Dell auditors shake things up

As I have mentioned before, my profession of auditing does not seem to be well respected. We do, however, serve a purpose, as was made dazzingly clear Friday:

Dell Inc. will restate its earnings for fiscal years 2003 through 2006 and the first quarter of 2007 after an internal audit found that certain employees had changed corporate account balances in order to meet quarterly financial targets, the company said Thursday.

I want to shed a little bit of light on this subject. I have seen this repeatedly throughout my audit career, and here’s how it works – in very broad terms.

Let’s say I am CFO Bob of the North American division of Massive Corporation. Part of Bob’s compensation is a bonus package that pays Bob $250,000 if he reaches or exceeds certain levels in a formula. The formula may have a half-dozen components – revenue, profits, units sold, whatever. The point is that if Bob reaches his goal he gets big money. He gets player money. If he misses it he may have to settle for the Jag instead of the Bentley, and Bob couldn’t bear that shame at Shady Hills Country Club.

Bob has to hit 8 out of 10 to reach his target in 2004. 2004 is a good year. Bob is confident he will make 9 out of 10 and get his $250,000 bonus. But Bob doesn’t get anything extra for that 9. 8 pays the same as 9. Bob leans back and thinks “well, maybe we should build up our reserves, just in case!” He increases a reserve in a well-funded account – maybe the accounts receivable reserve. This would be similar to you or me throwing another $1,000 in our car emergency account when our new car just passed every single inspection with flying colors.

So 2006 rolls around and Massive has a rough year. The North American division is not doing terribly, but Bob has not met any of his targets. He is at 7 out of 10 and unless he raises it to 8 before the end of the year he’s only going to get $50,000. Bob long ago burned through that 2004 bonus drinking his fine Scotch and keeping his mistress in furs. So Bob needs that 8. He needs it bad. One morning while his assistant is reading his email to him Bob suddenly remembers that reserve money he socked away. The accounts receivable are having a bad year, too. Massive is trying to collect their receivables but a lot of their customers are having troubles, too, and can’t pay Massive. Bob scratches his head and grimaces as a thought forms there. He thinks, “well, maybe I could claim it’s over-reserved.” He knows it isn’t – it was over-reserved in 2004 when times were good, but now that times are bad it’s probably just about right. But it’s a question of judgment and he’s a CFO, after all.

Bob grasps at his chance. He has his accounting staff transfer the reserve money into “extraordinary income” or something else that affects his score, and bingo! Bob makes his 8. Everyone is happy… at least until Bob gets found out by the internal auditors and gets fired. But don’t worry – no matter how much he ran his company into the ground he’ll do just fine.

Obviously, I cannot name names but I have seen this happen many, many times – sometimes blatantly, other times subtly. Once I ended up quitting out of frustration at this practice, because I realized I worked for a crooked company and could not keep working there and keep any self-respect. In Dell’s case, the auditors only gained traction when the SEC started investigating. Often, the auditors report to the CFO on a “functional” basis even though in theory they can go straight to the board (although the board members are probably going out for drinks with the CFO right after board meetings). So if the corruption occurs at the CFO level, it’s hard to fight it.
Think twice before you consider investing in any company that has exhibited this type of behavior. I would not assume, for example, that Dell has fixed the root problem of incentive-driven compensation, since that’s how most corporate employees are compensated in the US. It would be hard to say “no more bonuses – just do your job well!” If there is any type of incentive in the bonus plans – or in commissions or any other type of compensation – human nature will seek a way to make it benefit them. Invest with care!

fireworks

I am finally taking a much needed vacation. I have not worked a full 40 hour week in 19 of the 29 weeks this year, so saying it is much needed is a stretch. I do not feel overworked at all, but a vacation is still a vacation and work is still work. For almost everyone, one is preferable to the other.

I reflect back on my working life sometimes and realize that it is going to take many years of working 32 or 34-hour weeks before I can average out over my career to a 40-hour week. I worked ridiculous hours for the first 12 years of my work life. I have worked two days in a row without sleep, I have worked Sundays, I have worked on planes, I have worked on vacation, I have worked on a laptop in a bar and I have worked while deathly ill. I have worked a lot.

I often wonder if I had turned my efforts towards entrepreneurial channels where I would have ended up. I also wonder if the effort piled into a corporate setting is the same as the effort I would pour into, say, my own consulting firm or being an independent contractor plumber. I suspect that if it is your own business you would expend even more effort on it. At the same time, I never felt in my early working life that there was any need to hold anything back in my ferocious non-stop pace. It did not enrich me except in the critical sense that it brought me where I am today (cushy-but-mindless high-paying consulting gigs). It took some life changes to make me back off my pace. Had I not met Bubelah I probably would be blogging right now from the Frankfurt Wi-Fi zone on my way back from a conference in Kuala Lumpur while nursing a martini to shepherd me through another four-hour layover.

