Strategy is arguably the most difficult thing for a company to consistently get right. Corporations can succeed for years in their industry only to eventually fail by making one strategic mistake. Nothing proves my point more than the recent events at the global audit and consulting firm EY. Founded in 1989 through the merger of Ernst & Whinney and Arthur Young and Company, EY became a storied member of the Big Four which also includes the firms Deloitte, PwC, and KPMG. EY generated $45B in revenue in 2022. Note: I am a former consultant at Deloitte and Capgemini Invent.
EY is led by CEO and Chairman Carmine Di Sibio who took the helm in 2019. In 2021, Carmine came up with an idea – he wanted to separate the firm into two companies. One company would focus on auditing, the other company would focus on consulting. Code named Project Everest, Carmine and a support team worked tirelessly to sell the deal to current partners and executives. After more the one year of planning, the firm was set to vote on the motion.
Not so fast. Julie Boland, the U.S. Chair and Managing Partner, had been having discussions behind the scenes with several key retired EY partners who resisted the breakup. Boland had been considered a supporter of the breakup until the 11th hour when she called for a “pause” in the discussions. Shortly thereafter, the firm called off the split.
What makes this story so interesting is that EY spent more than $600M as a result of Project Everest with nothing to show for it.
Mistakes permeated the project. Primary among them was Carmine’s failure to invest more time listening to the concerns of the U.S. stakeholders in order to secure their support. Carmine should have required Boland to play a more active and visible role speaking about why she supported the split. Instead, Boland worked behind the scenes to sink the breakup.
There is anger that the plan was considered in the first place. Others are angry that it failed. There is fear that competitors are going to poach the best talent from EY; it will happen and many inside EY will leave on their own. Worse, there is fear that clients of EY are going to engage in discussions with other consulting firms. Clients may view EY as a risk to their business.
In my opinion, the result of the failed split is this – EY looks like a dysfunctional company. When a consulting firm becomes dysfunctional, who do they call for help?
Now what? In my opinion, the answer is easy. Carmine Di Sibio and Julie Boland should be managed out of the firm as both have alienated a large segment of partners and associates. The Board of Directors should launch a search to hire a CEO from outside the firm. Appointing a CEO from within the firm is a recipe for failure due to the fractured culture. Keeping Di Sibio as CEO for “stability” is foolish.
I wish EY the best.
