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For PricewaterhouseCoopers, layoffs pad bottom line

PricewaterhouseCoopers has cultivated an image as one of corporate America's upper-tier workplaces. Competitive pay. Great benefits. A perennial on Fortune's list of Best Places to Work.

Human resources experts with the company have preached to clients about effectively managing workers and using layoffs as the last option in times of crisis.

However, interviews with a half-dozen current and former Pricewaterhouse employees support a different picture of a financial evolution within the company in recent years. The accounting and professional services giant, known as PwC, has quietly and methodically slashed hundreds if not thousands of well-paying jobs, offshoring many functions to cheaper labor overseas.

In the Tampa Bay area alone, where Pricewaterhouse has swelled to become one of the region's biggest employers, the company dispatched HR jobs to Costa Rica, graphics jobs to Uruguay and database jobs to India. It confirmed a week ago that it's cutting 500 information technology positions, nearly all in Tampa, and sending the work to India-based Tata Consulting Services.

PwC won't say how many jobs have been cut locally or nationally as part of its outsourcing strategy. Company spokesman Jon Stoner pointed out, however, that the company has also added about 200 jobs in Tampa in the past 18 months through creating two delivery centers. It plans to add 200 more to that group in the next two years, he said.

Throughout the hirings and firings, PwC has remained profitable, according to outside estimates.

As a private company, PwC closely guards much information about its financial health and movement of its workers. However, it acknowledges its industry was not hit as hard as others by the Great Recession.

The $26 billion British powerhouse reported that, with currency adjustments, its global revenue rose slightly in its 2009 fiscal year, a time when many companies were struggling through the brunt of the recession. Revenue was down about 1 percent in North America and even more in Europe, but that was offset by strong revenue growth in markets such as Japan and Spain.

Pricewaterhouse and the other top global accounting firms "make a lot of money, and they've had an increase in revenue for many years," said Christopher Ames, president and CEO of the Ames Research Group, which analyzes financial data of the world's largest professional services firms.

"These firms work differently than a publicly traded company. In the firms, the shareholders are the firm and there's not that many of them. From the partners' perspective, they want to keep that money … and they've done pretty well."

Typically, the Big Four accounting firms allocate the highest pay to the thousands who have reached the level of partner. For fiscal 2008, Ames estimated Pricewaterhouse had average gross earnings per partner of $872,640, the highest among the Big Four. He thinks gross profits may have fallen some in fiscal 2009, but not much.

Blair Houston, who worked at PwC's Lakepointe offices in Tampa for two years and now works in Montreal, said he noticed a change at the top.

"It used to be a great place to work. They took care of their workers," he said. Now, "it's a company of bean counters, and all they care about is saving a few pennies."

Stoner, the PwC spokesman, said in a statement that the cost-cutting is "part of a thoughtful, strategic plan that will allow the firm to best serve its clients."

"The firm is one of the largest private employers and recruiters in the U.S. and as we make these changes, we are simultaneously increasing the number of jobs in other areas of the U.S. firm," he said. "All impacted employees will be encouraged to apply for other open positions at PwC, and those who cannot be matched will be offered generous severance packages."

The latest cuts, Stoner said, stem from the merger of the UK and U.S. information technology operations into using a single, outsourced vendor. He didn't identify Tata, though the Indian consultant is mentioned in documents given to workers when the layoffs were announced. Tata said it may hire 60 of the displaced workers, according to the documents.

Confirmation of the latest layoffs was unusual. Many cuts happen below the radar. PwC has not filed any WARN layoff notices with the state this year for any cuts, including the latest one.

Consultant Francine McKen­na, a former PwC employee who tracks the Big Four audit firms in her award-winning blog, re: TheAuditors, was shocked the company even confirmed the layoffs publicly. "They just don't issue press releases," said McKenna, who broke news of a previous PwC layoff in November.

Several PwC veterans said that is partly due to the process. A mass layoff is not typical; cuts come in small groups. Workers receive messages to "touch base" with a partner, a telltale sign they are about to lose their jobs. The total numbers are also murky, workers say, because a percentage of dismissed employees are offered either lateral jobs or lesser-paying jobs to stay with the firm.

Some displaced employees who were shifted to other, lesser-paying jobs may not be counted as laid off, even if they didn't last with the company in their new roles.

That was the case for Dave Bolock, one of about 50 PwC employees told in January that their jobs in Tampa were being eliminated.

Bolock, an Oracle database administrator who worked 11 years for the company, initially stayed to train his replacement with Indian outsource firm Infosys.

"Our goal was to make the people from TCS (Tata Consulting) and Infosys look good," he said.

Now working on contract for CVS Caremark in Pittsburgh, Bolock figures about 20 of the 50 in his outsourced group took other IT positions within the company. "And all of those 20 will be gone with this round," he predicted. "Anything outside of management, they've been trying to find a way to send it to India."

Formed by the 1998 merger of London firms Price Waterhouse and Coopers & Lybrand, PwC is a numbers-crunching colossus: more than 163,000 people in 151 countries.

Stoner refused to discuss the company's peak employment in Tampa or give a history of its shifting head-count. But based on government documents, the company repeatedly made promises to create jobs here that never materialized.

Since 1997, Pricewaterhouse has entered into four separate agreements with state and local authorities to receive tax rebates in return for creating high-paying jobs. The effort to lure desirable jobs to the state is known as the Qualified Target Industry Tax Refund Program, or QTI. Had PwC met the requirements of those agreements, it would have received millions of dollars in rebates for creating at least 1,045 jobs.

However, three of the four agreements were a bust, with the company failing to deliver promised jobs. "I wouldn't characterize those as being very successful QTI operations," said Bruce Register, corporate business development manager for Hillsborough County.

Only one deal made it past the first year: PwC's pledge in 2005 to create at least 320 jobs paying at least $49,000 each. For meeting those terms, PwC was to receive annual rebates totaling about $1 million from the city, county and state. PwC has yet to receive most of that money. The state says part of the payment is pending due to auditing of the company’s provided information.

PwC is hardly a trendsetter in offshoring its back-office and IT work. In fact, it's late to the game following the lead of fellow top accounting firms such as Deloitte LLP.

Some workers date the layoffs back to a 2007 reorganization when a data center in Tampa was relocated to Atlanta. Subsequently, workers involved in payroll, security, audit software and other roles found their jobs offshored.

The loss of 500 high-paying jobs is expected to have a ripple effect through the Tampa Bay economy, which is already suffering from a 12 percent jobless rate, fifth-highest among major metros.

Register, the Hillsborough County job development point person, tries to look at it philosophically. "These are strong jobs. For these individuals, this is quite a blow," he said. "But … we can't overlook the years of economic activity that was yielded from the jobs they've created. And at least they're still here."

Asked whether PwC is making a long-term commitment to the bay area, Stoner cited plans to expand its delivery operation by 200 people. "I think that indicates that there is absolutely an expectation we're going to continue doing business in Tampa."

This article has been revised to reflect the following clarification: PricewaterhouseCoopers says it has only received $255,000 in tax rebates in the past five years of approximately $1 million it is owed from the state of Florida for job creation. The state says part of the payment is pending due to auditing of the company's provided information. An Aug. 8 story was unclear on this point.

People at PricewaterhouseCoopers

Global workforce*: 163,000

Partners*: 8,552

North America and the Caribbean*: 39,142

Current Tampa workforce: 1,802

Tampa layoffs by year-end: 500

* Based on fiscal 2009 report

For PricewaterhouseCoopers, layoffs pad bottom line 08/07/10 [Last modified: Tuesday, August 31, 2010 5:36pm]
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