I also wonder if, having stepped off that treadmill, I could ever recover the frenetic pace of my earlier career. Every day Little Buddy is a little more interesting and a little bit tougher to leave behind. I think taking a two-week business trip to Europe, as I used to do, would break my heart right now. I know people do it out of necessity, but I wonder what circumstances make people categorize things as necessities rather than people. If I needed the money to pay for health insurance, OK, I could do it. If I needed it to buy the new Wii, I couldn’t. I would reduce my lifestyle at this point to spend more time at home. I would have to be paid insane amounts of money to start working late hours and taking constant business trips, and insane money for me is really insane – “work two more years then retire” kind of money.

Nonetheless, I do have ideas for starting my own consultancy or online business or charity or small neighborhood coffee shop and on and on. I know that if I started my own consultancy I would be busy all day with client work and all evening/night trying to reach out to potential new customers. A coffee shop would open at 5 am and close at 5 pm. An online business – if it is going to be profitable – is a huge undertaking. A charity would involve long hours for little return. So the question I ask myself is “would this be fulfilling?”

I think the answer is yes. I don’t want to take long trips now because I would miss my wife and son, but a deeper reason is that I simply don’t care at all about “taking one for the team” for my clients. I suspect if I worked in a more entrepreneurial environment I would be more passionate about the work, so even if it meant long hours I would ultimately be happier and more fulfilled and that would make the time spent with my family even better. It might mean long hours in the near future but maybe – just maybe – it would mean a better future for all of us.

As pointed out elsewhere, the perfect moment to do this is not going to be announced by people yelling, “Surprise, this is it!” When I was 25, I would have sneered at the idea that there was a higher purpose than working insane hours in exchange for business-class tickets and luxury hotels and company-paid junkets to Budapest. I know now that I was wrong – the goal is independence to live your life as you choose, free from the tyranny of a paycheck.

I do still believe that moment will come when I will cast my status as an employee aside, and that is the first big step. And who knows? Maybe there will be fireworks.

A German holiday

I remember from my time working in Germany that most German companies shut down for at least a couple of weeks in August. I don’t mean that most of the employees stayed away, or that business continued remotely. The accepted cultural norm was just to shut down, turn off the lights, set up out-of-office emails and leave. Yet I see my co-workers every day stay late or postpone vacations because they are “too busy.” I suspect, however, that they are not “too busy,” and that there are more sinister psychological factors at work. So why are Americans so terrified of time away from work?

Here are a couple of interesting facts:

  • A survey by Management Recruiters International of 730 U.S. executives in 2003 found that 47 percent surveyed wouldn’t use all their vacation time, and 58 percent said that the reason was job pressures. This same study also found that 35 percent said that they had too much work to take a vacation and that 17 percent felt that their boss was not supportive of employees taking all of their vacation days.
  • A study by Circadian Technologies found that the average overtime rate in extended-hours businesses in 2004 was 16.2 percent – that is almost one extra day of work each week. This is an increase over the 12.6 percent rate in 2003. Along with the increase in overtime came an increase in the absenteeism rate, up from 5.8 percent in 2003 to 12.4 percent in 2004. Of course this compounds the problem because when people don’t show up for work other people are asked to do overtime to pick up the slack. In general companies with high amounts of overtime had absenteeism rates of 17 percent, versus 9 percent in companies with low amounts of overtime.

To draw a conclusion between these two facts would be premature, but I have a lot of anecdotal evidence to support it. I see a lot of grinding overtime and delayed vacations in the corporate environment where I work. I also see a lot of “pseudo-vacations.” Here are a few examples:

  • Co-workers take their BlackBerries on vacation with them and actually answer emails.
  • I had one colleague tell me he would not go on a cruise because they would be unable to check email or voicemail while at sea.
  • Another colleague answered an email at midnight the day before she was scheduled to be induced to give birth.
  • I once passed out from a raging fever and a bad case of pneumonia right before a meeting because I felt I could not miss it and dragged myself into the office. Obviously, being unconscious, my contribution was minimal.
  • I know people at work who have missed weddings and funerals and children’s birthdays – because they were “too busy at work.”
  • I know more people than I can count who broke up with their boyfriends/girlfriends because they were too busy to maintain their relationships.

Just to keep things in perspective, I’m not a neurosurgeon and my colleagues are not oncologists. No one dies if our work is not done. Sure, some critical earnings info might be late or a SOX certification might be delayed, but these are big companies and there are many people to cover the slack. I also frequently ask the question “If you are so mission-critical that you can’t miss work for vacation, would Massive Corporation, Inc. still be able to continue if you were hit by a bus?”

Many colleagues would answer “no” but the truth is “yes.” The corporation will continue if you go on vacation. I sometimes wonder if people are just frightened of demonstrating just how unimportant they are to the overall machinery of the company. I have taken several cruises and long European vacations and never once checked my email or voicemail. Once there was an emergency that needed my attention, but one of my staff stepped up and handled the situation, as I knew they were able.

your commute is the worst commute

Different types of commuting must have different sorts of effects on the psyche. I know that personally driving makes me mental. I don’t enjoy it because the risk of accidents is far greater than almost any other form of transportation. I am unable to stretch or move around or relax, and particularly at night my eyes get tired. However, you can listen to the radio quietly, you can adjust the temperature to suit you and in general you are in a private space.

