Grant Thornton UK CEO faces cultural pushback ahead of election

01 October 2018 8 min. read
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Grant Thornton’s UK Chief Executive has reportedly been criticised by a collective of the firm’s Partners. In an anonymous note circulated to the British press, Sacha Romanovitch has had the bizarre allegation of pursuing a “socialist agenda” levelled at her, as she prepares to seek re-election for the top job at the UK’s fifth largest auditing and advisory entity.

Sacha Romanovitch became the first female Chief Executive Officer of a major UK accounting and advisory firm after a vote of Grant Thornton’s Partners ratified here as the CEO elect in late 2014, eventually taking up office from the outgoing Scott Barnes in June 2015. A keen advocate for increased social mobility within both the profession and wider business – recently taking up the position of Co-Chair of the UK government’s new Inclusive Economy Partnership – Romanovitch quickly set about work to reform Grant Thornton’s own corporate configuration.

At a time when public criticism of the UK’s largest auditors has been rife, Romanovitch moved to radically restructure the firm, allowing for some profits to be shared with all staff, rather than just Partners. At the same time, Grant Thornton’s UK head moved to reposition its focus to “profits with purpose”, meaning the firm would not only emphasise its own corporate social responsibility, but also move away from working for clients which lacked those same principles.

Perhaps unsurprisingly, these changes seem to have upset a number of the firm’s Partners. In an anonymous note distributed to the British media, and reported on by the UK’s Financial Times, a writer allegedly representing some 15 Partners and Directors at the firm accused Romanovitch of pursuing a “socialist agenda”, further alleging that under her stewardship the firm had “no focus on profitability”, and was “out of control”.

Grant Thornton UK CEO faces cultural pushback ahead of election

While it is questionable exactly which version of Capital the note sourced its definition of “socialism” from to include such a large corporate entity, it likely points toward a feeling among Partners that other members of staff are eating into their pay-outs, and do not deserve to share in the profits of the firm – which rose in 2018. The memo further suggested the incumbent leadership had imposed a “culture of fear” at the firm in the face of cricicism. The news comes as Romanovitch approaches the launch of her bid for a second spell at the head of the organisation, which is viewed increasingly by UK politicians as a vital challenge to the growing strangle-hold of the Big Four on the UK’s auditing scene.

With regards to the “culture of fear”, the note potentially refers to have previously questions about the direction of the firm were handles. Criticism had previously been directed at the leadership during a meeting in Grant Thornton’s London headquarters in April. According to sources present at the time, reported in the Financial Times, the meeting of more than 70 Partners saw several raise concerns about the firm’s strategy. Since then, long-serving Grant Thornton stalwart Robert Hannah, who spoke out at the meeting, was removed from the firm’s strategic leadership team. Hannah has been at Grant Thornton for almost three decades, and critics were quick to suggest that he was in effect demoted for speaking his mind.

According to the Financial Times, Romanovitch has come under further pressure for the firm’s financial performance, as well as her leadership style and strategy, after three Partners at the firm, who requested anonymity, stated support for at least some of the criticisms. While the trio did confess to feeling the “mischievous” note had exaggerated the firm’s plight in places, they sympathised with a number of grievances cited, such as Grant Thornton’s recent financial performance, its heavier focus on marketing and branding over profits, and the leadership’s supposedly heavy-handed response to critics. In November, a partnership oversight board is set to re-appoint Romanovitch or choose a new chief executive, and it has been suggested that the criticism now coming to the fore is an attempt to influence that process.

Culture wars?

Grant Thornton’s profits before tax declined by 12% in the first 12 months of Romanovitch’s tenure as CEO, decreasing to £72 million, from £82 million a year earlier. While revenues in the 2015/16 financial year grew by 2.5% to £534 million, distributable profits per Partner tumbled from £398,000 to £344,000. However, a large part of this fall was attributed to the ‘Vision 2020’ strategy, which involved developing Grant Thornton’s analytics capabilities; improving its work along trade routes; focusing on strategic accounts; and building development teams, which in the leadership asserted that in the long-run would streamline operations and boost profits.

Romanovitch commented that, “A small cadre of Partners will find it hard we are making decisions that will depress profits in the short-term but will help profits in the long-term. What has been the challenge with more establishment Partners is helping them to get their heads around the fact that profits and purpose are not incompatible. If profits get unhinged from purpose it might not hurt you now, but it will come back and bite you on the bum.”

“If profits get unhinged from purpose it might not hurt you now, but it will come back and bite you on the bum.”
– Sacha Romanovitch, Grant Thornton UK CEO

As the professional services industry continues to suffer from a lingering image problem, with many of its biggest names having been embroiled in some form of accounting scandal in the past few years, the change in rhetoric from Grant Thornton in recent years could be seen as a clear bid to take advantage of a gap in the market for a more ethical-seeming auditing firm. Following up on the firm’s results a year later, Grant Thornton perhaps began to reflect this in 2016/17. While revenue slightly fell to £500 million, due largely to the to the cessation of the government-funded Business Growth Services programme, post tax profit grew by 10.3% to £75 million, and average distributable profit per Partner was boosted by 7% to £407,000, and revenue was reported at.

Despite that, Romanovitch has stated that she is aware some Partners are still unsupportive of the changes to the firm’s structure. She added that this was “normal in any partnership”, and that she found the suggestion Partners could not scrutinise her strategic decisions as a major frustration, citing “lots of forums for Partners to give feedback” being made available. Meanwhile, she has also recently pointed out that while many Partners may dislike her approach, she remains popular among the firm’s 4,500 UK employees, while the company’s brand recognition is noted as being at an all-time high.

One supportive Partner told the Financial Times, “Large banks are asking us to do their audits – that would not have happened three years ago… We are getting into boardrooms we would never have got into before and that’s down to one person: Sacha.”

Others in the current leader’s camp have also noted that Romanovitch is the second female CEO of one of the world’s largest professional services firms to have come under such pressure. Earlier in the year, despite her own popularity among the firm’s workforce, Cathy Engelbert was blocked from running for a second term as CEO of Deloitte US. While some suggested that in a troubled year for the firm – when it was mired in a hacking scandal – someone simply had to take the fall, others alleged it was due to Engelbert being a woman. Likewise, a number of individuals in Romanovitch’s circle have questioned whether the criticism she is now receiving was laced with a certain brand of “old guard” sexism, from long-time Partners who dislike the change to the order of things at the firm.

Grant Thornton is reportedly looking into an investigation of the source of the note, meanwhile, as it breached a number of company rules. The note contained a copy of the CEO’s most recent performance review, which is something the firm says breaks its data protection policies.