C ove rSto ry

Originof Species

T h e

By Jack Sweeney

C ove rSto ry

C o n s u l t i n g Ja n u a r y / Fe b r uar y 2004 15

While New York City sustained

an enormous bl ow some two

ye a rs ago, it has since lost none

of its hard-nosed swa g g e r.

N o w, that temperament long epitomizedby New Yo r k ’s sharp-tongued citizenryappears to be ebbing somewhat — anintriguing development that many believeis now altering the psyche of Gotham.

H o w e v e r, what is defanging NewYorkers, we are told, is not OrangeAlerts or treacherous acts of terrorism,but an information resource commonlyreferred to as 311 .

It may be too early to access the fullimpact of the high-tech offering — akind of public hotline on steroids —but few doubt that 311 is now alteringthe relationship between the city’sg o v e r n m e n t and its citizens.

In effect, New Yorkers have lessreason to shout, or at least they believethat their government may have finallygotten the hearing aid it’s always needed.Arecent page one New York Ti m e s a r t i c l ediscussing 311 ’s growing positiveimpact quotes New York City mayorMichael Bloomberg as saying, “It is themost powerful management tool everdeveloped for New York City.”

Yet the experienced management

p r o b l e m - s o l v e r s ,specialized systems ana-

lysts, and programmers who werel a rgely behind the tool’s creation anddeployment escape any mention in theTi m e s article. So goes the all-so-hiddenlife of consultants, the invisible knowl-edge brokers who trace their org a n i z a t i o n a lroots to the early part of the last century —a time when men like Edwin Booz andJames McKinsey first distin g u i s h e dthemselves as trusted advisers to bothAmerican business and government,and established partnerships groundedby shared values and principles.

H o w e v e r, unlike the independentpartnerships that came to define con-sulting during the past century, thec o n s u l t a n t s behind 311 belong to amore commercial species — one thatanswers to clients and shareholders inall parts of the world.

Nothing Like It in the Wo r l d

Of course, it wasn’t always that way.The purveyor of 311 wisdom has con-sulting roots that run deep into the past.And if truth be told, its roots run nearlyas deep as those of such enduring partner-s h i p s as McKinsey & Company andBooz Allen Hamilton. But for thec o n s u l t i n g firm known as A c c e n t u r e ,its American roots became an obstructionin the way of its global future, or atleast it seems to have appeared that

way to thosewho’d prefer to have us

believe that Accenture cameinto being a mere four years ago.

This is perhaps a pesky footnote to amuch larger and grander tale of a con-sultancy that arg u a b l y, unlike any firmbefore it, is outwardly exposing to theworld at large the impact consultantscan have on business, government, andthe world’s economies.

“How the consulting professiongrew up — developing smart peoplewith broad general skills — is not theway it will succeed in the future,” saysAccenture Chairman & CEO JoeForehand, beginning what’s become afamiliar discourse on how, in theworld of consulting, specialized con-sultants are now trumping the impactof “generalists,” or those consultantsthat typically fill the rank-and-file ofstrategy partnerships.

“No one ever thought that consulting— in the industry that we are in — thatthere were any advantages to scale, andwe’re now changing the game throughscale,” says Forehand, emphasizing thelatter half of A c c e n t u r e ’s one-twopunch: specialized skills and globalreach. It’s a wallop that has given riseto a new species of consultancy, onecapable of supplying governments andbusinesses around the world with theeconomic knowledge and infrastructureneeded to compete globally.

T h e r e ’s never been anything quitelike them on the planet. Within thebusiness world’s sea of knowledge, weare being compelled to think of globalconsulting firms as the Gulf Stream —a massive and freewheeling currentpushing knowledge from continent tocontinent, from boardroom to board-

the world, and its escalating lobbyingfees. More recently, there was the revela-tion that the firm’s Middle East operationis being investigated by the Securitiesand Exchange Commission and theDepartment of Justice for possiblyv i o l a t i n g the U.S. Foreign CorruptPractices Act (FCPA), a law that barscompanies from bribing foreign o ff i c i a l sto obtain deals.