Subway travel is unpleasant to me, but not as frustrating. The lack of fresh air can be appalling at times. The sheer rudeness you see on a subway car is staggering sometimes. People will push and shove to get a seat, or throw their bags onto empty seats. Many riders appear to be highly dismissive of the concept of hygiene. The positive aspect is that you can instantly close your eyes and drift off until you reach your destination, or read or even just play a handheld video game. Time passes much more quickly on public transportation.

I have endured other commutes: near daily shuttle flights back and forth from New York to Boston for work, ferry rides and long rides on the Metroliner up and down the East Coast. For one wonderful year, I was close enough to my office to walk; so close that there was really no other possibility but to walk.

Right now I suffer through a part-driving, part-train-riding commute. I wonder if the type of commute affects happiness. Statistics show that a commute over 45 minutes decreases your overall satisfaction with your life. But what about the type of commute?

I would personally say a long car commute in heavy urban traffic is the worst. My sister-in-law, who detests public transportation, would disagree. My parents, who lived most of their working lives in a small town, think any commute over 20 minutes is unbearable. I have met plenty of people in New York who have two hour train rides between Long Island and Manhattan and don’t seem to mind because they can read the paper from front to back. Other coworkers spend four to five hours a day in their cars because they can’t bear to be in such crowded environments as a MetroNorth train or Long Island Railroad car.

What do you think?

ways to control expenses at work

Working in a cubicle farm, you learn that there are a few key behaviors and habits that really make the day go better. A quick run to Dunkin’ Donuts? A package of Doritos from the third floor vending machine? A coke? A newspaper? Before you know it, you’ve managed to waste time, money and your health, all for the sake of making the day go by faster.

So how do you control these bad habits? I’ll lump all of the answers into a list:

Keep track of your spending. I do this sporadically, to be honest, but every time I put together a spreadsheet that show my net earnings after taxes (I’m a consultant so my pay varies depending on how many hours I work) and then subtract everything I spent during the day, it provides a very powerful motivation not to spend so much. A dollar fifty for coffee doesn’t seem like much, nor does seventy-five cents in the afternoon for a quick little pick-me-up granola bar from the vending machine, but when you total that up over a week it can be a lot. I was horrified one week when, without thinking, I spent $53 on ‘stuff’ – a bottle of water in the morning, a cup of coffee, a salad, a banana in the afternoon.

Bring food to work. Every time I buy a banana from the convenience store I like to think I’m doing a good job for my health, and compared to buying a Snickers I am. But I am not helping my financial health, because that $.69 banana is expensive. A bunch usually costs less than $2 for 7 or so bananas from the market. You do the math. Bringing an old spring water bottle filled with filtered tap water saves $1 per day – double that if you fill it up before heading home.

Drink tea at work instead of coffee – and quit drinking soda, period. Black tea has just as much caffeine as coffee. Buy a 20-pack of premium tea bags like Tazo or Yogi and you’ll get 20 cups for $4, versus a cup of joe from the corner store for $1 (or more if you prefer Starbucks). If you have 20 workdays in a month, you’re saving $16 (or more) per month.

Bring something to read. We have free ‘subway’ papers in New York like Metro and AM New York, but I used to grab a copy of the New York Post for $.50 per day because I liked the sports section. On the other hand, if I bring a library book (depending on my library) I can save money, read less pointless news and maybe even educate myself on the train and during my lunch break.

Drink a lot of water. Don’t laugh at my reasoning for this one: I drink a lot of water and consequently I go to the bathroom frequently. Not a ridiculous amount, but more than most people, probably. I think this has several good effects: drinking water keeps my appetite down, it keeps me hydrated in the miserably dry and dehumidified recirculated office air, and it gives me some exercise to wake up going back and forth. I don’t see a downside there.

Don’t ever go out for lunch unless it’s an “occasion”. Generally you should bring your lunch, or at least eat something from the cafeteria (or a nearby deli). Going to a sit-down place for lunch will relax you too much, it wastes time (critical if you charge by the hour) and generally it is more expensive and your tendency will be to buy something rich. Just avoid it – a salad at your desk, or a quick cup of soup with colleagues in the cafeteria, will keep you from getting too tired or wasting time or overeating.

Don’t keep change. If you are tempted to hit the vending machine but all you have is twenties, you probably will grit your teeth and move on. I used to keep a change cup on my desk so I’d have plenty of “chip money” but now I try to use it up when I buy lunch, or just take it home for the change collection.

Leave. If I have a really bad day, and I’m dragging late in the day, rather than going to buy some food or some coffee, I just leave. Go home. You may cut an hour or so of billing time off of your day, but at least in my case that’s why I became a consultant – to have that flexibility. If you have a salaried job, just slip out early. I promise you that you won’t get fired for leaving one hour early one time a month. If you do every day, maybe – but probably not. If you do your job and leave an hour early every day, you may hurt your chances at getting the ‘employee of the month’ award, but a boss isn’t going to fire someone who gets their work done and makes him look good. Trust me. It’s hard to do, but no-one gets fired for leaving early if they aren’t busy anyway.

