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Think globally, act strategically

Ubiquity, Volume 2001 Issue July, July 1 - July 31 2001 | BY Ubiquity staff 

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John Parkinson relays the challenges for a global financial services firm including anticipating technologies, winning the war for talent, and finding innovative ways to maintain a corporate presence in a worldwide market.


John Parkinson relays the challenges for a global financial services firm including anticipating technologies, winning the war for talent, and finding innovative ways to maintain a corporate presence in a worldwide market.


UBIQUITY: Tell us, please, how you fit into the structure of Ernst & Young.

PARKINSON: I am part of a group called Strategy and Corporate Development that was set up to help guide the future direction of the firm. Within that group, I'm responsible for the firm's internal innovation program across the Americas, and that means everything from north of Canada to south of Argentina. I'm also part of a team that advises the management committee on the firm's strategy.

UBIQUITY: And when you think of innovation, what are you thinking of? What does that include?

PARKINSON: We think of innovation in five areas. The first focuses on completely new businesses or business models related to the delivery of professional services, and our question here is how can we do the professional services job in new ways? The second area concerns what we call channels, and we ask ourselves how we go to market by ourselves or with others in the professional services arena. The third area is products and services -- or what we call "offers to the marketplace" -- the kinds of things that we actually do. The fourth area targets ways that we deal with the core resources of our business, which are people. And then, the fifth area is operational effectiveness, and here we try to find more effective ways to run the business that we're in.

UBIQUITY: How do you see information technology as part of that mix?

PARKINSON: Information technology is absolutely key to the mix -- for a variety of reasons. One is that we have to get more and more leverage out of each hour that our people work, because we know that they are not going to work many more hours than they already do, and we know that there's a limited number of people available to expand the total bank of hours that we can deploy. And information technology has been and continues to be a big factor in providing tools to get that leverage and help people work smarter. Secondly, a big piece of our business involves effective connections to our customers -- the people we provide services to -- as well as to our own people and to others who provide services to those same customers and people. And making those connections work efficiently requires information technology. And then, thirdly, both our customers and our people expect it -- particularly the younger ones growing up in a world where information technology is prevalent. They look askance at businesses that don't provide them with IT tools to do their jobs.

UBIQUITY: How has information technology made its biggest impact on furthering innovation at Ernst & Young?

PARKINSON: The biggest impact has been in the area of knowledge sharing and collaboration. We have more than 80,000 people spread over more than 100 countries, and information technology makes it possible for them to work together across geography and time. As a result, we have been able to significantly grow our business ahead of the general growth rate of our industry for an extended number of years. And that ability manifests itself in a lot of ways -- such as in the way we think about how we operate the business, in our culture, and in the kinds of behaviors that our people exhibit. So, for example, our adoption of a single universal e-mail system in the mid-'90s replacing multiple and incompatible systems dramatically changed the way we think about how we communicate with each other. We'd been entirely a telephone culture before that, and increasingly, we're moving to a digital document culture. And in '96 and '97 we developed what was, at the time, the only online consulting capability. It gave us a new way to have our customers do more of the work of asking us smart questions and focusing our energies on what was important in providing answers to them.

UBIQUITY: How does that work?

PARKINSON: Basically, they ask a question on a secure Web site that offers a subscription service to which you sign up, identify yourself, and then ask questions that are routed to a specialist who provides answers immediately or within a negotiated period of time. There's also some smart guidance to help you frame the question, which makes it easier for us to understand the context you're asking it in, and there's some technology that helps make sure it gets to the right person.

UBIQUITY: What inspired the system's development?

PARKINSON: What inspired it was some research we did years ago that said if a person can get his or her question asked very quickly, then that question is more likely to be asked and the problem to be resolved. If the person has to wait awhile until the opportunity arrives, the probability that he or she will remember to ask it decreases geometrically. So what was needed was a kind of instant gratification service -- even if it's only relatively instant. Because even though you don't get the answer immediately -- usually it takes a day or two -- you get to ask the question (and have it noted) as soon as the topic arises. And that turns out to be a big piece of motivation for our customers, to actually get the thing asked, and the process set in motion.

UBIQUITY: What sorts of questions are asked?

PARKINSON: Since we're in a business that serves the finance, accounting and tax community, we focus mostly on tax issues and accounting practice questions. We're not allowed to do opinion shopping, which is against the rules of our profession, but often we can point people towards good places to get answers even if we can't provide an explicit answer or are not supposed to provide an opinion.

UBIQUITY: Now, your role as a corporate strategist for a financial services firm is something that's probably not often done by computer scientists, and yet you have a degree in computer science, right?

