Essay: Ernst & Young SWOT analysis & recommendations

Introduction:

ERNST AND YOUNG (EY) is a financial consulting firm having global presence and providing quality solutions globally. Their four service lines includes Assurance, Advisory, Tax and Transaction Advisory Services. EY have expertise in audit and financial services. Clients of EY ranges from start-ups to Fortune 500 companies from different industries. Major competitors of EY are McKinsey and Company, Boston Consulting Group, PWC, KPMG, Deloitte, etc. With the world becoming a global village, there is increase in the competition which calls for creative and innovative solutions for the problems faced by the companies. In this paper, focus shall be on the consulting industry and specifically on Ernst and Young in Hong Kong and Mainland China.

SWOT Analysis:

Before we proceed with the problem statement of EY in Hong Kong and Mainland China, let us first have a look at Strength, Weakness, Opportunity and Threat (SWOT) analysis of EY.
Strengths:
EY has numerous strengths which help them not only to thrive in the existing market but also to capture the new markets. Some of the strengths of EY are as below:

1. EY has a global presence through roughly 700+ offices in more than 150 countries in the world, viz., United States of America, Europe, Middle East, India and Africa, Asia-Pacific region and Japan.
2. EY has skilled workforce. EY has been investing a lot in training and development programs for the employees which results in highly skilled workforce from across the globe.
3. Marketing campaigns of EY directed towards enterprises and corporates are a huge success for EY brand. Further, sponsorship of various global events gives them a huge presence across the world. Also, mergers and acquisitions have strengthened the brand position of EY in the business world.

Weaknesses:
Weaknesses are the areas where EY can improve and sustain in the competitive environment. By working on these weaknesses EY can gain competitive advantage and stay ahead of markets. Weaknesses of EY are:

1. With increase in competition comes the slow growth rate for EY as the competitors are having more innovative solutions as compared to EY.
2. Attrition rate is quite high in EY. As compared to other organizations in the industry, EY is facing high attrition rate and spends quite a lot on training and development of employees.
3. EY needs to invest more in technology and integrate their processes across the board.

Opportunities:
EY can capitalize on the opportunities they have. Following are the opportunities for EY:

1. EY must develop their infrastructure which will help them in getting more clients.
2. Now-a-days companies are constantly looking out for consulting solutions. EY can take advantage of this opportunity to expand their market share.
3. EY has immense opportunities in emerging economies. The adoption of new government free trade agreement provides EY a new opportunity to enter emerging markets.

Threats:
EY should have a proper risk management policy and adopt preventive measures to protect themselves from the contingent threats. Threats of EY are as below:

1. Increasing competition can reduce market share of EY. Also, new entrants coming in the market can reduce the market share of EY. If competitors come up with innovative solutions, clients of EY shall switch to the competitors thereby reducing their market share.
2. New technologies developed by competitor or market disruptor can be a serious threat to EY.
3. The demand of the highly profitable products is seasonal in nature which is their core activity and any unlikely event during the peak season may impact the profitability of the company in short to medium term.

EY should try to convert their weaknesses into strengths and threats into opportunities.

Problem Statement:

After having a look at the SWOT analysis of EY, let us have a look at the problem statement. A question that struck my mind was “what are the challenges faced by EY?” While finding answer to this question, other sub question that knocked my mind was “how can they effectively manage their challenges in this competitive environment?” When we visited EY in Hong Kong, during the presentation given by their staff, the questions asked by my fellow students and I myself being from the consulting background, I noticed that EY is facing few challenges which are as below:

• Retaining top talent: as we saw in SWOT analysis as well, EY is facing challenges in hiring and majorly in retaining the top talent in the organization. Attrition rate at EY is quite high as compared to competitors. They spend a lot of time and amount on training and development of resources who join either as an intern or right after graduation and turn them in the most valuable resource who run EY. These trained employees leave the organization and join the competitors. Also, it is difficult to hire new people as Hong Kong is experiencing talent shortage. Further, hiring procedure is time consuming and expensive and it takes time for the employee to get used to the working culture and catch up with the job profile and expectations of management.
• Managing workforce: another challenge after hiring and retaining talent is managing workforce and their workload. EY personnel mentioned that they have high workload and one employee manages high number of clients. When asked about recruiting people he said that their workload is seasonal and therefore they cannot hire people just for seasonal workload. EY, therefore, faces problem in managing their workforce and their workload.
• Winning new clients: as the competition in the consulting industry has increased , winning new client will be difficult for EY if they don’t come up with innovative solutions as other firms will also be trying to get that client. Further, as they are facing difficulty in retaining top talent, there will be shortage of staff to work on these new clients and existing people will be overburdened.