Of course, the best solution would be to get a job where you don’t have to sit in a cubicle farm in a high rise building, but not everyone can be Peter Gibbons.

Professions in the dump

If you aren’t familiar with the auditing profession you’ll have to bear with me here for a minute. A couple of days ago, in discussing a project, one of my co-workers offered to give a one-day crash course in auditing to some junior staff so that these non-auditors could help on a audit project. A few years ago that would have had me snarling, but now that I’m a more mellow consultant I let it slide. However, it drives home the point to me once again that my profession isn’t respected.

I am fairly sure no-one has ever asked my sister-in-law, a doctor, to give a one-day crash course in surgery – and then expected to be able to perform surgery on their own. That might be too extreme of an example, though, so I’ll try again: I don’t think I have ever heard anyone ask a carpenter to give a one-day crash course in carpentry and then expect that person to be able to build a chest of drawers. I could go on forever with my examples.

The point is that I am in a profession that – despite being one of the final bastions of defense against corporate misdeeds in America – is respected a little bit less than supermarket baggers. I wonder why, to be honest. I guess there’s a perception of auditors as the sneaky guys who try to catch out hard-working employees stealing a pen, or even as the ‘snitch’. What most people don’t realize is that without auditors there would be no defense against outright financial fraud until it exploded and destroyed the company overnight.

In Enron’s case, the auditors discovered something and then (you can argue this) failed to be sufficiently tough about fixing it. The result? That company disintegrated over a few months once it was discovered. The Worldcom situation was similar, but auditors caught it in time and the company managed to correct the errors, fire the guilty and will survive, albeit in a reduced form.

What other professions are unfairly treated as ‘easy’? Here are just a few, in my opinion – add your own in comments if I forgot anything.

  1. Teachers. It is not sufficient to stand up in front of a room and ask kids to memorize 3+ 4=7. There’s a lot of hard work that goes on behind the scenes to prepare lesson plans and make sure children are educated, not just drilled.
  2. Nurses. The movie “Meet the Parents” probably helped show how silly this was, but I’m sure a lot of people would still look down on a nurse as someone who didn’t manage to make it to being a doctor. But nurses (or home aides, or nursing home workers, or EMTs, etc.) all perform the tough, dirty, and emotional work of caring for patients. I can’t imagine it’s easy.
  3. Truckers. I know it must seem like an easy job to drive for a living, but I’m sure a truckers job is every bit as stressful and boring and difficult as my job sitting in front of a computer. Spending week after week driving a slow, nonresponsive small building on wheels with tiny cars whipping around you right and left would be tough. I hate a slow truck just like any other driver, but I shouldn’t. Without truckers, this country would grind to a complete stop, and I mean complete stop – or do you think those California oranges are going to be delivered to the door of your local supermarket by train?
  4. Police officers. I have made donut jokes more times than I can count, but I am sure that any person who is willing to protect other people at the risk of their own life as a job doesn’t get sufficient respect. If you asked me to sacrifice myself to save my son, that’s an easy question – I would do it without hesitation. But a police officer can be put in a position to sacrifice themselves for a random stranger. That’s devotion.
  5. Stay-at-home moms. Bubelah stays home. It’s a tough job, for sure. Long hours, no weekends, occasional frights and often a heavy helping of monotony. Before you think I sound like I’m piling on my son, pick up a copy of “I Am A Bunny”…and read it 13 times in a row. Out loud, with sound effects. Every day. For a year. But actually that’s not my point; stay-at-home moms get less respect than almost any other ‘profession’ for the same reason I just put quotes around ‘profession’. No-one thinks it’s a job. If you take your child to a daycare center, you pay them. So a stay-at-home mom is actually performing a role that in other circumstances people are paid for. A stay-at-home mom will get no respect. People will say “boy, it must be nice to stay home all day” or “when are you going to get a real job” without realizing how demeaning that is. This country has glorified the two-income family who can afford a plasma TV and two brand-new SUVs in the driveway. While pretending to honor sacrifice and family, too often we do neither.

So I guess I’ll just toil along doing my job that I could apparently train someone in one day to take over, and dream of the day I can get some respect!

Resistance (apparently) will be futile

From Lindsay Blakely, at Business 2.0 magazine comes this news: Accenture has developed a computerized device called “Personal Performance Coach for type-A execs”. Basically it’s a Bluetooth phone-like thingy you leave in your ear at a meeting. If you want it to remind you to talk less, it senses your voice and tells you when you have talked more than your fair share.

Is this what we’ve come to, corporate America? Automated reminders to shut up? Would you feel comfortable working for a boss who sat in a meeting with a Borg-like headset? One who jabbered along, then all of the sudden rolls his eyes back in his head listening to the Mother Ship instruct him?

