Team collapse at Richard Wood and Hulme LLP

James Michaels was a senior associate in the Richard, Wood, Hulme, LLP. He assisted with junior associates and co-op students with resolving questions in addition to completing his own audit work.

He worked in a team to audit Spector's business in these years. In 2008, Michaels faced some problems: the audit started on November 3, 2008 and was supposed to be completed by November 19, 2008. The deadline was a strict one, but the audit was less than 50 percent finished by November 12, 2008.

Richard, Wood and Hulme LLP (RWH) was a mid-sized professional services firm that offered clients audit and taxation services.

RWH's culture consists of teams by employees. All audits were completed by teams. Also, RWH's bid to become Spector's auditor in 2003, so Spector was an important client in its company. Spector is a residential real estate company which entered into construction loads that disbursed funds as needed to assist in managing the company's cash flow when it entered the condominium markets. Spector's year-end audit began in November 2008.

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The team members were consist of nine people:

Genna Wood: She was a founding partner of RWH. Wood was responsible to the firm and client for the overall completion of the audit and for signing the audit opinion.

Adam Nguyen and Keri Feldman: They were senior managers. Both were responsible for assisting Wood with client relations and reviewing audit engagement work.

Jody Ellis: She was a senior associate. She would report to senior managers on a daily basis. And, she was responsible for managing the senior and junior associates while accomplished her own audit work. However, she had a problem that she didn't pass the chartered accounting qualification exam.

Kira Dee and James Michaels: They were all senior associates. They're duty were the same with Ellis, excluding daily basis report. Dee had the same problem with Ellis.

Heather Goodman, Mariana Faust and Scott Ireland: They were junior associates. Their job completed own work efficiently and assisted senior associates. All three of them would take their first exam in 2008.

Adrian Noth, Arvind Patel and Caleb Oldman: They were co-op students. They primarily took direction from the senior associates and assisted in completing their work.

The Spector audit team had a good performance in 2007. However, they faced many problems in 2008.

Since the examination was only offered once a year, Ellis and others hoped they could go to fully study. RWH employed Emma Watson to assign the engagement plan. And, Watson hadn't completed the planning when she leaved. This situation affect that Ellis came back and finished planning too late and everyone hadn't time to review it.

Due to the global recession, Michaels thought that they would require additional testing to determine the valuation of assets. So, the workload was increased to the audit team.

Spector didn't provide the team with the relevant information as needed on time. The team was waiting three days to get information.

Dee wanted to complete her work at home, so did Noth and Patel. This event leaded Michaels found co-op students shirked work. It also made the team members blamed each other. Conflicts within the team started upgrade.

However, financial crisis influenced Spector, they wanted to revise some information. This forced Michaels to restart his work. Undoubtedly, this would increase workload. So, Michaels need additional staff to join in the team. The senior managers refused this suggestion.

Within the audit process, Ellis and Dee took their exam. However, they still failed. With the firm policy, they should leave the company. So, Michaels' team lacked two good associates. This news made others who will take the exam were consider their job security.

RWH's competitor - Alpha LLP wanted to poaching people and promised good remuneration. And, some of them wanted to go there.

PROBLEM ANALYSIS

Throughout the Michaels' point of view in the case, we concluded three main problems.

THE FIRST PROBLEM THAT THEY MET WOULD COME FROM THE EXTERNAL ENVIRONMENT. The first aspect is caused by the financial crisis. The financial crisis began in 2007 in North American which made RWH hard to find new clients. What were worse that as the financial crisis reached the top in the fall of 2008, some of RWH's clients even went bankrupt and other clients also wanted to reduce audit fees. Even worse some clients were unwilling to accept standard annual rate increases. For give a perfect audit in time, the clients should give the necessary forecasted financial information to RWH in time so that auditors can have an effective plan. However, in 2008, some clients did not give they concerns, financial information to RWH on time which made auditors difficult to work well.

THE SECOND PROBLEMS CAN BE INCLUDED FROM THE INTERNAL ENVIRONMENT. One aspect is the bad leadership of the managers. The audit started on November 3 and the deadline was November 19 which was strict. However, the audit still did not finish 50 percent by November 12. What was more, Ellis and Dee, who were universally liked and had an excellent reputation at the firm, were fired because of failing to pass the chartered accounting qualification examination. It was astonishing that managers even did not give other employees any explanation about the fire of the two good staff.

However, managers did not understand how important to give a reassuring explanation that "Explanation reassures people that managers have considered their opinions and made the decision with the company's overall interests at heart. Employees trust managers' intentions even if their own ideas were rejected" (Kim and Mauborgne 2) Consequently Scott and Heather were annoyed several of their colleagues in the office were given time for their first professional examination, they were afraid about their own job security.

Michaels had requested if additional staff could be added to the engagement to assist the team since it had fallen behind schedule. However, the disappointing response from the managers told him that they rejected to add new staff because some senior colleagues felt adding new team members who were unfamiliar with client would be useless for the work. The bad impact was frustrating the junior team members who had been working at maximum capacity. What was insufficient for the managers to do was that they also did not gave team members exact reason why Ellis and Dee were fired, no one could bear that being fired just because of failing to pass the examination. Anxiety would finally spread quickly through RWH if managers still did not give employees convictive a reason for staff's firing.

The last important problem in RWH is the growing distrust between team members. All of the team members had worked at the client site together all the time in 2007. However, in 2008, some members began to go home after working for several hours and continue their work from home. Michaels was unsure about whether they were actually working from home. The worst thing for reflecting the distrust was about Dee. Dee already appeared to be working the longest hours; she always worked for maximum time.

