best and that they were able to face any challenge and do the best work a customer could expect from a professional services firm. This conviction helped drive the Firm forward.

Very soon, from the beginning of his activities, Arthur Andersen was convinced that the Firm he fathered would have success as long as he could hire young professionals with development capacity. In his academic role, as Professor and Director of the Department of Accounting in Northwestern University, he personally took care of the first recruitment processes between the best students in his classes.

The definite Firm’s bid, all along its later development, for the quality and competence of its professionals is one of its most easily recognizable hallmarks. That bid can be clearly identified by three differentiating elements:

1. The strict recruitment and selection processes, looking in the best universities for the best students, not just in economy, business administration or accounting but also graduates from other disciplines (engineering, mathematics, physics, etc). Searching for candidates with the potential to think for themselves, find their own judgment references and get interested by the business world from a global perspective. Looking for intelligent personalities rather than wise geniuses. Looking for persons willing to learn, open to group work and to shape their personality into the group’s rules, with integrity and generosity but without losing sight of results; in other words, persons that fit the values supporting the Firm’s culture, Arthur Andersen’s “city”.
2. The strong investment in professional training and coaching, not just on the technical side (accounting, auditing, taxes, consulting, etc.) but also on the management competencies. Training that extended along the whole professional life. Andersen invested annually 6% of their fees in training its people, a level never reached by any other firm.
   
   Not less important than these regular efforts to organize courses and training sessions was the idea that “in the field” training was a responsibility shared both by less experienced (but able to learn) persons and for the more experienced (responsible for the training of their subordinates). Everybody was to learn and teach at the same time, all throughout their careers.
3. The creation of professional growth and development standards, linking the systematic periodic evaluation of each professional with the assumption of new responsibilities, according to his category promotion. All together with a compensation scheme directly associated with that evolution.
   
   It was also very important in this case, in addition to the regulated system for applying the evaluation criteria, the fact that each professional faced every year (and several times per year on many occasions) the need to evaluate and communicate the result to his people and, on the other side, submit himself to his superior’s evaluation. These evaluation and result communication processes constituted a true organizational ritual, with great relevance and cultural impact.

The strict application of these criteria can also be considered determinant in the process of creation of a powerful Firm in Spain. Besides the fact that during the 60s and 70s, neither Arthur Andersen nor the auditing profession had much reputation within the student population, the Arthur Andersen’s bid to hire the graduates with the best qualifications in the most prestigious universities consisted of offering, more than an attractive salary, the opportunity to learn the internal functional mechanisms of companies and the development of a prestigious professional career, leading up to the opportunity of becoming a partner.

These “baits” succeeded in attracting an excellent group of young professionals that, on their turn, saw how the Firm backed its bet for professional development of the natives. The candidates could also perceive the professional opportunities opening with the huge needs of professional management in the Spanish companies, living then fully the open democratic transformation of Spain.

On the other hand, the view of the professional auditor as somebody with a wider vision that the application of accounting principles, somebody who should have solid knowledge about the economic, financial and organizational fundamentals governing the business world represented an additional incentive, attractive to the best professionals.

On top of that, the Firm became soon in Spain an excellent school of practice for executives that, either continued their professional development in the Firm to the partner level, or found many employment opportunities in an economy that demanded more and more professionals, well trained in modern management techniques. This phenomenon, produced very naturally, had also a double positive reinforcement, since:

• On the one side, the natural renewal required by the Firm’s professional development scheme was made easier (up or out)
• On the other side, a powerful network of “ex-Arthurs” was created, disseminating among the management levels of the main Spanish companies, and increasing significantly the Firm’s market power in the Spanish scene.

We all take today for granted that business organizations must bet on what is known as “talent management”. Mentioning this concept as a principle is almost a must in all corporate declarations on vision and values. It is however more difficult to find practical, operating, daily examples of this principle’s adoption.

In Arthur Andersen’s case, the idea that managing the quality of the workforce had to be done through its recruitment, training and professional development materialized in a very wide ensemble of practices, policies and procedures that affected all professionals from their first working day (even before) and all along their career. This included, but was not limited to, examples such as:

• Compulsory training programs, many of them centralized, to be received on key moments of professional development: accounting course, introductory auditing course, team leader course, seminary for new managers, etc. These programs were also associated with centralized venues (St Charles in Illinois, Eindhoven in Holland, Segovia in Spain)
• Countless technical sessions (tax law updates, specific specialized matters…) given by expert professionals in each office as circumstances required.
• Diverse materials and methodologies, available to all professionals. In theory, these had to be studied during time spaces not assigned to specific projects. In fact a professional’s time not assigned to projects or another specific activity was attributed usually to the concept “Personal Training”.
• The practice, very extended today, but quite innovative when Arthur Andersen begun to do it, of visiting Universities during the last months before graduation dates in order to present the Firm to the students in a “pro-active” way, by professionals coming from the same education centers to make a closer, more accessible and in consequence more attractive offer.
  
  The approach to University consisted not only of these presentations; it included diverse ways of establishing links with the teaching faculty and the deans’ offices.
• The demanding, strict and in many cases unpleasant recruitment processes, consisting of academic qualification records, psycho-technical trials, personal interviews of the candidate with professionals from the Selection department, with the managers and with the partners.
  
