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New EY chief dismisses revival plan to split Big Four firm in two
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EY’s new global chief executive Janet Truncale has ruled out an immediate revival of the Big Four’s plan to split in two, unveiling an alternative strategy that involves scaling back its central bureaucracy.
Truncal told the company’s 400,000 employees in a memo on Thursday seen by the Financial Times that the company would “recommit to working together as an organization” and that its new leadership team planned to simplify the way the company operated.
“There is enormous power in our global scale and connectivity. So, looking ahead, let us recommit to working together — with HELLO customers, our ecosystems, and each other — as an organization,” she wrote.
Truncale takes over on July 1 after the retirement of Carmine Di Sibio, whose attempt to spin off EY’s tax consulting and advisory business — codenamed Project Everest — failed last year.
Such a plan would have radically reshaped the industry, also resulting in cash gains for EY’s audit partners and freeing the consulting business from conflict of interest rules that prevent it from working with the firm’s audit clients. After more than a year of planning and $600 million in spending, Everest was shut down after opposition from the American arm of EY.
Unlike multinational companies, EY is structured as a network of locally owned partnerships, with the global headquarters overseeing the brand, managing IT and setting auditing standards.
The selection of Truncale, a Di Sibio ally, as chief executive raised hopes among Everest proponents that the plan could be quickly revived, but Truncale has signaled to colleagues that that is not the case, according to people familiar with the internal conversations.
In a webcast with EY’s 14,000 global partners on Thursday, she said the issues that motivated Project Everest remained, according to people familiar with the call, but said no split was being planned.
Instead, it said it would make structural changes to the global operation, including reducing the number of roles that oversee EY member firms in Europe, Asia and the Americas.
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Member firms in Europe have sometimes chafed under multiple layers of management, while the North American company has been agitating for cost cuts across its global operations, which spent $6.4 billion last year, or nearly 13% of its global revenues.
Truncale wrote in his memo that EY would make new investments in units that advise clients on transformation and sustainability, and expand its managed services business.
The name of the new strategy for the $50 billion revenue company is “All in.”
“I personally love the name ‘All in,’” she wrote. “The name was extensively tested with EY clients, partners and people. We agree that this captures the importance of working together to be successful.”
In a farewell note published on LinkedIn earlier this week, Di Sibio said he was proud of Project Everest. “The strategic rationale for this continues,” he wrote, “and has awakened the industry to outside investment, including private equity investment. Above all, Project Everest has made EY a more resilient and courageous organization, better prepared for future challenges.”