I have a much better system. If you are a boss and feel you talk too much in meetings, drink a lot of water before the meeting. A lot. Thirty minutes in you’ll need to go to the bathroom, so you’re going to want to hurry the meeting up – which means you have to let everyone get their bit in.

When I read articles like this, or spend some time on the Bing blog, I wonder why it ever gets to this point. Is it just that executives are so clueless about their middle management’s (or senior management’s) activities? I guess so.

But if I find myself, as a consultant, in an office where everyone walks around with a headset in their ear telling them how long to talk – or eventually, how long to spend at the water cooler – I’ll know it’s time to drop out and find a job in construction with my neighbor Lawrence.


I believe you have my stapler

A dark secret in corporate America is theft. I’m not talking about Enron or Worldcom. I’m talking about the little guy who takes a pen from the supply room, brings it home and uses it to write checks. He is a thief.

I don’t think I would be disappointing anyone who knows me to admit that I have taken office supplies and used them for my own personal use. I have taken a package of Post-It Notes home. I took a binder once. I even took a stapler – because of a supply glitch I had ended up with three in my office. There are even less obvious ways I use company property for my personal use: I print out New York Times articles to read on the subway, using company ink and paper. I call long-distance to my New Jersey home from my New York office.

I have never taken a phone or a computer or anything of significant value, though. So if a thief breaks into your house and steals a roll of paper towels, is he any less a thief than if he steals your TV? Does it matter that I stole Post-Its and not my office HP Laser Printer?

Cynics will tell you that you’re just compensating yourself for being underpaid by taking it back out of the company. I doubt they would say the same if a teenaged babysitter started taking home cleaning supplies from their houses every time she came over. Environmentalists will tell you much of it will be wasted, anyway, so it’s no harm to use it in one place rather than another.

The lengths good people, good citizens, will go to in order to explain how stealing from a Fortune 500 company is somehow “OK” are amazing. That theft cuts into profits and reduces shareholder value – maybe an index fund that you hold dips one-quadrillionth of a point. I wrestle with this myself, but I still don’t stop myself from using the printer in my office to print out an email to read on the train, or a personal flight boarding pass. I don’t think twice about grabbing a work pen and taking it with me at the end of the day.

I’d be interested to hear if anyone has any thoughts on this? Am I being a prude, or is stealing just stealing no matter what?

You are not Jack Nicholson

There’s an excellent dialogue going on over at Million Dollar Journey that includes a few comments from yours truly. The gist of the comments I’ve been following (and there are two different comment ‘streams’ going on, so you have to read through them) is that there’s a disconnect between competence and promotion in many organizations. I take the position that who you know is far more important than what you know, a position held by Gates VP.

I should start off by saying I dislike the position I’m defending. I wish that every promotion in every company was always based on the simple question “who can do this job best?” It’s not. Often the question is “who stood up for me in that political battle over who got the corner office” or “who hangs out after work and has a beer with the boss” or, even worse, “who is male?” This is awful – but I think it’s still true, and it’s going to take many more years to break that pattern.

I have been having an earnest disagreement with a colleague at work over the past couple of days. We had a large meeting, including 40-50 people from several departments, to determine a course of action for a big corporation-wide problem. The meeting was ‘facilitated’ by one of the groups, meaning someone stood up front and assigned responsibilities and due dates for various tasks. In breakout conversations afterwards, I took the position (as did other consultants present) that this exercise was ridiculous. Assignments were given and responsibilities assigned before a goal was defined or basic information was discovered. Most of this was brushed off with earnest declarations that “at least we’re getting something done!” by employees of the corporation.

I wish I could say that pure technical competence is always going to win out. I would be happy to hear that people who read this could say “my workplace is like that!” I can speak mostly just to my experience, and my second-hand knowledge of my family’s, friends’ and colleagues’ experiences. For all of them, their workplace promotions and treatment have been driven by a combination of accident, personal preferences and irrational behavior, with a tiny mix of technical competence thrown in.

As far as competence goes, there may be people out there who are The Only. Jack Nicholson, for example, is more or less the only guy who can put Jack Nicholson in a movie. You can’t outsource to India, or hire 30-year-old Jack Nicholson. You can hire someone similar but not the same. If he doesn’t show up, you don’t have Jack Nicholson. You, however, are not The Only. Whatever you do, I guarantee you that somewhere out there, a person exists who can do your job as well as you can for less money. They may not be interested – maybe they are working for someone else, or prefer to live in a different city, or they just never heard of your job. But you are not irreplaceable.

I use that point to show that competence can’t be the driving factor. Often bosses may not be interested in replacing you because it’s too much of a hassle to fill out the “no cause lay off” paperwork with Human Resources, or it means they’d actually have to break in a new person. But if the opportunity to replace you with someone who could do your work just as well as you presented itself – with no effort on your bosses’ part – and they would take the job for less money, why wouldn’t your boss replace you?