  All these tests and interviews were recorded in a “personal file” that contained thoroughly the personal course of each one of the Firm’s professionals.
• The requirement of all team leaders, managers and partners, as part of their professional responsibility, to take part as instructors in the regulated training sessions in the field for their subordinates.
• The intensive and systematic evaluation processes, applied on standard formats, with the obligation to emit a final evaluation and with the requirement to communicate and discuss it personally with the evaluated individual.
  
  In different formats, each responsible person had to issue a clear statement on the work performance (project by project) and the potential observed in the evaluated professional.
• The processes of organizational analysis and approvals in the promotion decisions to particular professional categories (manager and partner especially), that required evaluators to support the candidates’ cases with documented and very consistent reasoning, in order to obtain the organizational approval required.
• The existence of a very structured career, with different stages of professional development, with parallel specific salary bands and with the assumption of parallel growing responsibilities (technical, team management and supervision, sales work, business development, ...)
• The “up or out” philosophy, implying each professional needed, after having covered certain development periods in each category, to demonstrate his capacity to assume new responsibilities or start thinking of a new professional alternative.
• The creation, already in the 80s and 90s, of a structured service to support reorientation for those professionals giving signs of difficulties to fulfill the professional requirements of the standard career.
• The fact that the only real state asset owned by the Firm was its own university, the Arthur Andersen Center for Professional Development, opened in St. Charles, Illinois, in 1970, that was not only a first magnitude organizational icon but also a predecessor of the corporate university idea, followed later by many companies.

To sum up, we could say that talent management (recruitment, training and professional development) was inoculated intensively throughout the organization and was an integral part of daily work.

Is this particular and intensive way of understanding talent management causing any harmful effects? It seems clear that the benefits obtained exceed their eventual contraindications, but nevertheless if they exist it is convenient to take them into account.

On the one side, such a demanding selection and continuous evaluation mechanism impacts the professionals, either those not accepted on selection, or those accepted but invited later to leave the Firm because of the tough evaluation process. Furthermore, in spite of the systematic and professional standards applied to these processes, there can be mistakes in their application. Hence a possible negative effect in leaving the “wounded on the way”, which generates groups who reject the brand.

The “up or out” philosophy is not without a certain aggressive component in its implementation; true, the termination processes used to be given time and organized support to facilitate an adequate employment of the affected professional, but also true was that the situations could contain humiliating elements with an obvious negative load, such as those called “PT” or “pending termination” , implying the person was on his way out of the Firm, or the dis-assignments in “planning” that left the professional without any client assignment and without any specific work to do, seated in the office staff room (space for common use of personnel without an assigned space).

True, however, that “up or out” was not a capricious practice. The career and the system required it. The career was designed so that every level (assistant, senior, manager, partner...) was reached with a certain age. Seniors over 30 years old, or managers over 40, had no sense or place in the organization. On the other hand, the career of assistant, senior or manager was designed to last about 2-3, 2-3 and 5-8 years, respectively; he who would not pass to the upper level over that time was displaced by the system itself.

In the end, the bid for meritocracy as fundamental element of professional development can also in its practical application present drawbacks, that generally can be associated with a somewhat imperfect execution and with the collateral damages that could be produced to those professionals who did not see their own expectations properly fulfilled. Nevertheless, at least in the experience of the co-authors of this book, that did not imply a rarefied atmospheres or an unhealthy competitive spirit that could degrade or harm an environment of cooperation and comradeship.

In conclusion, to bet for the best people and treat them with respect, to give them real development opportunities and to pay them well are indispensable requirements to achieve solid and consistent success in a company.

The evaluation system

The Talent column in particular and the whole building rest on the evaluation system. This system has to be perfectly in line with the principles because that’s what makes them credible.

Principles are valid only in so far as they are applied, and the only time when each professional sees if they are truly applied is when he is evaluated and finds out that the basis of the evaluation process are the same ones of the value structure he has been sold. Were it not so, the whole building would come down.

Evaluation closed the circle. Well done, it reinforced the model; badly done, it shattered it. Guidelines, advise on how to carry out the evaluation and what to consider in each case were important, but the most important were the persons, those making the evaluation. They had to have the same values and to give them due importance. It was not, it is not, easy; but making it possible is what it is all about.

Those who carried out the evaluation process (partners, managers, seniors...) were to be unbiased and know how to transmit, mainly setting a good example, the Firm’s “message” and especially the seven columns.

The problem starts to get serious when one of the persons (or all of them) in the management summit lack the moral fiber needed. When, so to speak, they laugh at the Firm’s principles.

Light and shades of internal coaching

Andersen used to follow a practice that we consider very advisable for every company: professionals, from their first years, were assigned to a tutor or coach. Usually he was a manager in the group they were assigned to. And the managers were assigned to a partner.

The guidance and support that the professionals received from their tutors was hugely valuable and capitally important to retain the best professionals and keep them motivated in their career to the partnership.

Even a young partner had his own mentor. Normally he would be the partner in charge of the group he belonged to. The help from the more senior partners was a decisive support for their career and allowed them to climb the steps to higher positions in the Firm’s organization chart.

Reaching that positions meant to win additional units (indicator of worldwide profit quota for each partner), and therefore a higher remuneration, a higher recognition (ego) and more power inside the Firm.

The dark side of coaching was that sometimes showed a tendency to turn into a power game in which the more powerful partners defended their pieces like in a chess game, causing confusion, dependency and blind loyalties, which are never healthy.

In due time, the Firm tried to correct these problems by setting up the tutor figure out of the hierarchical line, but it never worked fully.