Exit Interview

1970: a year that saw the ill-fated Apollo 13 mission, Concorde’s first supersonic flight and the split of The Beatles. It was also the year that Jim Freer, fresh out of college, joined Ernst & Young as an accountant in the company’s Seattle office. Nearly four decades later, Freer has risen to the post of Americas Vice Chair of People and is on the verge of retirement, having spent his entire working life with the firm. In an age where people seem to change jobs almost as often as they change their clothes, such career longevity is striking. “What has just kept me here for all these years is this culture, the opportunity to do different things,” Freer says. “It’s just always been one additional challenge and opportunity after another. So I hope I’ve contributed something, but certainly it’s been a great, great ride for me.”

Freer’s long service and multiple roles have left him with an in depth experience of how the HR function has changed over the years at Ernst & Young. “In the mid-‘80s there really were two parts of HR,” he says. “One was recruiting, attracting talent, and that had some of the forward-thinking kind of things that we are doing now. The other part was simply transactional, dealing with W-2s, payroll forms and those kinds of things. That’s really all it was at that point in time.” Freer goes on to describe a decentralized organization where each of the 100 or so offices would have its own processes and filing systems. As evidenced by E&Y’s reassuringly commonplace appearances on numerous ‘Best Places to Work’ lists, it’s obvious that things have moved on.

So what led to Freer’s move into the HR office? “One of the things that really attracted me to this role is I just have a passion for our people,” he says. “The opportunity to spend my working hours thinking about how we could improve culture and help our people achieve their potential was incredibly attractive to me.” The change also gave Freer the chance to sit on E&Y’s executive board and the operations committee. He describes it simply as a “dream come true.”

Freer is clear that the key to Ernst & Young’s success, both in HR and in business, is its people. “Every one of our assets goes down the elevator every day and every day we hope they come back,” he explains. In an industry that doesn’t market any ‘hard’ products, the major differentiator is a company’s culture. “That can’t be duplicated by anybody else,” Freer continues. “It’s something that takes time to build, and we have been focused on building a people-first culture here. Watching that develop is probably what I am most proud of.”

When Freer moved into his current position in 2000, he was faced with the challenge of figuring out how to determine whether Ernst & Young’s People Team was reaching the goals it was trying to achieve. The first priority was to create a feedback-rich culture where people had the opportunity to report on what they thought about the overall work environment. The second called upon his accountancy experience to work out some objective measurements on performance, a process that Freer acknowledges was fairly difficult. The Global People Survey, an annual employee questionnaire, seeks to resolve at least some of the issues. Freer tells us that one key question asks employees to respond to the statement ‘I am proud to work for Ernst & Young.’ “That’s a pretty straightforward question,” he says. “In today’s world, with as much cynicism as there is and with as much job changing as there is, I really didn’t know what level we could reach.” The results speak for themselves. After four years of doing this survey, positive responses to the pride question have kept on rising. In 2007, 94 percent of people stated that they were proud to work for the firm. Appearing genuinely surprised and touched at this vote of confidence, Freer says “To me that is just an astounding number in today’s environment.”

But quantifying how employees feel about their place of work needn’t always originate inside the company. The firm has consistently been rated the highest on the Fortune Best Places to Work list among its Big 4 competitors and Freer sees this as an extremely positive indicator. “That was one of the things that I thought was an objective measurement of how we’re doing, as well as being part of the feedback-rich nature that we had hoped to create,” he says. “In that Fortune evaluation two-thirds of your score depends on how your people respond to a survey sent directly by Fortune, over which we have no control. It’s not one of those where you can fluff up the responses and maybe get by with something that’s not as close to reality as it should be. This is one that really represents for the most part how our people think about being here.”

Ernst & Young was the only professional services company to crack the top 50 last year and the only big four company that has managed 10 straight years on Fortune’s list. They’ve clearly been doing something right.

Something that Freer is justifiably proud of is the work the firm has done on diversifying the group’s employee base. “When I got into this role we were not retaining women, and minorities, at the same rate that we were men and the majority population,” he explains. “There were not enough women and minorities at the partner level, at the ownership level of our firm. We needed to change that and put our people first in a way that engaged them, that made them want to be part of this organization and be proud to be part of this organization. That would lead us to growth, it would lead us to excellent client service delivery and a lot of other things.” Success in this area is easy to see. Ten years ago just five percent of the firm’s partners were women. Today the figure stands at 16 percent and in the latest round of promotions, women made up a full 33 percent of new partners.

This improvement has been achieved in a number of ways, but the concept of flexibility is at the heart of most of Ernst & Young’s efforts. Freer insists the flexibility itself isn’t purely a gender or minority issue, but an overall people issue. “It’s just that a lack of flexibility is felt in some cases most acutely by women;” he says. The firm uses an employee website which provides resources for all worker s seeking to make their working lives fit more comfortably around other commitments.