I will tell you the only reason why, and it’s not a good reason. Maybe there’s a boss who likes having the guys around. He likes football and blonde jokes, and he’s surrounded himself with guys who at least act like they do, too. Now maybe there’s a recent MIT graduate or foreign-born professional or woman who could do one of his guy’s jobs, but this boss inwardly cringes a bit at the prospect of having to watch himself. He likes that crutch of talking about the Giants as an excuse for real teambuilding. So he will keep on his guys.

You could have the same scenario play out different ways. Bosses who like single people because they don’t have commitments like kids pulling them away from a single-minded devotion to work. Other bosses may like pretty women, or people who curse, or Christians, or quiet people or Ivy League grads. The preference doesn’t have to be negative, at all, but it’s a preference, and if you don’t meet that requirement you’re going to have to work harder to make up for it.

So while I think the old boys network as a clear, obvious component of the corporation may be fading, I don’t think it’s realistic to assume that corporations always reward the best, smartest workers. I can look around my workplace right now and see plenty of smart people who are working for less-smart people. I have seen plenty of people smarter than me stuck levels below me, and plenty of people stupider than me well above me in the corporate hierarchy. Every time, the reason has been the preferences of the boss or the group-think of the management team leading a department or just a herd mentality. You shouldn’t ever just rely on your brains to succeed, because if you do you’ll be smart John Kerry watching dumb George Bush take the oath of office. Successful, but a step behind.

true rates

I get paid on an hourly rate, and one of the things I do obsessively these days is try to figure out what sort of hourly rate I would need to generate as a freelancer. There are a million imponderables, of course – different rates for different tasks, different rates for different clients, include expenses or not, and so on. But one of the interesting exercises I did was try to figure out what I actually make today on an hourly basis including all of my daily expenses. I learned a couple of things from this calculation.

So for the sake of this example, here are a few of the variables:
Hours 8
Commuting hours 2.5
Rate 50
Tax rate 25%
Lunch 8.00
Coffee, extras 4.00
Parking 8.00
Public transport 5.25
Gas, wear and tear 1.50
Dry clean shirts 0.75

A few of these costs are more or less fixed. The tax rate is a rough estimate. My federal and state rates are higher, but get reduced due to mortgage interest deductions, etc. I usually figure 25% is a fair approximation of what finally goes out.

My parking and public transportation costs are hard to alter. The public transportation is reduced slightly by using an FSA pre-tax benefit card, so that’s $5.25 rather than the post-tax $7.00 per day. The parking is the best rate I can find near my station. I could take a light rail near my house that would cost $6 per day instead of $8, but would increase my commuting hours by another hour per day at a minimum.

Gas and wear and tear on my car is a very rough estimate. I fill up less than once per month, since we don’t use my car for family driving. So for the sake of argument it costs me $50 per 60 days to operate the car, plus a little for wear and tear on the tires, oil, etc. The federal mileage allowance is $.485 per mile (http://hr.blr.com/human_resources/mileage_allowance.htm), and I drive about 4 miles round trip per day, or $1.94. So split the difference, $1.50.

Dry cleaning my shirts costs $.75 per day. I’ve tried to shy away from the fancier shirts and pants I used to prefer that required dry cleaning, rather than just launder-and-press. $.75 is a lot per day, but I think the amount of time spent on ironing isn’t worth it. The shirts won’t look as good and it just takes me too long to do it.

The killer in this calculation was the lunch and extras. I like a salad for lunch most days, and of course the salad bar is a quick and easy option. I get a by-the-pound salad, so a cucumber slice costs a lot more than a piece of lettuce. I started tracking my costs and was surprised that I average $8 per day on salad. This is part of the battle between health and wealth. I need to cut it down, though.

The extras are the worst item. I sometimes want water on the subway. It gets hot and the air is tepid, and a cold bottle of spring water really helps. That costs $1 if I forget to pick up a case from the supermarket. My client doesn’t have coffee machines, so that’s another $1.50 for cafeteria coffee. And inevitably during the day I may want a seltzericon, or an apple. So that may run anywhere from $0 to $4 per day. I recently started drinking black tea at work, since a bag of Tazo high-end black tea costs 20 cents per tea bag and has just as much caffeine as coffee. That should save me about $300 per year.

After all of those expenses pile in, my net is much lower. If you include my commute time in the calculation, that’s about $26/hour, or $208 per day. If you don’t include commute time, it’s $34/hour and $272 per day. I include the commute time since that’s working time – I’m not doing it for fun.

What can I take away from this? All of these expenses are directly arising from traveling in to a major metropolitan area to work. I effectively make $26 per hour on a 10-10.5 hour day. So if I worked from home making $30 per hour after tax, 8 hours per day, I’d be better off. In my industry $70 to $100 per hour pre-tax is a fairly common and easy range to achieve for in-office work. I don’t have a good estimate or remote work, because auditing is typically on-site.

