Bou­tique Con­sult­ing Firms Of­fer More In­cen­tives to Re­tain Tal­ent

Cos like Mazars, BDO & KNAV of­fer more eq­uity, hefty pay pack­ages to part­ners

The Economic Times - - Companies: Pursuit Of Profit - Sachin.Dave@ times­group.com

Mumbai: Bou­tique con­sult­ing firms are now busy do­ing what they rou­tinely ad­vise Cor­po­rate In­dia to do: De­sign­ing tan­gi­ble ca­reer-growth op­por­tu­ni­ties and bulge-bracket pay pack­ages for their cru­cial tal­ent who may find com­pet­ing Big4 of­fers too tempt­ing to re­sist.

The hunt for tal­ent for part­ners and di­rec­tors has led firms such as Paris-based Mazars to be con­spic­u­ously gen­er­ous in In­dia: The firm, which is seek­ing to in­crease its num­ber of part­ners to 70 from 27, is of­fer­ing eq­uity of the global par­ent to some of the in­com­ing part­ners. The stan­dard prac­tice re­stricts such own­er­ship only to In­dia en­ti­ties.

“The way our struc­ture is cur­rently, some of our part­ners have eq­uity not just in the In­dia firm but are also part­ners in our global firm,” said Bharat Dhawan, Part­ner of Mazars In­dia.

Mazars’ gen­er­ous eq­uity-own­er­ship of­fers fol­low De­cem­ber’s un­prece­dented ex­pan­sion by BDO, a Bel­gium-head­quar­tered pro­fes­sional ser­vices firm that lured away about 400 ex­ec­u­tives, in­clud­ing 40 part­ners, from its com­peti­tors in the past one month. Apart from the tra­di­tional Big 4 — PwC, EY, Deloitte, and KPMG — none of the other firms have seen part­ner-level re­cruit­ments on BDO’s scale.

The Big4, as in most reg­u­lated global mar­kets, dom­i­nate In­dia’s pro­fes­sional ser­vices busi­ness with about 1,200 part­ners and more than 100,000 pro­fes­sion­als at var­i­ous steps of the ca­reer lad­der. With in­creas­ing changes in the reg­u­la­tory land­scape and stricter cor­po­rate gov­er­nance, the de­mand for au­dit and over­sight pro­fes­sion­als is in­creas­ing in the world’s fastest-ex­pand­ing ma­jor econ­omy, where the Big 4 are reg­u­lar tal­entshop­pers at mar­quee B-schools and fi­nance pro­grammes. Hence, bou­tique firms are tak­ing to in­no­va­tive struc­tur­ing of com­pen­sa­tion and ca­reer tracks to re­tain their best tal­ent and ex­pand the base.

“If one has to at­tract and re­tain best tal­ent, then firms have to go the ex­tra mile, in­clud­ing open­ing their doors for eq­uity own­er­ship and sim­i­lar tal­ent at­trac­tion in­cen­tives. Money is not the only mo­ti­va­tion now, as pro­fes­sion­als want in­no­va­tive chal­lenges and want to Man­ag­ing part­ner, Nan­gia and Co be part of some­thing dif­fer­ent,” said Rakesh Nan­gia, man­ag­ing part­ner of Nan­gia and Co — a New Delhi-based In­dian full-ser­vice firm. Among the in­cen­tives these firms now con­sider are higher eq­uity, profit shar­ing from ei­ther the global or do­mes­tic pools, meatier roles, swankier of­fices and cre­ative des­ig­na­tions. And the in­no­va­tions are not re­stricted to transna­tional au­dit and ad­vi­sory firms.

KNAV, a firm founded by four In­di­ans, is not only of­fer­ing some part­ners eq­uity, but also is cre­at­ing a struc­ture that en­sures par­ity be­tween the founders and lat­ter part­ners.

“No one, in­clud­ing the founders, can con­tinue to hold eq­uity for­ever. Our manda­tory re­tire­ment age is 65, un­less all other part­ners vote to have a part­ner con­tinue af­ter re­tire­ment,” said Nishta Sharma, man­ag­ing part­ner of KNAV. This would mean that only tal­ent and ca­pa­bil­ity to gen­er­ate rev­enue would be­come para­mount in the firm.

In the next two years, re­cruit­ment pro­grammes may be­come even more ag­gres­sive, as Cor­po­rate In­dia seeks to com­ply with the big­gest change in in­di­rect tax­a­tion since In­de­pen­dence. Reg­u­la­tory changes such as au­dit ro­ta­tion and new ac­count­ing stan­dards on the au­dit­ing side and tax­a­tion laws such as GST and GAAR on the tax­a­tion front are cre­at­ing de­mand for pro­fes­sion­als.

On In­dia’s rev­enue leader-board for pro­fes­sional ser­vices, the Big 4 make up the top four po­si­tions, fol­lowed by Grant Thorn­ton, ac­cord­ing to most in­dus­try ex­perts. The rank­ing there­after is un­clear, with every ma­jor player claim­ing to be among the top 10.

The Big 4 alone have to­tal rev­enue of around ₹ 10,000 crore a year from their In­dia op­er­a­tions. While there is no clar­ity around the rev­enues gen­er­ated by other well-known firms in In­dia, it could be as low as 50% of the rev­enues gen­er­ated by the Big 4. “The reg­u­la­tory changes in some way pro­vide op­por­tu­nity for some firms with strong knowl­edge base to di­rectly com­pete with the Big 4. If they play their cards well, some of the smaller firms may see a huge jump in their top line in the next year or two,” a se­nior part­ner with a Big 4 firm told ET.

If one has to at­tract and re­tain best tal­ent, then firms have to go the ex­tra mile, in­clud­ing open­ing their doors for eq­uity own­er­ship and sim­i­lar tal­ent at­trac­tion in­cen­tives RAKESH NAN­GIA

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