Technology also plays as a part in other ways. “We made a decision some time ago that all of our employees would have laptops and leading edge tools,” Freer continues. “This can be a double-edged sword as it can tether people at times when they’d not prefer to be thinking about work. But I think that is far outweighed by the flexibility such tools can give them.”

There has also been a major focus on creating a better environment for working parents. Parental leave has recently been expanded so that new mothers can take three months of fully paid time off, while fathers who are primary caregivers are entitled to six weeks. Freer tells us about the firm’s working mothers network, an effort that provides advice and support to parents throughout the organization. “It brings working mothers together, locally and nationally, and allows them to share experiences and best practices,” he says. “We’ve also just implemented a network for expectant mothers, which is supplemented by those who have been working moms for some time and trying to help the beginners understand how to cope as a new mother.” These efforts are having tangible effects: Ernst & Young has been on Working Mother’s 100 Best Companies list for over ten years and ranked in the Top Ten this past year.

With so much flexibility built into the company, having trust in employees is essential. “That’s a key factor, and it’s one that you have to continually work on,” Freer confirms. “It’s something that’s very hard to build and very easy to destroy. It takes a long time to create.” It all comes back to Ernst & Young’s people-first culture. In an environment where employees are given a good degree of trust and autonomy, while still benefiting from the structure that a well-managed company provides, you tend to get a better response from them. They are happier and more productive in their work and they are far less inclined to go and look for a new job.

Freer sees staff turnover levels as a major indicator of E&Y’s success as a company. Quite aside from the message it sends about the firm being a good place to work, it also has major financial significance. A potential downside for a company that spends so much time and energy on training its people is that it can be incredibly expensive when they leave. Freer estimates that the cost of losing just 10 staff members can be as much as $1.5 million. “When one of our people leaves that’s a significant loss to us,” he says. “Turnover in the public accounting profession had been at quite high rates up through the last century. So we decided that we’d be able to tell we were being successful if retention went up. Retention is always going to be somewhat cyclical, but our aim was to improve the overall. We’ve been at historical highs for the last three years, and that has had a huge impact on our business.”

Turning once again to the Global People Survey, Freer tells us about an ingenious way in which the results are used to forecast business performance. “We gave our outside survey administrators the detail of our business units’ performances, which ones of them were the highest performing business units and which ones were the lowest performing, and asked them to try to figure out if there was any correlation in the answers in the Global People Survey,” he explains.

The results were interesting. After a lot of work, the administrators came back with a list of questions that have now been dubbed the Business Effectiveness Index. “This Index shows a correlation between positive scores in the Global People Survey and what that business unit is likely to do in the coming year,” Freer continues. “It’s predictive. We’ve now done the modeling for three years in a row and it has held out every time.” The highest performing Global People Survey business units will often outperform the lowest performing units by upwards of 25 to 30 percent. This provides great insights into what areas need to be focused on to have the biggest impact on operations.

As his time at Ernst & Young draws to a close, it’s clear that Freer has enjoyed his nearly four decades with the firm, particularly the last eight years in HR. “I have been blessed with a team of people committed to effecting change, he says. “Over the years we’ve been able to develop a true People Team throughout the Americas and really change the focus from being transactional to being a part of operating the business. Not only developing that strategy, but also executing it. It’s been an honor to work with these people over that time.”

Anyone expecting his final days in the job to be more relaxed than those that preceded them is going to be in for a surprise. “I’ve got so much to do I can hardly breathe,” he says. “It’s like taking a vacation, only this is the long vacation. There are so many things that I cannot leave here without completing that it’s going to be a tough few months. But I know they will be great months. “

Constant evaluation
Jim Freer explains Ernst & Young’s innovative People Point initiative.
It’s a very simple, maybe even somewhat blunt, tool that we introduced about five years ago. It’s a survey that is open to every single person in the firm, from the newest recruit who joined yesterday to somebody like myself, who’s been here 38 years. Regardless of position, everybody has an opportunity to evaluate any partner or principal in the firm on one question. That question is, “How effectively does this person foster a positive work environment and help our people grow?”

So everybody’s going to have the opportunity to evaluate any partner or principal in the firm. We thought that to get the really honest input and feedback to this one question that we desperately wanted we needed to make it anonymous. Some of the people being evaluated were not very happy with this but we made a decision that we were going to use it as part of our annual evaluation of our partners and principals and it’s been an incredible tool. We have seen continual growth in the quality of the input from our people. A year ago we had somewhere around 40,000 people submit responses. I’m not aware of anybody else doing anything else like this, where you ask your own people to provide the input anonymously on any partner or principal.

It’s been one of the things that I think has had a huge impact on culture, particularly for our women and minorities. Because we do splits of the input, we are able to get an overall summary input of minorities and women comparing how we’re doing from the culture perspective with those groups compared to the others. It’s been a tremendous tool for us.