This exercise made me realize two things: 1, if I worked from home I could charge a much, much lower rate than I charge for going into the office and still net more. 2, I spend an awful lot on unnecessary items. As a consultant, I often talk myself out of bringing my lunch, since I don’t know where I’ll be, or I won’t know if they have a fridge, or whether this will be the day my client wants to have a lunch meeting. I should learn to overcome that, because $12/day is ridiculous.

Using these numbers, though, my main thought was that 50% of my rate is gone before it hits the bank account, effectively. That is a sobering percentage.

Consulting

Consulting is a tough lifestyle for someone accustomed to the heights of corporate America. I was a fairly senior person in my corporate life, having zipped and lucked my way into a corner office overlooking downtown Manhattan. Only two people in my reporting chain separated me from the CEO of the company. But I had severe problems with the organization and with my boss, and eventually that combined with the incessant travel and never ending corporate politics wore on me. When I got married, I realized that there was a life beyond work and Friday nights.

So I joined a consulting firm that provided almost no support other than locating clients and taking care of billing and collection. I don’t get a computer from my company, or any sort of review or office supplies or whatever. I rely on my client for that. However, I don’t have the headache of finding clients or chasing after invoices, which is no small thing. And most importantly, they pick up 50% of my health insurance costs.

I went from commanding multiple teams in far-flung countries to commanding, well, myself. I am in charge of nothing and nobody, and I am often supervised by people who are junior to me and who would have worked one or two levels below me in the past. So I stop and remind myself once in a while about why I do it:

I never travel. Travel is a lot of fun when you’re single. I visited half the planet while staying in swank hotels and eating rich food. However, after you’ve been to Paris for the fifteenth time it gets boring. The routine of plane-hotel-office-hotel-office-plane gets overwhelming after a while. I keep a journal, and on these business trips I routinely have entries that begin “Stayed up until 2 am drafting the final report in my room.” I wasn’t partying constantly. Now, if I don’t want to travel, I don’t work for clients who require it.

I have no corporate political affiliation. My previous jobs had a high component of politics; alliances were formed, strategy meetings were held, whispered conversations in board rooms were standard, and after-hours meetings huddled over drinks were frequent. I was sick to death of these things. I was good at corporate politics, but I realized that what “being good” meant was that I was expert at ripping other people down without really lifting myself up. I did do some good – I often used my political scheming to help lift some great people who worked for me – but by and large it was all negative. As a consultant I have no stake in such things, since I have no hope of promotion or fear of demotion. It’s liberating to only worry about the actual work.

I leave work at 5, both physically and mentally. As I said above, I used to carry my work home with me, and even into my bed and sleep. No more. I am not reachable once I leave work. I don’t check my work email before sleeping. I have no Blackberry. There are no weekend “catching up on my reading” sessions.

I have no investment in the company. I used to worry about the success of my company. This may seem like a small thing, but as an auditor you have some ability to really seriously damage your company, either through missing something in the audit (Enron, anyone?) or finding something in the audit (Worldcom). This presented me with harsh choices at least three times in my career. Each time, I tried to raise serious issues to senior management and was overridden by my superiors, creating a real love/hate attitude in me. It’s not easy knowing you work for crooked people, because then even your honest efforts only serve to enrich them. Now all I do is my work – my investment is in me and the quality of my work that will be the basis for landing future clients.

I get paid overtime. That’s no small thing. I used to work 80 or 90 hour weeks and wouldn’t get a dime more; in fact, 40 hours would have been considered slacking. Now if I work more than 40 hours my rate skyrockets. Most clients don’t like the higher rate, so they send me home after 40 hours. I can’t say I hate that – getting home at 6 or 6:30 gives me time to go a few rounds with Little Buddy before he goes to sleep. In my past life, when I wasn’t traveling I often wouldn’t be home before 8.

I get to quit my job two or three times a year. This is the greatest thing. I had a client earlier this year that nauseated me. Their unprofessional attitudes, horrible physical offices and cruel treatment of their staff made it one of the worst places I’ve ever worked. However, rather than needing to go through the drama of worrying about quitting a job I’d just started, I simply wound down my consulting gig and moved on. I never have to give any of those guys another thought. Even at the good clients I only stay long enough to do good work; when they start making small talk about me coming on board as an employee I usually know it’s time to go

boosting your career with an overseas stint

When I was younger, I was largely unaware and uninterested in the world outside the US until I won a scholarship to study in Germany when I was 15. I had a terrific experience, both personally and academically, that inspired me to continue my German studies and someday return to live and work in Germany. One of the main reasons I went into accounting was the knowledge that it was a worldwide profession – business travel, international business, and so on made it likely that I would have a shot at going overseas sometime in my work life.

During college I decided that I had studied German long enough and that I would fulfill my language requirements with courses in Japanese. This being the late 80s, Japan’s economy was blazing and knowing Japanese seemed like a good idea. However, when I showed up at the registrar to sign up for Japanese I found that the course was full. The university I went to had a fairly limited selection of languages, including mostly the usual suspects – French, German, Spanish and Italian. However, I noticed they had added a course in Russian, so I signed up for that, instead. I had some history with Russian, so I figured I could do fairly well in this language that was, at the time, a pointless diversion.

