My first “real” full-time job after graduating from business school was working for one of the Big 6 public accounting firms. This was one of my first opportunities to appreciate the difference between experience or ability. FYI, before I started working, the group of public accounting firms was referred to as the Big 8. But after a series of consolidations over the years, it’s now referred to as the Big 4. I was there somewhere in the middle.
In any event, I wasn’t an accountant, I was a financial analyst providing consulting services. And one of my first large engagements was supporting the litigation aftermath of a leveraged buyout that had failed. Not to delve too deeply into the specifics, mostly because I can’t recall most of them as this was 20 years ago, but essentially the investors filed a claim to recover their investment which was lost when the acquired company failed.
The reason for the failure was at the center of the dispute. Some argued that too much debt was used to fund the purchase price thereby leaving the company insolvent. Others argued that the management team failed to deliver on its projections. But again, the specifics of the situation aren’t important as what I took away from the experience.
Life in Public Accounting
As this was one of my first work experiences, I really had no idea what I was doing. Usually in the public accounting world, the question of experience or ability doesn’t get much attention until you’ve worked your way up the ladder. When you’re hired, you start off working on the lowest level projects. For instance, checking the math on every page of a report to make sure that all the columns and rows add up correctly. There’s nothing worse than a finance company sending out a report with a math error because your spreadsheet failed to include the last line of a column of numbers. So we had first year analysts check every single number on every report.
Related: Is a CPA Worth It?
What is scary about that is the firm billed our time to the client at a rate somewhere around $175 per hour. That’s not what we got paid, it’s what the client paid. And the first-year analysts had nearly the lowest billing rates of anyone. So just imagine how expensive it was to get a Big 6 valuation report.
The organizational structure in public accounting firms is a pyramid. A new financial analyst (also known as a consultant) reports to a senior consultant who have two years of experience. The senior consultant reports to a manager who reports to a senior manager who reports to a director who reports to a partner. And then the whole thing starts over again once you make partner.
But this was not a usual Big 6 engagement. On this engagement, I reported directly to a partner. He also happened to be the partner in charge of the regional office. This meant that he was bogged down with administrative work in addition to the client work. But it also meant that I was mostly on my own.
I tend to like being on my own, but when you’re right of school working on a high profile failed LBO and you have no idea what you’re doing, it can be stressful.
Sink or Swim
So when you find yourself in a situation in which you have no idea what to do, how do you respond?
Doing something is usually better than doing nothing. My father was my youth football coach and he used to say that when you’re on the field you may not know the right thing to do. But even if you don’t know the right thing to do, do something. If you do nothing, you know you’re wrong. If you do something, there’s a chance it’s right and even if it’s not, sometimes good things happen unexpectedly. The same applied here. We were hired as consultants to do something. And hopefully what we did would add value, so I had to do something to kick-start the process.
Trust your instincts. It’s rare that you do something that cannot be undone. In this case, while I was inexperienced, I did have multiple degrees and had worked as an intern in multiple companies. And I had strong analytical skills. So that’s what I did. I put together spreadsheets. And I drafted documents outlining my thoughts. I wasn’t looking for conclusions. I just wanted to get down on paper everything that came to mind and I would figure out what to do with it all later.
Realize that you cannot control how other people react and respond. Instead, focus on your own actions. Nothing stifles productivity more than second-guessing yourself. It’s too easy to sit back and question everything you do. And even easier when others do the same. But that doesn’t get you anywhere. Have confidence in yourself and in your actions. While there may be multiple ways to attack a situation, you choose a path and you’re going to follow it.
Ability Wins Over Experience
I cannot recall how the litigation eventually turned out. I do remember meeting with the partner in-charge. He reviewed my work and seemed pleased. He was able to quickly go through the information that I had put together and draft a document that we sent to our client.
I mentioned to him how impressed I was that he could so quickly and easily pull all the information together.
And after all these years, I remember his comment back to me. He complimented me on my analytical skills. And he said that I actually had better analytical insight than he did. And the only thing I was missing was experience. Having worked on many similar projects over the years, he knew what the client wanted and needed to see and hear.
I would get there and it was only a matter of time.
It was a simple yet highly motivating compliment and I’ve kept it in mind ever since. When I meet a younger employee, I look at their potential. Do they have the underlying skills to succeed even if they’re lacking experience in the area? I have found it’s easier to gain experience than to teach someone how to be analytical.
Readers, obviously you would rather have both, but if you had to pick one, which would be more important, experience or ability?