Acoba, Ignacio, Madrono, Marcelo, Patajo, Paz, Villanueva BA 221 Case Report Williamson and Oliver Case Context

submitted: November 22, 2007

Williamson and Oliver is a large firm providing accounting and auditing services to a variety of clients. It has expanded its business by buying up smaller firms in desired localities. The firm engages in six different lines of business, namely, career path of employees; compensation of employees; and desired behavior from employees. Problem Statement This report responds to the following question: What changes should be made to Williamson and Olivers compensation system in order to bring about the desired outcomes in their key result areas? More specifically, how can the following issues be addressed (a) lack of management experience on the part of the PICs; (b) low market share for the majority of the offices; (c) the lack of eligible managers for promotion; (d) achieving the ideal mix of shortterm and long-term profitability; and (e) the rocky transition from a local firm to a local office of a national firm. Analysis The firm currently aims to concentrate on four key responsibility areas Practice Management, Practice Development, Human Resources, and Client Service, by focusing on six specific factors net income, collections, chargeable-hours growth, client service, human resources development, and one-firm commitment. This set of factors forms the basis for the firms evaluation of each individual office under it, regardless of the mix of services offered by that office. The mix of services offered by the company is summarized by the table below, with each service being offered to the following types of clients. Size of Clients - Large (Fortune 1,000 companies) - Medium (publicly traded but not huge) - Small (privately held, not large enough to have professional financial management) Mix of Services - Opinion Audits - Taxation Advisory Services - Project Consulting - General Advisor Services

These various services can be classified as either mature businesses or as growth businesses, with each classification necessitating a different strategic approach. The mature businesses would need a harvest strategy, with the firm maximizing short-term profits rather than looking to the long-term future. The growth businesses on the other hand, would need a build strategy, with the firm focusing on gaining significant market share rather than on generating short-term profitability. The two approaches would each need a different set of control measures in order to achieve their specific objectives. This classification of the various businesses can be summarized by the table below: Size of Clients Large Medium Small Opinion Audits Harvest Build Harvest Taxation Advisory Services Harvest Build Build Project Consulting Build Build Build General Advisory Services Harvest Harvest Harvest

The current evaluation system is therefore lacking in this regard since it uses a single set of factors to institute control over the entire range of services, without consideration for the kind of strategy the firm needs to employ. Recommendations The group therefore proposes that the office evaluation system be modified to take into account the particular metrics that are salient for each individual strategy. The alterations proposed to the system will address the problems of the firm. To supplement the new system, several additional recommendations have been made which will be presented in the following section.

Management Training Programs

Training is necessary to address the lack of eligible managers for promotion in the future. The group recommends training programs as prerequisite for promotion to senior accountant as well as PIC. That is, before a junior accountant and a senior accountant can be promoted to senior accountant and PIC, respectively, they must go through the firms management training program. These programs would involve extensive on-the-job training in the position for which they will be promoted to. This includes the requirement that each senior accountant would be required to have regular onthe-job training as PIC, for instance, at least once a month. This is to place emphasis in ensuring a succession for each offices PIC. Service Bond

The success of the above training programs is hinged on the retention of these junior and senior accountants. As such, in line with training, the group recommends that the firm compel those undergoing or have accomplished the program to stay with the firm for a given number of years to ensure that there is a sufficient pool of PICs. Hiring Outsiders

The group considers that the above management training programs cannot presently address the lack of eligible managers for promotion. As such, if there are no eligible senior accountants to handle the general management job of a PIC, the group suggests that the firm consider hiring non-technical managers, but preferably with an accounting background. This, however, is a form of last resort for the firm in consideration of its shortcomings, which include degradation of employee morale and the lack of experience of the manager in this specialized position. New Client Incentive Bonus

A majority of the firms offices have a low market share in their respective localities. To address this problem, the group recommends the implementation of a client incentive bonus. This involves awarding employees who have brought in new clients a portion of the revenues generated in relation to their project with these new clients. This would encourage all employees, even entry-level accountants, to pursue or improve the marketing aspect of their job. The group takes into account that certain states in the U.S. do not allow this type of financial rewards for professionals. In these states, less explicit form of rewards should be implemented, such as _____.

Revised evaluation system to include both financial and non-financial metrics (See Exhibit __) The above set of measures parallel the current set used by Williamson and Oliver. The main revision is that a separate set of metrics is used for each strategy employed, with the composite weights adjusted accordingly.

Service areas that are mature and require a harvest strategy need a greater emphasis on net income and collections, and less emphasis on revenue growth and development. Service areas that have a high potential for growth and require a build strategy need a greater emphasis on growth in market share, and less on short-term metrics such as net income and collections. Specific metrics for the long-term factors client service, human resource development, and one-firm commitment, have also been added to complete the picture. Client service can be measured by utilizing customer satisfaction surveys and peer reviews. This involves the averages of the final numerical ratings for both the customer satisfaction survey and peer reviews Human Resource Development can be measured by conducting interviews with the underlings of candidates for promotion. High marks for the subordinates reflect favorably on the management skills of the candidate. One-firm commitment is a persistent problem for the company since the local offices that it acquires still retain their old corporate culture rather than assimilating that of the parent company. Hence the local offices tend to continue doing things their way rather than adapting to the practices of Williamson and Oliver. One way to counteract this tendency is to make part of the PIC compensation dependent on overall company performance. Conclusion Summarize the stuff. shet Solution Hire outsider x

Problems Lack of eligible mgrs / inexperienced PICs Low market share for local offices Short Term Profitability Long Term Profitability Rocky transition from local firm to local office of a natl firm

New client bonus

Revised Evaluation System X X X X

Mgt training program X

Service Bond X