Recommendations:

After doing all the research and analysis around the problem statement of EY, I would like to make following recommendations which may help EY grow further:
Retaining Talent:

• Retaining employees is critical for the long-term success of the business. EY should come up with Human Resource policies which are employee friendly like giving work from home facilities during high workload periods, vacations after end of seasonal work, good pay hikes, etc. For e.g., often during audit season, since an employee is working on number of clients, they must work long hours so as to meet statutory deadlines. In such cases, if employee has been constantly working long hours, he should be offered flexible working conditions like work from home or should be given mandatory leave post completion of the audit season.
• Often employees leave because of managers and supervisors rather than their actual job profiles. This situation is not only in Hong Kong but also across the globe. There should be quality managers and supervisors who are leaders in true sense, who understands that organization grows with an employee and makes best possible effort to retain employees by keeping them happy and motivated. Also, there should be reverse feedback from the employees about their supervisors and managers.
• EY should motivate employees to come up with creative and innovative suggestions which can be implemented by the company and if the company is benefited from the suggestion and saves money, the employee who suggested such a creative and innovative solution should be appropriately rewarded. This will create motivation among employees to constantly improve their process and in turn will help the organization to stay ahead of competition. They will also feel that they are heard and they make difference to the organization. Since Hong Kong is a major financial hub and many companies starting their business in Hong Kong, EY has to be competitive by being creative and innovative.

Managing Workforce:

• It was confirmed by the personnel form EY that during audit season, for example, workload is quite high and employees working in audit department are very busy and work for long hours. They cannot hire people because it is seasonal work. In such cases, they should allow employees from other departments to try new opportunities or take up other challenging tasks from some other departments where there is high workload. Organizations should remember that passionate employees always want to learn and grow. They don’t want to stagnate. When given an opportunity to try challenging tasks and new opportunities, employees will learn new things, will have knowledge in all the business lines, which in turn will help the organization as well that their employees are aware of all the business lines and can help in the situations of high workload.
• EY specializes in audit and accounting services. There are so many things which an accountant does can be automated. If new technology is introduced and the work in the area of audit and accounting services is automated, many of the tasks can be done by technology and employees can concentrate on the qualitative tasks rather than repetitive ones. This will also reduce manual errors.

Winning New Clients:

• Hong Kong being reputable international financial and business hub, new companies are coming to Hong Kong because of numerous benefits. Many-a-times consulting companies approach new clients and just introduce their firm and the services provided by them. This approach does not always help in winning new clients. A detailed study of an organization or new client is a must. With detailed study, EY can find out what client is looking out for and can develop a customized product for the client. Further, proposal given to new client should be action oriented and to the point rather than just marketing oriented. It should seem to the client that EY is already aware of the exact requirement of the targeted client and is prepared with action plan. This also ensures a good rapport and lasting relationship.
• Instead of investing in or setting up a separate research and development department, EY should acquire disruptive startups that are providing innovative solutions in their industry. There is a win-win situation in this case as startups have ideas but lack funds and hence are looking out for funding and EY can get innovative solutions without spending a lot of time and money on research and development.

Conclusion:

Every organization should understand that it grows with employees. If employees are happy and motivated, profits and numbers shall follow. Hong Kong has numerous benefits due to its geographical location, best infrastructure, broadening economic base and transforming the economy, etc. Most important is Hong Kong possesses unique comparative advantage over many other cities in accessing the China and Asian markets. Hong Kong being dominated in the service sector, EY has to face tremendous competition from competitors and has to continuously improve and innovate in order to sustain in the market and stay ahead of competitors. EY should reinforce its strengths and capitalize the opportunities available in the market. At the same time, it should work on its weaknesses and should tackle the threats prevailing the market.
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