Then there’s the growing off s h o r i n gstrategy through which Accenture andits global competitors such as IBMBusiness Consulting Services and CapGemini Ernst & Young are addingknowledge workers to cheap laborlocations around the world, a strategythat critics charge is putting A m e r i c a njobs at risk. (Accenture expects that itso ffshore capability will ultimately createnew jobs in the U.S.)

And as if that weren’t enough tokeep Accenture in the political hot seat,t h e r e ’s the consulting firm’s push intoe-democracy services — a label for thef i r m ’s Internet voting push involvingo fferings facing heightened scrutinywithin this national election year. Suchtechnologies, a growing number of criticsc h a rge, are vulnerable to hackerscapable of manipulating votes, thus

u n d e r m i n i n g d e m o c r a c y.Adding to the hubbub around

Internet elections was the revelation inN e w s d a y last year that Election.com,one of A c c e n t u r e ’s premier e-govern-ment partners, had sold controllingpower to an investment group made upof unnamed Saudi nationals. Last June,Accenture bought out the Saudiinvestors as part of a deal under whichit acquired Election.com’s publicassets. Not more than 60 days later,Accenture had expanded its list of e-democracy clients to include the U.S.Department of Defense, as part of ane ffort to design and build an Internetvoting capability for thousands ofabsentee uniformed services personnel.

“The Pentagon’s program wasadopted with disturbingly little publici-ty or debate. The public is entitled toknow more about how it will work, andhow it will be protected,” read the leadeditorial in the Sunday, January18,edition of T h e New York Ti m e s.

No doubt Accenture would preferthat the Pentagon speak for itself on thesubject of Internet elections, but thefirm remains steadfast in its efforts tomake the technology more secure.

So far, Accenture appears to be coping

room, from government to government.And, as with the private partnershipsthat helped establish consulting in thelast century, client confidentialityremains the linchpin that underg i r d stheir existence. However, given thedemands shareholders now place uponthem and the borderless nature of theirwork, global consulting firms now facechallenges — both economic and political— all but unknown to their consultingp r e d e c e s s o r s .

The Profession’s Lightning Ro d

For its part, Accenture has unwittinglybecome the lightning rod for the newconsulting species, given its size( 83,000 employees) and the number ofgeographies (47+ countries) it currentlyoperates from. W h a t ’s more, its publicly-held status continues to illuminate thenature of the $11 billion firm’s workand actions through the foggy filter ofroutine Securities and ExchangeCommission filings and governmentreports. Such filings have led to everwidening press reports noting thef i r m ’s incorporation in Bermuda, itspush to privatize governments around

16 Ja n u a r y / Fe b r uary 2004 C o n s u l t i n g

C ove rSto ry

“Unless you are wi l l ing to f ire those people who— while del ivering results — care nothing aboutthe va lues of an o r g a n i z a t i o n ,

then you will not be sending the rightmessage to the organization.”

— Accenture’s Fo r e h a n d

C o n s u l t i n g Ja n u a r y / Fe b ruar y 2004 17

It’s been more than four ye a rs since Joe Fo re h a n dbecame the final partner ever to be elected CEO of Accenture.

In the years that have followed, Forehand has overseen the

conversion of the Andersen Consulting partnership into the

p u b l i c ly-held entity we know to d ay as Ac c e n t u re. Wi th th e

c o nve rs i o n complete, ch a n ge still remains a constant at th e

fi rm, where Fo rehand is leading Ac c e n t u re’s 83,000-member wo rk-

fo rce to the outer edges of business tra n s fo rmation outsourc i n g.

CM: Is the growth of outsourcing services within Accenture

likely to undermine the types of consulting opportunities it

offers your people?

Forehand: Consulting is a very important part of our future,

always will be. If you look at what matters a lot to people, it’s

being on a winning team. Being on a winning team is hugely

important when it comes to attracting the best consultants

away from our comp e t i to rs. ... If you look at the tra n s fo rmation of

o u t s o u rcing, it invo lves what may be the highest fo rm of consulting

— in fact, some of our people call it “extreme consulting.” It’s

about being able to ta ke the hard e st, to u g h e st ch a l l e n ge s our

clients have and doing the front-end transformation needed to

meet them with an outsource model. And then, if you also look

at the career opportunities we have and where we ’ re creating new

businesses around business process outsourcing, our people

have the opportunity to be the chief operating officer or the VP

of sales for some of these businesses. This offe rs a combination

of consulting and operational experience that will make them

much better consultants.