PARKINSON: That's right, I have a postgraduate degree in computer science, and I'm a mathematician by original training. And yes, I suppose it's a little unusual to have somebody with my background, which is almost entirely in technology and technology strategy, migrate into corporate strategy. But, you know, it turns out that the problems of technology strategy and corporate strategy are not all that different, even though the domains themselves are somewhat different. The problems and the processes that you use to define and guide strategy are just not all that different. Analysis is analysis. I'm an analytic and numerate person by habit as well as training, and a lot of strategy benefits from a more quantitative approach than some firms take in the development of corporate strategy.

UBIQUITY: Is your role at Ernst & Young the result of the convergence of technology and business that's happened in just fairly recent years? Is it likely that a person with your background would have had that kind of job 20 years ago?

PARKINSON: I think it's unlikely, and I guess it's also unlikely that someone of my relatively young age 20 years ago would have been seen as a natural corporate strategy type. I think it's partly the convergence -- or, maybe a better word here, the interdependence -- of technology and business, that influenced the choice of what kind of person was needed for the job. We know from work we have done on corporate governance, for instance, that one of the key concerns of the corporate boards of public companies is their inability to fully comprehend the impact that technology is having on their businesses and the markets within which they operate. So I think there is a desire to get more technological expertise into the corporate strategic process. But a large part of it, in my case, I think, is that to be a good strategist you have to have a couple of characteristics beyond the obvious. You have to be willing to question the status quo in ways that are difficult to do in many business environments, particularly traditional ones like ours. You can't be wedded to strategies that preceded you -- or even to ones you've created yourself. And that's because a secret of the success formula is to be able to change strategies at need. A technology background serves well for that habit of mind. Since technology changes around you all the time, so you learn not get too enamored of any one particular area, or you get left behind.

UBIQUITY: What's the key to changing the status quo?

PARKINSON: Questions. Not solutions, but questions. The key is always to question the status quo, because the questioning, by itself, often causes sufficient incremental change to lead to the result you want. And steady, incremental change is always the preferred goal. There's simply no reason in our industry or in many others to have to have a revolution every six months. You just want to continue to push evolution along on a regular basis so you don't stagnate, and only rarely is there a real need to radically change things.

UBIQUITY: Is incremental change much easier to accomplish than radical change?

PARKINSON: Not necessarily, and not always. People don't always like to have other people questioning what they do or the way they do it questioned. They think it's a challenge to their professionalism or competency or to their work ethic. Of course, it need be no such thing, but it's often difficult to explain that to people, so I get a lot of push-back. But that's okay: it's necessary and it's part of the process. The process includes a learning component in which we all reflect intelligently on whether we can do something better, including the way we do things in Strategy and Corporate Development.

UBIQUITY: Do you feel that Ernst & Young is a particularly innovative company?

PARKINSON: Within our industry, which you might argue is not a particularly innovative industry, yes, I think we are. I think that the history of our activity over the last 25 years or so has shown us to be a first mover in many things. Not everything: I don't think anybody gets to be the only innovator or the perpetual first mover. But we were at the forefront of the consolidation phase in the industry in the late '80s. We were the first to restructure our tax practice. We were the first to invest heavily in technology, and so on. So yeah, I think we are amongst the most innovative. I would also say, though, that as happens in a lot of industries, many of the innovations occur in much smaller businesses within a given industry because it's easier if you have less inertia and less people to change when something new comes along. And we, like every other very large corporation, struggle mightily to understand how to do that effectively when a change might touch 20,000 or 80,000 people.

UBIQUITY: Do ever start with smaller units?

PARKINSON: Yes, we do, quite often. And, actually, one of the advantages of our size is that we have, within us, many small units where we can try new things. But of course we have to be careful that, in doing so, we don't trigger what I call a corporate immune system. We have to be able to efficiently isolate from the status quo things that are significantly different, until they're strong enough to stand on their own; and yet at the same time we always have to do that in a way that allows us to reintegrate them into the general body of the firm once we've proven that they work and that we want to stick with them long-term.

UBIQUITY: What challenges do you see looming ahead?

