At a time when the audit firms are trying every trick in the book to contain attrition, an all-time high 800 mid and senior executives from the Big Four – EY, PwC, Deloitte and KPMG – including partners and directors have jumped ship to join competition in 2016.
The audit firms have not only increased gardening leaves which is sometimes six months to one year for senior executives now but in the last one year they have become much stricter in its imposition including holding back capital for an extended period, yet this year the Big Four saw mass exodus not seen in the last 4-5 years.
While joining competition and poaching is common among the Big Four where sometimes the entire team has moved from one firm to another, the attrition number this year is about 30-40% higher than what was seen in the last 2-3 years due to people demand driven by scaling up and regulatory changes including GST, audit rotation and taxation (direct tax), said industry sources. “With so much more movement happening today companies are looking at gardening leave more seriously and imposing it more in recent times to ring fence clients,” said Navnit Singh, chairman and managing director of India for leading global executive search consultant Korn/Ferry International.
The idea is to keep you away from clients and markets while the company rebuilds relationships,” he adds. However, this is not deterring senior executives to move sometimes with the entire team.
In October, about 200 plus executives, including 20 partners, were on their way out from KPMG to join Deloitte, which is looking to strengthen its advisory practice team, the biggest such movement in the audit and consultancy space in the last five years.
In September, PWC poached five top executives including partners and directors from KPMG’s private equity tax practice moved with their teams. Among the Big Four, a partner normally heads a 12-13 member team.
The last time the audit firms had seen such high rate of attrition was about five-six years ago when such mass movement happened. The firms are aggressively hiring also due to some regulatory change, said Industry experts.
Every firm currently is increasing the size of their GST teams. Also due to audit rotation many firms are strengthening their audit teams. While some others like Deloitte are strengthening their advisory practice as they are set to lose some marque clients from their audit practice.
While in the past several executives would leave surreptitiously without the current employer knowing about his next employment, with the poaching war heating up this year companies have become much stricter in implementation when some senior executive or a star performer quits to join a competitor. In many cases the firms are also holding back capital money which is part of partners’ salary when they quit.
“The idea is to prevent the person who is leaving from using information that they have gathered during their stay in the company by extending the period of confidentiality,” said Poorvi Chothani, managing partner of LawQuest, which helps clients with employment related issues in India.
Gardening leave can be imposed if it is a part of the employment contract however it is not necessarily an effective retention tool, she said.
Attrition remains a big challenge as the competitors, which again in most cases are the big four, are getting innovative to get around the long gardening leave period.
In a recent case one of the senior partners in a big four firms resigned to join a competitor. His firm has not only asked him to serve a 12-month notice period but in all probability he may not get his capital money or in best case scenario, his capital money will be disbursed two years down the line.
“The partner will be paid a joining bonus which is equal to his one year salary in the new organisation. This would take care of his capital money part,” said a senior official in the new firm he is joining. This would mean that when the partner joins the new firm he will already have some money to invest the firm as capital money.
In desperation to attract talent, new executives and partners joining the firms are offered similar terms of appraisals.
With a hope to attract the best talent from competitors, the Big Four are tweaking terms in employee contracts wherein the newly-joined partners and executives get fixed appraisals for the first two years of joining, irrespective of their performance.
News Source: Economic Times