CM: What part of Accenture’s workforce should we expect

consultants to make up in the future?

Fo re h a n d : It’s a little hard to be real precise with that. We have

th ree grow th platfo rms: our business in high-value consulting, our

whole te chnology services, and the services wo rk fo rce or outsourc i n g ,

w h i ch we are incre a s i n gly growing as we ta ke on client emp l oye e s

and re-skill them to be a part of our front office as we grow.

But I could see, over the next three to five years, where it —

if you look at just the type of work we do, there could be a

ro u g h ly equal split between the two (consulting and outsourc i n g

services). And we’ve moved from where outsourcing was a b o u t

15 percent of the mix over the last couple ye a rs to now it’s

w h e re it’s above 30 percent, and I think you’ll continue to see

that traj e c to ry over the next th ree ye a rs with the continued

grow th in the outsourcing type of wo rk. We do see this as not

j u st two separa te lines of business entire ly, because outsourc i n g

st i m u l a tes consulting demand. And even though our reve n u e s

o ften times are counted as outsourcing, oftentimes consulta n t s

may be involved in the transition and transformation.

C M : Going fo rwa rd, are we like ly to see a larger portion of

Ac c e n t u re’s solutions wo rk fo rce become dist ri b u ted to oth e r

l ow- c o st “offs h o re” markets?

Forehand: If you look at a lot of what’s happened, and how

buyers are saying, “As cer tain types of technology skills get

more mature, we want to pay a price of X,” often this is less

than what that price point is in the U.S., for example. However,

it’s important to understand that as we look at our workforce

of 83,000 people, we see that only 5 percent of these people

are located in “of fshore,” lower-cost locations. ... A lot of

what’s been going on is that the more complex consulting pro j e c t s

— which is where we excel — have in the last couple of years

not been what clients have been buying. And that’s been part

of the reason for some of the decline in consulting. However,

we’re starting to see the size of consulting projects get bigger

as companies come out of the downturn. And it’s important to

realize that when you get in and look at some of the bigger

change programs, the IT content of a typical large-scale project

that can go of fshore is still relatively small.

CM: But you still have to price competitively?

Fo re h a n d : Yes. Recognizing that, to be comp e t i t i ve, we have to

be able to provide a price point for certain types of skills and a

p rice point at which we can be comp e t i t i ve. There are countless

e xa mples of how we ’ ve won pieces of business to d ay where 80

or 90 percent of it is sourced within the U.S. But having 10 or

20 percent of it sourced in a low- c o st country is enough to be

the comp e t i t i ve edge to give us an adva n ta ge in landing wo rk .

So I look at that on the contra ry: The ability to have some of

that capability gives us the ability to be much more comp e t i t i ve

for our U.S. wo rk fo rce. We hired 800 people just within the U. S .

w i thin the fi rst two months of our fiscal ye a r. So we view us as

n ow coming out of a cycle from what was tru ly an abrupt jolt to

the whole indust ry to where we are fo rmulating new jobs.

CM: Certain competitors of Accenture pride themselves on

leadership training. What can you tell us about changes in

Accenture’s approach to developing leaders?

Forehand: This past year, we began holding three-day leader-

ship development seminars for our newly-promoted partners.

And we have made a sizable commitment — going back over a

year ago, now we have some 1,500 partners who have gone

through this. They spend three days with all of our leadership,

and each of our leaders has teaching assignments. I teach a

part of the class, about two hours on just how we developed

the things that we believe are important in terms of leader-

ship. We go through sessions on our core values, business

ethics, a whole host of things related to how you increase your

effectiveness with clients. Things like how to work better in

teams, as a partner leading teams. So this has been extremely

successful with our newly- p ro m o ted part n e rs — to get hands-on

within a leadership type of environment and to find out what’s

important to maintain us and them at the top.

