Deloitte’ Success and Its Strategic Human Resource
Deloitte Touche Tohmatsu Limited, also branded as “Deloitte”, is the largest private professional services organization in the world - Deloitte’ Success and Its Strategic Human Resource introduction. It has almost 170,000 staff over 150 countries. Deloitte mainly delivers audit, tax, consulting, enterprise risk and financial advisory services. In the mid of 19th century, Deloitte started its business earlier than any other competitors in the professional services industry. Deloitte is now also famous for its accounting area which is one of the four largest audit company in the world.
Compare to other famous consulting company like McKinsey & Company and Boston Consulting Group, Deloitte’s consulting has lower risks. The reason is they focus on different consulting area. McKinsey and Boston are famous for their strategy consulting which means give the companies idea about how to enter a new market. Thus their consulting result would involve many unpredictable economic factors. However, Deloitte focus on the low risk Human Resources consulting which is more predictable and stable. There isn’t too much forecasting but more adjusted numbers to evaluate.
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Deloitte also takes advantage from its strong accounting and makes the consulting results more accurate. Another important reason that Deloitte has confidence in human resources consulting is they have an efficient human resources strategy in the company. Once I was glad to speak to Xiaoxing, Liu, who works as a Senior Consultant for two years in the Japanese Deloitte company. Mr. Liu said the human resources structure in Deloitte is just like a pyramid. At the very bottom rank is Business Analyst. They also have the largest numbers in the company.
The second rank is Consultant. The difference between Business Analyst and Consultant is their job specifications. Business Analyst doesn’t have any specify and Consultant is just got promoted to special area like accounting or marketing. Then as the pyramid goes up, they have Senior Consultant, Manager, Senior Manager, and Partner. Basically, Deloitte manages its human resources as a cross table. On the vertical line, employees are differentiated by various industries that company serves. On the horizontal line, employees are differentiated by their individual skills.
Usually, one project needs at least one Manager and several Senior Consultants, Consultants, and Business Analysts. When the manager gets the assignment, he can first check what industry is this project abort, for instance, it is a food company offers for consulting. Then the manager can easily pick up people that worked with Food Company before, and then he chooses people based on their personal skills such as financial, accounting, etc to form a group for the project. The Business Analyst is the last to pick up because they are not specified in any areas or any individual skills.
Mr. Liu said these people stay in a “pool”, whenever a project need them, they will be chosen randomly or based on previous experience. Each time the project finishes, the manager will give the team and individual evaluations. Based on this evaluation, they can get promote or demote in the future. Deloitte has shift the role of Human Resources from administrator to strategic business partner. Traditional HR mainly focuses areas such as improving HR operational efficiency, reducing staff costs, and training or developing. They must be done well first.
These kinds of activities have become tablestakes and Deloitte doesn’t want HR function limited by these. The new market force requires a new strategy with more competencies. Deloitte did a survey that shows what HR must focus more time and effort in order to help an organization thrive. First is the leadership development and pipeline. Company always wants there is no gap between building the next generation of leaders. Second, high performance culture that creating a workforce that is pre-wired for high performance. Third, talent management which attracting developing, and retaining the talent an organization needs to thrive.
Fourth, talent acquisition-recruiting and hiring people with the right skills and capabilities. The last is anticipating and responding to mission, things like critical events proactively addressing strategic challenges, instead of reacting after the fact. These challenges have a tremendous impact on an organization’s overall performance. Thus, Deloitte came up with the idea of partnership which focuses on strategic people issues, not just administration and operating efficiency and deals the problem of keeping a sustainable advantage in the marketplace.
To achieve the goal of building partnership, this requires HR greatly upgrade its talent and capabilities. However, at first they were weak in HR innovations. It is expensive, difficult to achieve, and hard to sustain a good human resource strategy. To close the gap in innovations, Deloitte had to either build or buy for HR. They finally chose to do both. They first increase its investment in business-related training in order to help HR staff improve their business knowledge and experience. They also recruit leaders and staff with more aggressively, actively attitudes to fill the shortage of talents.
Deloitte believes that before HR can help the broader organization address its strategic talent challenges, HR must first address its own talent challenges. As the employee gets promoted to Partner, he can share out 10% bonus from Deloitte each year. Deloitte uses this strategy to create a high performance culture and develop and attract leaders to the company. They also apply the same strategy in their consulting idea that helps other company to transfer their HR system into a new level. As Mr. Liu mentioned, the Japanese Deloitte also has their special treatment during the recession.
Most western companies chose to cut off the pay and usually have 10%-15% unemployment. Deloitte insists on no unemployment during the recession. Because of the recession, most company won’t afford the consulting fee or other business analysis fee so Deloitte would lose couple of its business. The payment in Japanese is base on staff’s activities each year, so the less business the less pay they can get. The Japanese Deloitte decided to share the project by more than one team, so people can still increase their activity without taking the risk of recession.
Another way to fill the shortage of business is to create business service. In 2009, Deloitte opened a new business area which is Sustainability and Climate Change. They got lots of advantage from it. It’s a hot topic. Most company needs to know how to find a sustainable and green way of operating. This also raised their reputation in the market. These all related to their HR strategy. With the strategic HR system, they can easily come up with the solutions and reorganize the organization effectively. The partnership also helps the company to hold their talent resources.
However, Deloitte made mistake in their decisions. Mr. Liu said this is the biggest lost in their Japanese Deloitte company. In 2000, the IT consulting department of Deloitte in Japan had achieved a great success. At first, Deloitte didn’t realize the problem. One day, the top manager in the IT consulting department took all the teams away from Deloitte, and they start their own business name ABEAM. Soon, ABEAM became the second largest IT consulting company in Japan. On the other hand, Deloitte lost almost all the resources and people in their IT consulting department. In the later years, they have no competency in IT onsulting area anymore. From this experience, Deloitte learned that the balance inside the company is important. They also found their weakness in their partnership. They chose to increase the percentage of partnership in the company from 10% to 20%. Although the partners get fewer shares, there are 10% more get motivated. In conclude, Deloitte finds their way to success by using the revolutionary human resources strategy. They developed the partnership and improved it from their mistakes. As they give other company consulting idea to success, they first became an example of it.
“HR talent paradox”, Slideshare: http://www.slideshare.net/wangwj_arthur/hr-talent-paradox-deloitte
Abeam Consulting: http://www.abeam.com/gbl/eng/