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The only top talent that matters are the ones that can source their own deals. They’ll get taken care of. Everyone else is replaceable.
Client delivery is table stakes
Accentures 2001 IPO was less equitable than our hypothetical one to their employees (70/15/15 vs . 82/12/6) and they’ve done well. There wasn’t a mass exodus.
The non-partners who were issued RSUs did fine if you look at the stock performance. In hindsight most anyone (public shareholders and employees alike) would love to have gotten in on the $14 share price knowing what we know now.
Is there another professional services IPO success you care to share? I have only seen people mention Accenture so honestly curious. Also if anyone in her was with Accenture at the time of the spin could they tell us - was it handled better than EY is handling this 😂?! Bc I seriously doubt this is a case study in good management.
Not a partner, the way I see it, there are two kinds of people. One with the skills and mental aptitude to pivot and navigate in an environment with changes and uncertainties, they will be fine with the structural change at EY or any other firm. One without those skills wouldn’t like change, and the split and going to competitors/industry would be equally challenging to them.
What I do worry is the leadership’s ability to execute and implement, things did not go well with Mercury, unlimited PTO policy and many other examples in the past.
Not a partner, but from what I hear — Concerned, no. But certainly aware of the fact that people will weigh their options. But anyone who made it that far in the pipeline has enough maturity and professionalism to discuss with leadership and decide if they see themselves here, in whatever strategic form the firm finds itself. I can’t imagine that future partners (or equivalent title if there’s an IPO) won’t still make a ton of money and have great professional opportunities. I’m sure some people will try their luck at a different firm, or take this as a “sign” if they were thinking about going to industry anyway. But seriously doubt there will be a mass exodus.
@Principal 1 - Curious, is this the primary reason for the IPO?
My plan is to let this play out and it least give the firm the chance to make staying compelling, but definitely am not being shy voicing my concerns to the senior partners I work with. Not sure how much weight I put in it, but at least being told that there is a lot of discussion on jr partner and SM pipeline retention in the context of deal economics.
It looks like a horrific deal for the newer senior managers. Maybe retention awards are needed to keep enough of them around.
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Sure - always talent concerns with any transaction.
It would incredibly silly to assume that there won’t concessions made to account for that. There always are with these types of transactions.
So my suggestion, wait until more details are shared. Speak with your practice leader. None of us are interested in losing top talent, and I think this would end up being a good situation for our top performers if it were to happen.
If I speak to the practice leader I make it known that I could consider leaving. The optics of that look bad when this is the person maintaining the pipeline trajectory
Other than Accenture none of the other consulting spin-offs have gone well (do any of the other 3 even exist today?). Personally I think EY is making a long-term mistake - time will tell. I’m glad Deloitte is staying the course as One Firm.
You sure Deloitte is staying the course? None of the SEC pressure on all big 4 would change their mind in a year or two? And yes i know your leader denied it and Deloitte’s history has always been to stay as one. Still….
Reading this thread was really eye opening. Especially in how certain partners positioned themselves in the discussion.
I think one of the largest issues here is that, there really is no information. We’re just told to “trust EY leadership,” and “wait for more details.”
This is the same EY leadership that didn’t fire people, but did “performance based separations,” and took away banked PTO on 2 months notice. Some of us (myself included) lost >100 hours of banked time.
The sad reality is that EY team members and our colleagues been burned a couple times in recent memory. I’ll see how it shakes out, as I’m sure others will too. But this could all be easier if it was out in the open. Keeping everyone in the dark only makes it seem more and more like something nefarious is happening.
In early response to the eventual point of “well what if there are no details solidified yet.” Fine, then give us a timeline when we will know any new information. Make this an open topic.
For all the talk about the future leadership of the firm in this discussion, I really don’t see a lot of leadership by example (on either side) when reading these messages.
Unfortunately don’t have any info on deal specifics that hasn’t already been shared here, or in the news, but one timeline point heard on one of the calls was vote this fall and year+ to close the deal, if decide to split. With that timeline, will be very interesting what that means for PPMD promotes next July if the decision is to split since the the vote will already have happened but the deal will not be complete.