The Last Elected C E OA Ta lk With Accenture’s “A p p ro a c h a b l e ” L e a d e r

C ove rSto ry

rather well with the extra wattage illumi-n a t i n g its activities. Such scrutiny s h o u l dperhaps be viewed as a rite of passage,given the ambitious trajectoryAccenture management has set for thefirm. Still, the firm’s footing at anygiven time is only as certain as the valuesits consultants espouse, and to its credit,A c c e n t u r e ’s management doesn’t hesitateto speak up when asked how the firm ismaking sure its people continue toabide by the firm’s values. (SeeForehand interview, page 17.)

“Unless you are willing to fire thosepeople who — while delivering results— care nothing about the values of ano rganization, then you will not be sendingthe right message to the org a n i z a t i o n , ”says Forehand.

“ We have had to work harder atinstilling our values, because they reallynow need to be built deep into theo rganization. This is no longer a clubof a couple of thousand people, but an83,000-person organization in over 47countries,” he explains, while con-trasting Accenture with the “clublike”partnerships credited with havingestablished the consulting profession.

The Immaculate Conception

The firm’s challenge has been com-pounded by the fluidity of its structure,a series of altered states each now rep-r e s e n t i n g a chapter in an evolutionary

tale filled with leadership endeavors. I t ’s a tale whose most recent chapter

a rguably begins with the exit ofF o r e h a n d ’s predecessor, Georg eShaheen. As the CEO of what was thenknown as Andersen Consulting,Shaheen opts to become the CEO of ill-fated grocer We b Van, thus giving theconsulting profession an episode ofbiblical poignancy.

Having helped galvanize A n d e r s e n ’sconsulting army behind a plan to splito ff from Arthur Andersen, Shaheencourageously leads A n d e r s e n ’s consul-tants to the edge of the Promised Land,only to be tripped up by the temptationof dot-com riches. For his indulgence,Shaheen is barred from ever tasting thefruits obtained by the firm’s windfalldivorce from Arthur Andersen, andA c c e n t u r e ’s subsequent IPO.

The divorce windfall came as theresult of a somewhat controversiala r b i t r a t i o n decision that guaranteedAndersen Consulting its freedom after itforfeited all rights to the Andersen nameand forked over to Arthur Andersen $1billion — a sum many times smaller thanwas anticipated.

S t r a n g e l y, A c c e n t u r e ’s managementcontinues to argue forthrightly thatsince the arbitrator’s decision statedthat Accenture was not owned byArthur Andersen, Accenture cannot becharacterized as having broken off orspun off from Arthur Andersen. W h a t ’smore, Accenture management arg u e s

just as fervently that the defunct A r t h u rAndersen should not be characterizedas having any parental link toAccenture. To d a y, nowhere is A r t h u rAndersen mentioned in the corporatehistory on the firm’s Web site.

But if George Shaheen is the biblicalequivalent of Moses in A c c e n t u r e ’s tale ofcreation, the accountant Arthur A n d e r s e nis undeniably Adam. You only need toexamine the executive bios on A c c e n t u r e ’sWeb site to discover that its CEO “joinedAccenture in 1972.” 1972? (Think: Nixonvs. McGovern, Munich Olympics, PetRocks.) While it would be another 27 yearsbefore Andersen Consulting was off i c i a l l ydivorced from AA, it would be another 15before the name Andersen Consulting waseven coined. In fact, when Forehand joinedArthur Andersen, consultants resided inwhat was known as A A’s managementinformation consulting division.

Forehand’s is not the only fuzzy bio.While Jackson Wilson, chief executiveof Accenture’s new business process out-sourcing business, “joined Accenture in1975,” Stephan James, Accenture’s chiefoperating officer, “joined Accenture in1968.” For its part, James’s bio shouldperhaps be considered a historicala r t ifact, given that it appears to confirmAccenture’s existence as far back as theJohnson Administration.

No matter. While A c c e n t u r e ’s past maybe foggy, its vision of the future has neverbeen more clear. Or so those who praisethe leadership of A c c e n t u r e ’s CEO tell us.

