12. Service

The values driven by the idea of Service are quality, innovation, respect for the client and the wish to give him positive surprises.

In the Andersen culture, satisfying the client was a dogma. But the watchword was not just satisfying the customer by fulfilling his mandate, even to his highest expectations; the watchword was to work until those customer expectations were exceeded: “Exceed client expectations”.

“Customer service orientation” is also one of these slogans we are used to find in all company definitions of vision, mission and values. Indeed, any company is basically supported by its capacity to offer valuable products or services to its customers, who, just because they perceive this value, are ready to pay for it. That is why it is coherent enough for any organization to work for the alignment of its professionals with the satisfaction, on an excellence level, of its customers.

In Arthur Andersen’s case, this concept showed in at least two values that were constantly present from the first day: the attitude of service and the reach for excellence.

On the one side, there were matters oriented towards a very demanding and perfectionist vision of what excellence means in the development of a professional service. In the early days, these “professional excellence” criteria were very much associated with the auditor’s reputation, but afterwards they were extended to the rest of the professional services the Firm gradually deployed, such as consulting or tax advice.

We refer to formal matters, easily seen, in relation with professional behavior, respect for the client and due quality of work:

• Hard work to ensure that time engagements are met and promised results delivered on time; this implied that as long as a “job” was on, there was no limit to the hours or efforts made to meet the “deadlines”.
• Give a serious and professional image, from physical attire (dress standards) to the expected behavior when in the client’s premises.
• To apply systems and procedures to ensure quality and precision in the information produced towards third parties.
• Respect to the letter the confidentiality and discretion engagements, raising the “professional secret” to the very strict fulfillment category.

To sum up, a whole ensemble of guidelines to promote a highly professional collective image, needed to support an image of credible and trustworthy advisors.

Furthermore, another relevant aspect is the type of approach that Arthur Andersen gave to the auditing professional service, from the beginning. Perhaps the best reflection is on the words of senior partner Paul Knight, in the 60s: “As the most experienced members of our organization know, the basic idea guiding our action is to go beyond the figures and apply business sense to them so that they become contributing factors to the improvement of business management”.

From the first days Arthur Andersen refused to be just an auditor, tax advisor or systems consultant. The effort was always done to be a business advisor (“trusted business advisors”). This ambition to transcend the mere provision of the auditing service in its stricter version (fulfillment of accounting standards), and convert the examination effort into a tool for business improvement is possibly one of main distinctive traits of Arthur Andersen’s professional culture. Behind this idea is the drive for diversification of the professional services range that developed over the Firm’s history and, in the final years, the reason for the insistence in becoming a multidisciplinary firm in which customers could find an answer to practically any management need for advice and support (“one stop shopping”).

These driving ideas, idées-force, (professional rigor and ambition to transcend strict auditing) were present from the origin of Arthur Andersen’s operations in Spain. The rigor and the excellence when documenting and presenting results that the auditing examination represented for the Spanish companies of the 70s provided a wholly useful innovation, with a differential value that opened the eyes of many entrepreneurs and many executives about how to better manage and govern their businesses.

In the case of Spain, the decision to bet on industry sectors specialization had a special importance. In the 30s, Arthur Andersen had reached the conclusion that “the total knowledge required to dominate the particularities of accounting regulations in diverse industries exceeds the intellectual capacity of one single professional” and felt the need to parcel knowledge along industrial sector lines, creating specific teams and tools (Industry Reference Binders) to serve that specialization. In Spain, certain specific partners were soon assigned to dedicate their professional activity to specific sectors, creating highly specialized teams for banks, insurance, energy or state companies and public administration. This move was particularly smart in a double sense:

• on the one hand, because the industry sector knowledge acquired by the specialized professionals formed a very valuable wealth in order to apply effectively the idea of going beyond the figures and the accounts, getting over time very high market shares in the sectors in question;
• on the other hand, getting right the identification of future challenges gave Arthur Andersen an excellent position to become a reference in each industry sector development and in the Government resolutions being issued for their regulation.

The client service orientation, like the other columns of the Andersen Model, had also a deep penetration in daily professional practice. Formal and informal guidelines were issued frequently on the attitude and behavior required from the professionals regarding the clients and the external image: attire, timetable, punctuality, austerity, dedication, etc. The professional evaluation criteria themselves included intensively reference elements to matters such as date fulfillment in work execution, the extent of self-revision of the individually reached conclusions, the external image and the relations with the customer representatives, etc.

Daily work included protocols to cross check, contrast and review in order to minimize the risk of mistakes, especially when issuing reports to be delivered to the customer.

Perhaps one of the more remarkable operating elements in this field was the ”blue-black memorandum”. This report was established as a working standard in a January 1939 internal bulletin and was requested from all teams as an element additional to the auditing report that was the main purpose of the work. The basic idea was that the client had to get from the auditing team, once the work was covered and the audit finished, a report with constructive suggestions and recommendations for improvement. This duty, affecting all of the team professionals, implied, in the course of the work, a tension to identify improvement ideas to be presented for discussion with the client.

Though this is a very subjective remark, we believe that all these mechanisms contributed to create in all of Arthur Andersen’s professionals a habit of “taking to bed” the problems or management challenges in the customers projects being treated.

The client orientation spirit and particularly the multidisciplinary approach can also generate drawbacks that can be neatly identified in Arthur Andersen’s history.

The first and most clear drawback is the eventual emergence of conflict of interest between the services given to the same client by different practices. Internally, Arthur Andersen tried to protect itself from the risks associated with such a circumstance by adopting the figure of the “Client Partner”, responsible for giving a minimum of coordination and for keeping the integrity principles in the multidisciplinary schemes of relation with the clients, but it is certain that the increase in organizational complexity and the incentives of each business line to grow made difficult to ensure that this self-regulation formula worked properly in every case.

On the other side, the incentives to business growth and development, in an environment of high internal and external competitiveness, brought the whole organization to install a “sales culture” that set in collision course the meritocracy principles with those of excellence in service provision, a situation very difficult to manage in an organization of tens of thousands professionals.

From the personal point of view, the client service commitment may collide with the need of family and leisure time. This collision is not unavoidable, but is normally produced when the person does not know how to manage time or when quantity of working hours substitutes for quality of work. In Arthur Andersen, like in many other organizations, the commitment of employees with the projects, with client service, was occasionally abused. The executives have to manage carefully the commitment to quality and service to avoid that it becomes an excuse for “work-dependency” (vicious obsession with work, workaholism) and to detect, under this exaggerated attitude, real situations of incompetence by the executives themselves or their subordinates, or inefficiencies in the working system.

One of the incompetence situations usually hidden in these cases is that of selling a product or service at an insufficient price, that does not allow for the desired margin, and trying to get that margin afterwards, demanding from employees an impossible productivity or an extension of their work beyond the acceptable limits.