PARKINSON: There are three big challenges that drive our strategic thinking. First and foremost is to somehow keep people interested in doing the work that we do; that's the people challenge. But that challenge is not just "the war for talent" mantra in the conventional sense, it's the reality that if we seek to continue to grow, as we do, then we have to find a way to constantly refresh the flow of people into our profession. And the people challenge has become much more complex in recent years, as the training period for certification tends to lengthen out at the same time as the generations entering the workforce now tend to have different perceptions about careers, working environments, work expectations, and so forth, than the current top executives of the firm had when they were first starting out.
Secondly, we are challenged to understand what a global professional services firm should be, how it should operate, how it should be structured, how it should invest resources to build and maintain a global presence and so on, and we know that that's an absolutely critical success factor going forward. But there are too few useful models around for us to copy, so we're being forced to innovate and experiment in that area. We believe that a solution will emerge in the next four or five years, but it's not exactly clear today what that solution will look like. And then, the third challenge, as I alluded to earlier, is understanding ahead of time what the critical differences that developing technologies will bring to our business will be. For example, what will get automated away? What will remain the province of human expertise? What new collaborative work techniques will emerge? How will we shift effort between what we do and what our clients do? And so forth?

UBIQUITY: You said that you suspected the problem of maintaining a global corporate presence would likely be solved in four to five years. Why four to five years? Why do you say that?

PARKINSON: There are a couple of factors in that. Most of our scenarios say that it will be no more than four to five years before the two remaining super-consumer blocks and super-industrial blocks -- that is to say India and China -- are essentially integrated into the world economy. Remember, I look at this from the point of view of a professional services firm serving major corporate clients, rather than as someone targeting the broader global sociodemographic. So my specialized interest in globalization is focused on the specific question of how do we get to be the premier financial assurance business in China, where today, there is very little financial assurance, in spite of relatively free enterprise. Our best guess, based on a scenario-based prediction -- it that sometime around 2005 the structure of global trade will be such that we will have China and India aboard, at the governance level and the reporting level. And that will be what determines how our business evolves for the succeeding decade, absent any major or wrenching structural changes in the world economy.

UBIQUITY: One more question about the "people problem." Do you see important differences between the recruitment and retention of financial people as contrasted with the recruitment and retention of technical people?

PARKINSON: There are some differences. The challenge that we have in the financial arena is that while some of the work we do is very complex and hard to understand, it is retrospective in nature, by which I mean that once you've gotten the rules, you're in good shape, because the rules don't change very often or very much over time. So in the financial arena you have to have the kind of people who like to work with precision and repeatability and reliability. Now, many of those traits, it turns out, are similar to the kind of engineering traits that you want in the technology space, but in technology you've got to be much more willing to try new things and to push boundaries. So you end up with different kinds of people going into the two professions, even though they often come out of, broadly speaking, the same academic predilections.

UBIQUITY: Is there a common problem in recruiting and keeping both kinds of people?

PARKINSON: One problem both areas have in common is that there just aren't enough people who want to spend the time getting trained to learn the work well enough to excel at it. A lot of people nowadays believe that it should be possible to get good quickly, so that they can get happy or wealthy or whatever you want without any fuss or bother. And the idea that you have to go through an extended apprenticeship before you're certified to be a safe practitioner is increasingly difficult to sell to the kids coming out of school.

UBIQUITY: What are your thoughts about education of those kids?

PARKINSON: First of all, I think that the education that they go through today is wildly inappropriate to the social and economic needs of the people going through it. What we have today is a system that you can think of as the industrial model of education, and that is predicated on the theory that the scarce resources are teachers and that you should therefore optimize the system so that it maximizes the teacher component, not the people component. Well, that worked really well for most of the 20th century, but it's not working anymore, and we have to do something about that. Of course, just what we do about it is a tough problem. Part of the answer is in technology, but another big part of the answer lies in the sorts of expectations that society puts on its education processes. It requires an understanding that we have to invest more to get the same amount of results generation after generation, and that's because what you need to come out of an education process gets richer and more complex over time.

UBIQUITY: Has Ernst & Young been doing anything new to improve its own recruitment and training processes?

PARKINSON: We're constantly looking at how we recruit, how we target more effectively, how we structure a career model that's more attractive to people, how we can economically structure the business so that we can co-invest with our people over an extended period in the career-building process. And we have, over the last 18 months, essentially restructured our processes to put the concept of collaborative lifetime career-building at the center of the offer we make to the people we'd like to recruit.

UBIQUITY: Most of our readers are technical people. Do you regard Ernst & Young as offering something good to them?

PARKINSON: You know, directly in terms of switching out of a technical career into an accounting career, the fair answer would be no, but in terms of providing a model of how a 21st century enterprise that depends on talented people to operate, then I think we do have something very interesting to offer, because we're in a position to try a lot of things that other businesses may not be. There are high mountains to climb, but the views are spectacular.


John Parkinson, a partner at the professional services firm Ernst & Young, has been with the firm since 1985. He holds a BS in Mathematics and an MS in information sciences from Exeter University in the UK.

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