18 Ja n u a r y / Fe b r ua ry 2004 C o n s u l t i n g

How Accenture’s Consulting Shrank(in millions)

C o n s u l t i n g

% Incre a s e

( -1 % )

4 5 %

$2,095

Q1 2003 Q1 2002

$2,126

$804$1,166

Source: Accenture Q1 Reports (Period ending November 30, 2003)

O u t s o u rc i n g

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The CEO Partner

Always Joe, never Joseph, Forehand isshorthand; that is, A c c e n t u r e ’s CEOprefers none of the longhand protocol ordivine detachment his predecessor wasknown for. I t ’s been said before andbears repeating that George Shaheenwas the managing partner of a partner-ship, who thought of himself as theCEO of a corporation — i.e., hethought of the partners as his employees— while the ever approachable J o eForehand is the CEO of a $11 billioncorporation, who thinks of himself as amanaging partner: He views his vicepresidents as more or less his partners.

Just how this ironic management twisthas impacted the firm’s ability to instillvalues in its people is anyone’s guess, butclearly the firm has needed to enhancethe reinforcement of its values as certaincultural mechanisms found within theAndersen partnership are no longer pre-s e n t . At the same time, people’s actionscan seem to be more transparent within acorporate organization where lines ofreporting have been more rigidly drawn.

Following the arbitration’s outcome,A c c e n t u r e ’s first order of business wasto create a vehicle to take public. To dothis, the newly-branded Accenture hadto undergo a vast reorganization thatwould roll 40-plus independently-owned, local country partnerships intoa single holding company.

“When you move to become a globalcorporate entity, you can assume thatthe mother ship is going to be charg e dwith a lot more knowledge of its globalactivities than when it was a looselyknit set of partnerships,” says Ti m o t h yDickinson, a Washington attorney whospecializes in FCPA cases.

Dickinson says that any firm experi-encing vast structural change such as whatAccenture has recently experienced w i l lwant to be extra vigilant of those peop l eresiding in geographies where firm busi-

ness is conducted through joint venturesand other shared investment models. To date, Accenture’s people appear tohave little doubt what industry theybelong to. For their part, the firm’sc o n s u l t a n t s frequently speak of theircareer goals not just within the firm, but ina larger context relative to the consultingp r o f e s s i o n .

“ T h e r e ’s a sense that we do thingsbetter than other firms,” says an A c c e n t u r esenior consultant, who asked us to notto use his name. “Accenture’s peopledevelopment programs are what havekept me here the last few years, andgoing forward it will be all about gainingexperience. I don’t think that otherfirms can offer all the sorts of opportu-nities Accenture now does.” SeveralAccenture consultants echoed similarcomments about how they perceivedthe firm stacks up with its rivals.M o r e o v e r, they praised the firm’s lead-ership and the emphasis that has beenplaced on the firm’s values.

Do the Right Thing

“ We’ve had a consistent message that, ifwe do the right thing for our clients andwe do the right thing for our people, thenthe stock price does not have to be thoughtof as something that matters,” explainsForehand, who also cites the firm’s eff o r t sto enforce a lengthy code of ethics spe-cially tailored to be infused throughout aculturally diverse organization.

For its part, the firm managementalso cites its independent positioning ashelping to deter potential conflicts.

“ We’re not carrying any kind of aproprietary solution or technology thatanybody has to be suspicious about interms of what our motives are. We havealliances, certainly, and that’s a part ofdoing business,” says Forehand.

Still, rivals argue that this positioninghas been undermined by A c c e n t u r e ’s

C o n s u l t i n g Ja n u a r y / Fe b r uar y 2004 19

199933 years af ter joining

Arthur Andersen,

AndersenConsulting CEO George Shaheenjumps ship for dot-com grocer WebVan.

Joe Forehand is elected head of

Andersen Consulting.

2000Arbitration windfall: While a divorce

settlement for Arthur Andersen and

A n d e rs e n Consulting gave AA all rights to

the Andersen name, it requires Andersen

Consulting to pay AA $1 billion, a meage r

sum at the time, considering that

Andersen Consulting had an estimated

market value of $25 billion.

Arthur AndersenCEO JamesWadia resigns after

arbitration outcome

is announced.

