Start-Ups

Accenture accentuates the positive

The sweeping cuts at Accenture last week might look like heartless bloodletting, but as columnist Tom Rodenhauser explains, it's smart business.


We first heard rumors of Accenture layoffs back in March, during the firm’s normal end-of-fiscal-year review process. Strong denials at the time didn’t mask an underlying concern over weak client demand.

Reality finally caught up with the world’s largest consultancy last week when Accenture axed roughly 600 support staff members. A like number of consultants were offered sabbaticals at 20 percent of their pay. Most analysts agree that business won’t pick up again until Q1 2002 at the earliest. So like other major consultancies, Accenture is dealing with a different type of bloodletting after three years of gorging.

Meanwhile, Accenture and its underwriters tacked another $700 million to the firm’s impending IPO, for an expected total of $1.7 billion. The 2,500 partners should earn $5-10 million each, depending on the valuation.

The combined news presents Accenture as a corporate meanie, heartlessly cutting working stiffs while lining the pockets of its partners.

Sorry. The truth is much more prosaic. Accenture needs to demonstrate its resolve to the financial community. Despite S-1 claims to the contrary, Accenture knows perfectly well how to operate a public company. Rule number one: Cut expenses to sustain profits.

And yes, Accenture partners will benefit from the extra capital infusion. But let’s remember that half of these folks—Accenture doubled its partnership in September 2000—are already millionaires. The payoff is expected because many partners are taking pay cuts in lieu of stock.

Accenture certainly takes its share of abuse and ridicule. As much as cynics would have you believe otherwise, the firm’s IPO is not an out-and-out greed play. And unlike Accenture’s marketing tagline, there’s nothing interesting about this news.

Heard on the street
Inforte ekes out a quarterly profit, while Digitas says its per-share earnings will go from positive to negative. Conventional wisdom points to Inforte as a survivor, right? Actually, Digitas enjoys greater accolades from the analyst community—with the caveat that any investment is still high-risk. Good advice.

About the author
Inside Consulting is written by Tom Rodenhauser as a free weekly supplement to The Rodenhauser Report. The report informs senior advisors and business executives of consulting trends and best practices. Subscription cost is $295 per year for 10 issues. Copyright 2001, Consulting Information Services, LLC. Reproduction is prohibited. Quotation with attribution is encouraged.

 

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