14 Chapters
Medium 9781523098033

6 An Injudicious Change Adventures and misadventures in Big Four branding

Gow, Ian D.; Kells, Stuart Berrett-Koehler Publishers ePub

Branding was key to how the Medici Bank flourished. From Scotland in the west to China in the east, the bank’s brand was immediately recognisable as a signifier of safety and integrity. And it served a more local purpose, too, helping keep ambitious junior staff in line. A manager in a hurry could strike out on his own and establish a rival enterprise using Medici methods, but he could not claim to be part of the trademarked Medici Bank: the right to use that name was an exclusive privilege of the partnership.

Despite the family’s criminal origins, and all the twists and turns in the Medici story, the name is still one to conjure with – an all-time great brand. Even today, it is used in European banking. The current Big Four names, too, are among the most recognisable worldwide brands, and so are among the firms’ most valuable assets.

Early in the twentieth century, fans of Britain’s magnificent Great Western Railway called it ‘God’s Wonderful Railway’; detractors called it the ‘Great Way Round’. The first large-scale mergers among railway companies were remarkable for their anguished deliberations about corporate titles. Whose brand would have the greatest prominence in the new name? Whose heritage would come first? The same anguish has since featured in mergers of large accounting firms.

See All Chapters
Medium 9781523098033

7 Porn Star The culture of the Big Four

Gow, Ian D.; Kells, Stuart Berrett-Koehler Publishers ePub

The day-to-day correspondence of the Medici Bank reveals men concerned with external matters such as the alum mines, the wool and silk markets and the creditworthiness of monarchs. But they were also concerned with internal matters. Were the bank’s systems strong enough to detect fraud and prevent financial disaster? Who was ready for a pay rise and a promotion? Were the young men graduating from the abacus schools up to Medici standards?

Angelo Tani, Rinieri da Ricasoli and Cosimo de Medici all understood ‘leverage’, which in partnerships means growing the business by hiring junior staff to complement and extend the capacity and capability of partners. The Medici Bank was one of the first large partnerships to grapple with the underlying equation of leverage: the incontrovertible calculus that profit per partner is equivalent to margin times hourly rate times utilisation (the extent to which staff are busy) times the number of staff per partner. Bringing on more staff was one of the few ways in which the bank could pursue higher profits.

See All Chapters
Medium 9781523098033

9 Unqualified Auditing as the foundation of the Big Four brands

Gow, Ian D.; Kells, Stuart Berrett-Koehler Publishers ePub

All the Big Four provide audit and advisory services, and in all the firms there are significant differences across these two service lines with respect to: staff qualifications and experience, job sizes, charge rates, delivery timelines and contract types. Compared to advisory, auditing is a higher-cost, lower-margin business with different economics and a different culture. Audit and advisory practices occupy separate divisions within the Big Four firms, and are often physically separate too. A Big Four advisor can go a long time without even seeing a Big Four auditor, and vice versa. When young staff speak of Big Four work as ‘indentured labour’, they are more than likely speaking of audit work. The daily routine of a junior auditor is dull and repetitive – so much so that the Big Four seldom highlight audit in their corporate communications and marketing to graduates. Inside the firms, auditing is deprecated and its practitioners have low status. Most graduates view a stint in auditing as a stepping-stone towards something else. Anything else.

See All Chapters
Medium 9781523098033

2 Glory, Not Infamy The Medici Bank as a precursor to the Big Four

Gow, Ian D.; Kells, Stuart Berrett-Koehler Publishers ePub

Piero de Medici – known as ‘Piero the Gouty’ (‘Piero il Gottoso’) – was born in 1416. In 1464 his father died and Piero inherited, at the age of forty-eight, a famous institution that was exceptionally profitable and well-run. Piero’s father – the illustrious Cosimo de Medici – and his grandfather – Giovanni de Medici – had built the family business into Europe’s most important private enterprise: the greatest bank in the world.

The Medici Bank was based in Florence, the capital of Tuscany. In the late middle ages, Florence was a substantial and prosperous city and the centre of global finance. A large gold coin, the florin, was first issued and named there; its widespread use throughout Europe added to the city’s financial prestige.

Unlike most cities and countries in late medieval Europe, Florence was ruled by a mercantile family, the Medici. The activities of the Medici Bank were intertwined with those of the Florentine state, to such an extent that the boundary between bank and state was conspicuously fuzzy. Upon Cosimo’s death, Piero became the head not only of the Medici Bank but also of the Florentine government.

See All Chapters
Medium 9781523098033

5 Mere Automata Staking out the Big Four’s turf

Gow, Ian D.; Kells, Stuart Berrett-Koehler Publishers ePub

In one of his notorious purges, Henry Ford famously sacked his accountants en bloc. ‘They’re not productive,’ he said. ‘They don’t do any real work. I want them out of here today.’ That story cannot be the whole truth; Ford’s enterprise would’ve collapsed without in-house bookkeepers and financial controllers. But the anecdote helps illustrate a wider twentieth-century trend, that of large industrial companies electing to outsource their accounting services. Corporates that had maintained significant in-house accounting units – such as IBM and Unilever – would decide it was preferable to buy those services from the marketplace.

This trend, unsurprisingly, helped spur and transform the accounting firms, as did other twentieth-century shifts: diversification of the firms’ activities, particularly into ‘management consulting’ or ‘advisory’ services; cosying up with governments; benefiting from the ‘audit explosion’ and the rise of the ‘audit society’; and, like modern Medici, spreading out internationally, with networks of branded franchises in which each national practice was a separate legal entity.

See All Chapters

See All Chapters