2001Andersen Consulting launches a $175

million rebranding campaign to establish

its newly-minted name — Accenture.

Accenture incorporates itself in Bermuda.

Accenture initiates a vast reorganization

that will roll 40-plus partnerships into a

holding company.

Newly-branded Accenture raises $1.67

billion with its initial public offering.

Arthur Andersen comes under scrutiny as

Enron investigation heats up.

2002Arthur Andersen is found guilty of

obstruction of justice, relinquishes its

permits in all s tates where it was

licensed to practice public accountancy.

A c c e n t u r e’sWatershed Chapter

C ove rSto ry

willingness to accept marketing andremarketing fees from different technolo g ypartners. Such rivals point to the inductionof Microsoft CEO Steve Ballmer as anAccenture board member and toAvanade, a consulting joint venturebetween Microsoft and A c c e n t u r e .

Meanwhile, rivals within consulting’sstrategy encampment routinely charg ethat Accenture isn’t any longer a consultingfirm at all. It is instead an outsourcingc o m p a n y, they say, that offers clientsconsulting services. W h y, even Forehandhas on more than one occasion commented,“ You really can’t call what we do consult-ing any longer. ”

Another pesky point? Or is there apattern here?

It’s a consultant; it’s not a consultant. Its roots run deep; it has no roots at all. I t ’s an American success story; it never

was American. I t ’s independent; it’s not independent. C l e a r l y, the consulting firm poised

to define consulting’s New Age faces a

definition challenge all its own. “ We’re not an easy enterprise to

understand,” begins A c c e n t u r e ’s chiefoperating off i c e r, client services, Wi l l i a mGreen (bio note: Green “joined A c c e n t u r ein 1977”), when asked whether the firmwill be further escalating its Capitol Hilllobbying efforts. “We’re a very wellknown company within the United States.There are not many people who don’tknow someone who has worked forAccenture, or was a customer or some-thing like that, so we’ve had to gothrough an education process — that’show I’d describe it.”

Translation: We are well known; weare not well known.

The Story of Creation

The “education process” Accenture hasundertaken has undoubtedly been mademore challenging due to the complexit yof the firm’s story of creation.

“Being a public company is notm u t u a lly exclusive from having corevalues and doing the right things forclients,” says Forehand, underscoringonce more his mantra to ignore the stockprice.

Indeed, Forehand’s thought gains sup-port when you consider that one of themore strident examples in recent memory o fa business falling victim to values eros i o ninvolves a partnership — Arthur A n d e r s e n .Besides avoiding legal entanglementsrelated to A A’s collapse, A c c e n t u r e ’s delib-erate efforts to obscure its shared lineagewith A A may be rootedin a fear that futureclients will view it as being more suscepti-ble to such values erosion. After all,S h a h e e n ’s hasty exit seemed to underscorea theme all too familiar to ArthurAndersen: It’s about the money.

Be that as it may, A c c e n t u r e ’s clientsappear to routinely find value in thef i r m ’s one-two punch.

“ We were very pleased by the expertisethe people from Accenture brought to thetable on this project, and the commitmentthey made to us,” says Gino Menchini, NewYork City’s commissioner for informationtechnology and telecommunications, whooversaw the 311 project for the city.

“ We have had a number of city gov-ernments from around the country, andeven from other countries, that haveeither met with us or called us about3 11, and they want to know how wedid it, and what worked well, and whatdidn’t,” says Menchini, who remembersspeaking to government o fficials inChicago and Baltimore before movingforward with Accenture.

In a way, 311 is about new beginnings.For just as 311 is arguably helping NewYork cut the corners off its hard-nosedpast, it is helping Accenture turn the pageand reveal to the world a new species ofc o n s u l t a n t .

2 0 Ja n u a r y / Fe b rua ry 2004 C o n s u l t i n g

C

Accenture’s 2003 Revenue by Region(in billions)

(2003 total net revenue, $11.82 billion)Source: Accenture Ltd.

$ 5 . 3 5

$ 5 . 67

$ . 7 9

E u ro p e

A m e ri c a s

Asia Pa c i fi c