Related Posts
Community Builder
Bowl Leader
More Posts
Hi fishes, How is WLB, Hikes in company @dell .
Additional Posts in Accounting
Think they did a good job on this piece. It was a truly embarrassing moment for the firm, but I think it’s being handled as well as can be expected. Should go smoothly this year 🤞
https://www.washingtonpost.com/entertainment/ap-exclusive-new-rules-govern-handling-of-oscar-envelopes/2018/01/22/7e1d5cf2-ff86-11e7-86b9-8908743c79dd_story.html
Salary nyc pwc tax?
Top worst audit industries?
Fall is coming...
Anyone knew or worked with Karen Ward?
New to Fishbowl?
Download the Fishbowl app to
unlock all discussions on Fishbowl.
unlock all discussions on Fishbowl.
Here is how it works:
1) partners must bring in $ - usually quantified by estimated number of hours or actual hours.
2) managers must figure out how to get the work done, within the estimated number of hours, and at the right leverage ratio to earn a profit - the goal profit is agreed upon before the engagement begins.
Like any goal, the easier you make the goal (the lower the profit you can get leadership to agree to), the more likely you are to achieve it. This means more hours to do the same amount of work.
In reverse, if you set a challenging goal (less hours), even if you get most of the way there but not quite - a bigger benefit than a low goal, it causes a loss and reflects very poorly on the manager (bad engagement management and project management skills are usually standard for this - careers have been killed by this). As most managers have been at the firm for a a while and have a huge investment in time and sacrifices into the firm, it is perfect environment for stress, fibbing (eating hours), and pressure.
Here is how the firms use this dynamic to support the partners/firms objectives:
the partners need credit for supervising a high number of hours at a high rate per hour (they are measured on this and get paid on this).
-Managers are in charge of maximizing the rate per hour (compensation and future aspirations at the firm depend on it)
-Staff and seniors are in charge of staying chargeable and maximizing hours (your compensation depends on it)
Haha, welcome to public. The place that pays you a set amount per year, but wants you to bill more than your level/peers.
But in the end, all of these “losses” are really not financial losses - they’re just cost accounting losses because the firms have decided to use hours as the allocation base even though our salaries are fixed. Even if the argument is our hours could be used on new business, a partner is never going to stop bringing in clients. It doesn’t matter how many staff are left - they aren’t going to stop bringing business. So I get that the firm has to somehow track profitability but at the end of the day we are all fixed costs and the partners are going to bring in as much business as possible regardless of the hour pool available.
I’ve seen a situation where nationals have come to a partner and told him that the audit engagement isn’t worth our time. The realization is super low, and the client is so stupidly complicated that Managers and Sr Managers have helped complete audit testing, which is obviously a huge waste of resources.
And frankly the partner gets that this job is inefficient too and we’ve been working with the client to help them get their shit together. But partners are too business-minded to not consider the opportunity cost of a horribly inefficient client. I’ve also seen situations at my office where partners almost won new audits... but there was not enough staffing for it so nothing happened. Lol there is nothing more satisfying than being a disgruntled staff and watching that situation unfold.
Think about the risk. When a staff or anyone for that matter charges an hour of time to an engagement, revenue is earned. So what if the team books a total of 1,000 hours by the end of the engagement, and when multiplied by rates, yields 500k in revenue booked. Now like you said the fee is fixed, let’s say 400k. Therefore, the firm has booked 100k more in revenue than they will be able to collect. Thus, write off required or the partner shooting his shot in front the audit committee.
With that said, I think the contrast between manager’s and associate’s incentives is almost necessary to propose a reasonable fee. An associate charging time non-stop, left unchecked by a manager would lead to inflated audit fees. Likewise, managers can’t have all the bargaining power so the firm incentivizes associates with utilization to make sure they get paid for the work they do.
Thus, I personally don’t think associates are graded on utilization. At one point I had a TTM utilization of 112% and got rated a 3 (albeit at a previous firm, no bonus, 4% raise). Looking back at my performance then, that rating was fair if I was judged on efficiency.
Because the two metrics are being used to assess two different things.
Think of utilization as a popularity contest. Higher utilization means your in high demand, the managers and partners want you on their jobs. Lower utilization means you might be the senior of last resort. People accept you on their job, but they aren’t actively seeking you out.
Profitability or Realization measures a partner’s ability to generate $$ while using the fewest resources as possible.