The Fall of Arthur Andersen - Organizational Culture Issues|Human Resource|Organization Behavior|Case Study|Case Studies

The Fall of Arthur Andersen - Organizational Culture Issues

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Case Details:

Case Code : HROB024
Case Length : 12 Pages
Period : 1990 - 2002
Pub Date : 2002
Teaching Note :Not Available
Organization : Arthur Anderson
Industry : Consulting
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Changing the Organizational Philosophy

According to former Arthur Andersen partners, the decision to remove the two-year audit practice rule was the first step in developing a generation of future leaders at Andersen who did not share a deep bond with the audit group or its values. According to Victor Miller (Miller), the head of the consulting group, "The real bitterness emerged when we began pulling people [into the leadership circle] with no background and no personal relationships with the auditors." During the late 1960s, Arthur Andersen's consulting group continued to grow, and began competing with computer giants like IBM in computer consulting services...

Human Resource and Organization Behavior | Case Study in Management, Operations, Strategies, Human Resource and Organization Behavior, Case Studies

The Auditing/Consulting Divisions Fight it Out

In 1987, to end the animosity between the two groups, the audit group agreed to separate the groups and allow the consulting group to function as an independent division. However, this agreement included a clause, which stated that the group, which earned more would have to give 15% in the earnings of the other group. The agreement also stated that the consulting partners now would directly report to other consulting partners and not auditing partners. In 1989, consulting group revenues accounted for over 40% of the firm's total revenues of $2.8 billion...

A Change in Values - Why Andersen Began Compromising

Arthur Andersen Worldwide had not only experienced internal conflict, it had also experienced an erosion of its culture. Various factors were responsible for this cultural decay. During the 1990s (especially in the mid and late-1990s), the auditing services business was at a low. Arthur Andersen had the slowest rate of growth (12.6%) among the Big Five auditing firms. Also, though its consulting group was making profits, it was still in the initial stages. The consulting groups of competitors such as KPMG and Ernst and Young were, however, making high margins on their consulting services...

Andersen - Ready to Fall

In this vitiated environment, Arthur Andersen employees were not allowed to question the superiors and were forced to comply with improper orders. There was no transparency in the system. According to Toffler, most of the people did not want to be involved in unethical activities, and such activities took place only because 'decent people were put under unbearable pressure to do their jobs and to meet the firm's ambitious goals with very limited resources to get the job done.'...


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