Yeah, but there’s a question of valuation. Looks like they’re pricing it at 3x sales, which is rich for professional services. Curious what the typical investor looks like at that valuation besides employees. Guessing it’ll perform like all the PEs that went public. Largely nothing expect when the fed injected liquidity to inflate all valuations and in apollos case they shifted to high yield
@EY3: Professional services firms are pretty effective recession hedges in a lot of industries. When talent gets laid off during recessions, pro serv firms are called in to fill the resource gap. Plus, unless you have an arthur anderson type episode, vsry hard to fail if you are top 5 or even top 10 in the market. Revenues grow slowly, but you are pretty much going to keep getting repeat business. In terms of comparision, think FMCG firms, except with higher margins (and no dividends at the start)
Will the firm ever explain the math behind how it was determined that the current generation of Partners get to retain 70% of the consulting business and only 15% is left for the next generation of leaders? (residual 15% listed). How was that 70% arrived at? Why isn’t it 80, 45, or 65?
That will likely never be explained but probably advice from Morgan Stanley/JP Morgan. Think Shark Tank. They’re coming up with a valuation of the business. What are the current partners willing to part with/give up control of? Split that among all the consulting partners. What would make it worth it to the public to buy? What projections are they making to performance to help that stock price rise? What is enough carrot to dangle in front of existing employees to keep them here?
EY will never be Accenture and it’ll be a huge mistake becoming answerable to Wall St. They will get crushed under the quarter upon quarter pressure… there is no long game here.
All perks will dissolve and there will be an exodus of top talent.
I'd think that as long as the equity grant for new partners is sizeable enough, this is not necessarily a bad thing. Sure pension is gone but I'd rather take liquidity via potential public stock... thoughts?
Accenture did the latter
Everyone is concerned - always - about talent retention. We are a people business. At times I find these comments about the partner carrot curious. On one hand, there are complaints that not everyone makes it (conclusion: the value prop isn’t real). One the other hand, there is this portrayal of the separation as taking something away (conclusion: partner promotion is a guaranteed entitlement??).
Anyone working in business for guarantees and promises is looking at things all wrong. Instead, consider what the real opportunities would be for you when things inevitably change.
There are very appealing pros and cons to the private partnership model and the corporate/stock options and RSU model. No one has a crystal ball, ever, but EY is an inherently conservative firm that doesn’t jump wildly into things. This transaction is no exception.
Having been an employee at Accenture when it IPO’d, and now an EY partner - I get it. You think we are all mustachioed and monocled up, measuring yacht windows for drapes while using a staff’s back as a ladder. Sure, okay. That’s what we said about the pre-IPO partners too. That wasn’t quite right, as it turns out.
SMs in the pipeline have a choice to make, as they would before this proposition. They will not all make it. Most will not become PPMDs (in the EY model). But now, those who might go to NewCo have some pretty compelling new options to consider. Yes, with downside of risk in having stock equity become a bigger part of total rewards. But help me understand what yellow brick road you think current partners are skipping down, going all in on the firm with their capital, and being limited in how they can invest? We are literally risking it all today to be a partner in the firm, and yes, every risk has a potential reward.
As someone who has absolutely no economic or professional interest in this, EY14 - you really are not covering yourself in glory here - more like covering yourself in shit.
The consistent put- downs anyone questioning the transaction is a bit much.
But hey, please let me know if the plan is to just have an Accenture style growth; I’d happily short the shit out newco stock.
I’m not dancing around anything. You are not reading. Who promised you that the future partnership would be the same as the current one? No one promised me that when I became a partner. The partnership has changed significantly over time and every generation of partners had one job: protect and grow the business so that future partners have a business to run. The job was not “make it so that everything we have is available in the same form for future partners to go on autopilot.”
EY18 not at all the case. I am a vocal advocate for EY people. I personally mentor 20 people and will be sponsoring 2-3 SMs for partner next year. I’m here to connect with disaffected people who frequently choose to open up, but I realize most probably just need to move on, and that’s okay.
I respond in kind to the energy I pick up, for the most part.
You cannot build a successful business you don’t believe in with people you don’t trust.
The split is nothing but a windfall for current Senior Partners. The driver is not quite clear… perhaps is an attempt to save the Consulting arm and monetize on it before a major blow-out happens (unfavorable decision on Perrigo case, another SEC finding, etc) Who know what skeletons EY has on its closets!