In the late 80s there was no real reason to suspect that (a) Russia would ever be particularly open to Westerners or (b) a place that would offer any sort of opportunities to anyone other than academics and writers. That would of course change rapidly but at the time it did not seem particularly likely. So I studied Russian, and my professor – Dr. Don – was a real inspiration and one of the two or three best teachers I’ve ever had. He was young, enthusiastic, friendly and had a real passion for languages and linguistics. I stayed in the class past the minimum requirements and went on to be one of the first two Russian minors in the school’s history.

So approximately five years later, in late 1995, I was approached by a partner in the Big 4 firm I was working in. I had told everyone quite frequently that I wanted to work in Germany, and the partners had told me they would keep an eye out. Of course, Germany didn’t lack for accountants so the idea of me working there had a slim chance of success. However, the partner told me that they had received an unusual request from the Moscow office for short-term assistance for any Americans. The partner knew I had a Russian minor, and asked if I was interested.

Of course I was, so I jumped at the chance. I did a phone interview and was all set to go in February of 1996. I flew to Russia and realized on the taxi ride into Moscow that I didn’t even remember the word for snow (“snyeg” if you’re curious). My Russian was very, very rusty. I had a lot of adventures in Russia, both in my initial four month stint and in my return for a year and a half for a different company, and in further visits and business trips there. I will cover those in future posts.

Today, however, I am going to focus on the five most important outcomes of my work in Russia as it has related to my career since. I think these outcomes are critical if you’re considering working overseas, or want a big-time corporate job. I’m not sure working in England would give you the same cachet as more exotic locations like Russia or Indonesia or China, but it might.

  1. I learned a foreign language really well – not just grammar, but some slang, intonation, and so on. This is only moderately useful if the language in question is Russian, but considering Russia has one of the hottest economies in the world and is used as a lingua franca throughout Central Asia, it is more useful than Italian or German.

  2. I embraced a culture and by doing so, became more open to all cultures. I wasn’t close minded or terribly parochial, but I really learned what it was like to be immersed in a culture fairly alien to one’s own. I can’t say I went native. I lived in an apartment that cost 10 times what the normal Russian could pay. I spent more on a meal and drinks on a date than most Russians would see in a month. I had an Internet connection and a state-of-the-art computer. But I did make friends, and spent time at their homes and talking with them and doing things with them on the weekends that a lot of my colleagues – who uniformly didn’t speak Russian – never did. And that experience made it that much easier for me to relax in the future when I went to other countries around the world (although I never got comfortable with midnight steak dinners in Argentina…)

  3. I learned true independence. If you want to learn how to deal with customer service problems in the US, try standing in line at the Russian phone service center and arguing with a 50 year old grandmother in Russian about your disconnected phone bill. And if that example’s too mild, try going cross-country in a four-wheel drive with two bodyguards to a former prison camp surrounded by radioactive wastelands, then eating lunch with a sobbing drunken bank director choking out patriotic Soviet songs while eating toasted pine cone seeds. If you don’t feel a little bit lost during that experience and a little bit more confident about handling yourself after it’s over.

  4. I gained tremendous work experience. I had to constantly work not only on accounting, but on three different types (US, Russian and international), all while constantly switching back and forth between two languages, managing clients and handling a huge workload. I had been managing a staff of maybe 1 person, auditing $2 million dollars in sales per year companies at home. The next year, in Moscow, I was managing 25 people on an audit of one of the biggest clients of my firm in Russia, with audit fees alone of $2 million.

  5. Finally, and most importantly, I created a massive shining bright spot on my resume that, ten years later, still draws more attention, more conversation and more interest than anything else I’ve ever done. I’ve worked since then in locations from Turkey to Argentina, and nothing compares to the shock and amazement your average corporate worker expresses to me when they found out I worked in Russia. It has gotten my foot in the door at several companies; it has wowed recruiters and it has become an endless source of anecdotes that seem to fascinate people (or it could be just that they are polite but I think I can tell the difference).

If you’re planning on getting a job in the corporate world, you should consider a stint overseas, preferably someplace that isn’t ‘safe’. At every step of my career there have been people competing with me for positions, assignments and promotions. Many went to better schools, had more certifications, had better connections or frankly were smarter or better looking. But I have yet to encounter many who could top the conversational firestorm I can usually unleash by dropping “that reminds me of the time I got arrested by Russian immigration on a business trip in Vladivostok” or “at least no-one is getting assassinated like the general director of my client in Moscow” and so on.

I suppose that despite my appearance, my mild southern accent or my calm outward appearance my willingness to go work in the wild East in the mid-90s, when things were just 30 minutes away from total chaos in Russia, makes me look like a super-confident, devil-be-damned risk taker to some people. It’s not true; I am a pretty conservative guy in most of my actions. However, the appearance is enough to provide an ‘in’, and that’s usually what it’s all about in appearance-conscious corporate America.