Yet some team members believed just because of her chatty disposition, constant email checking and general inefficiency with her time that caused her working so long hours. This kind of awful fact does not even meet any requirement of building contractual trust which is "You want your team members to share the attitude that they are all in one boat and together can pull through any storm. When they support each other's intentions and are aligned in their purposes, contractual trust is reinforced and people's trust in each other is enhanced" (Ross 4).

ALTERNATIVE SOLUTIONS

We analyzed that the main goal is to keep the whole team members on track and try our best to finish the audit on time. We come up with three possible solutions that can reach the goal we set.

SOLUTION 1: KEEP THE EXISTING TEAM MEMBERS OF THE SPECTOR AUDIT TEAM AND DON'T ADD NEW MEMBERS IN IT. Meanwhile Michaels reporting to Wood, Nguyen and Feldman that the team needs someone to refill the blank which left by Ellis and an explanation of why Jody Ellis and Kira Dee were fired from senior managers is needed to comfort several employees who didn't pass their chartered accounting qualification examination. By asking support from senior managers to reunite the whole team can improve the team's efficiency since almost the whole team were in the same audit team back to 2007 and they made it under a lot of pressure to meet the deadline. Make a clear assignment to each members for each day's work and make sure everybody can put aside their own business to work on the audit for Spector.

PROS: This solution can make the team work with the least changes to the whole team and directly face the problem that the team is falling apart and lack of leadership from the top level of the company. The most effective way to comfort all employees is to solve their concerns is to let them know what is really happening. The explanation or notice from the senior managers is an anchor of the whole team. Since almost the whole team members were successfully completed all work in 2007 audit, team morale can be regained by this solution.

CONS: Although we can reunite the team and improve the team's efficiency but we still facing the problem that we are hand-shorted for a big amount of work and the deadline in close. Influence of the explanation or notice can't be precisely predicted and they may still worried about themselves that they didn't pass the examination either. The main problem is that the senior managers won't give any explanations for why the two got fired, Michaels can only report to the senior managers but can't decide what they do or not.

SOLUTION 2: MICHAELS REPORTS TO SENIOR MANAGERS TO ADD MORE JUNIOR ASSOCIATES AND CO-OP STUDENTS INTERNING TO THE TEAM. Assigning work to new team members to improve the whole team's efficiency to meet the deadline.

PROS: Adding new team members can increase labor hours to improve the efficiency of the team. As the very detailed audit work is completed by co-op student interning and less complex parts of the audit engagement work is completed by junior associates, we can believe the newly members have the ability to help complete the job.

CONS: Adding new team members will add unsteadiness to the whole team which is beginning to fall apart and new team members needs time to learn to work with the old team members. Lacking of leadership can't not be solved.

SOLUTION 3: DON'T CHANGE THE CURRENT SITUATION OF THE TEAM BUT INFORM SPECTOR THAT WE DON'T HAVE ENOUGH TIME TO FINISH OUR WORK because we didn't get any information from Spector until the third day of the audit and ask Spector for more days to finish our work.

PROS: We can have more time to finish our work and don't make any changes to the current team and everybody is familiar with what they are doing. We don't need to make a new plan to reassign tasks.

CONS: Client has a great chance to question our ability of finishing our job on time and may not choose our company next time. So there is danger of losing client. The solution can't solve the problem that the team is falling apart and several employees are worried about their own career in our company.

RECOMMENDED SOLUTION:

If I am Michaels, I will choose the first solution. In 2007, our group did a great job with high level of commitment, cooperation and collegiality and successfully met the demanding two-and-a-half week deadline. During the past 9 days, our team meet a lot of troubles such as additional work because of the change of circumstance, 2 team members are fired, some teammates worried about their work security, teammates had complains include inefficiency work and doubt if two co-op students actually work.

Adding senior associates from other team to take care of Ellis and Dee's work can quickly compensate the lose than introduce new employees from outside. Explaining the reason of dismissal from top managers can conciliate other team members and let them focus on the audit. The managers also need to set clear goal and expectations, encourage team members that they can do this. The most important thing is to resolve the trust problem. Only with trust, the team can work with high level of commitment, cooperation and collegiality and improve the work efficiency.

This solution do has some cons, which can be conquered in my opinion. We can increase our work time in the evenings and weekends. This can give us more time to work together and finish the work. In order to do this, the company may need to pay more bonuses to team members for the efficiency work. If the higher managers don't want to explain, Michaels also can explain himself by the name of Adam Nguyen or Keri Feldman. So he can conciliate and encourage for a short time, which is enough to finish the audit.

In this case, I believe our team can successfully meet the deadline.

IMPLEMENTATION STEPS:

CREATE FACE TIME. During face time, the first thing to do is explaining the reason of dismissal to conciliate team members and let them focus on the audit. Secondly, is to encourage team members- giving them confidence that they can finish the audit on time. Thirdly, team members can know each better by communication.

SET CLEAR GOALS AND EXPECTATIONS. Clear goals and expectations are fundamental to building and maintaining trust. Set every day's goal and
achieve it cannot only build confidence, but also increase trust of team members.

MAKE THE WORK VISIBLE AND PROVIDE ONGOING FEEDBACK. This is the key point to build trust. Michaels should review every member's work and give feedback everyday. Doing this can make members believe their team is fair and trustworthy. Also the member who do bad today can feel pressure and working harder in the future.