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ldn’t be back in the office until next week. As he put the  receiver down, he thought maybe things would get better. TWO WEEKS LATER Sands showed up unexpectedly at Palmer’s office and said they needed to talk about Olds. Palmer was delighted, thinking that now he could tell her what had been going on. But before he had a chance to speak, Sands told him that Olds had come to see her yesterday. She told him that Olds confessed that he was having a hard time working on both Crosby’s and Palm

ldn’t be back in the office until next week. As he put the  receiver down, he thought maybe things would get better. TWO WEEKS LATER Sands showed up unexpectedly at Palmer’s office and said they needed to talk about Olds. Palmer was delighted, thinking that now he could tell her what had been going on. But before he had a chance to speak, Sands told him that Olds had come to see her yesterday. She told him that Olds confessed that he was having a hard time working on both Crosby’s and Palm

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question

 Palmer finally decided to pick up the phone and request an urgent meeting with
Sands to resolve the problem. He got up enough nerve and put in the call only to
be told that Sands wouldn’t be back in the office until next week. As he put the
 receiver down, he thought maybe things would get better.
TWO WEEKS LATER
Sands showed up unexpectedly at Palmer’s office and said they needed to talk
about Olds. Palmer was delighted, thinking that now he could tell her what had
been going on. But before he had a chance to speak, Sands told him that Olds had
come to see her yesterday. She told him that Olds confessed that he was having a
hard time working on both Crosby’s and Palmer’s projects. He was having difficulty concentrating on the auditing work in the afternoon because he was thinking about some of the consulting issues that had emerged during the morning. He
was putting in extra hours to try to meet both of the projects’ deadlines, and this
was creating problems at home. The bottom line was that he was stressed out and
couldn’t deal with the situation. He asked that he be assigned full-time to Crosby’s
project. Sands went on to say that Olds didn’t blame Palmer, in fact he had a lot of
nice things to say about him. He just enjoyed the consulting work more and found
it more challenging. Sands concluded by saying, “We talked some more and ultimately I agreed with him. I hate to do this to you, Bruce, but Olds is a valuable
employee, and I think this is the best decision for the firm.”

What, if anything, could Palmer have done to avoid losing Olds?

Case Moss and McAdams Accounting Firm Bruce Palmer had worked for Moss and McAdams (M&M) for six years and was just promoted to account manager. His first assignment was to lead an audit of Johnsonville Trucks He was quite pleased with the five accountants who had been assigned to his teum, especially Zeke Olds. Olds was an Army vet who returned to school to get a double major in accounting and computer sciences He was on top of the latest developments in financial information systems and had a reputation for coming up with innovative solutions to problems M&M was a well-established regional accounting firm with 160 employees located across six offices in Minnesota and Wisconsin. The main office, where Palmer worked, was in Green Bay, Wisconsin. In fact, one of the founding mem- bers, Seth Moss, played briefly for the hometown NFL Packers during the late 1950s. M&M's primary services were corporate audits and tax preparation. Over the last two years the partners decided to move more aggressively into the consult- ing business. M&M projected that consulting would represent 40 percent of their growth over the next five years. M&M operated within a matrix structure As new clients were recruited, a man- ager was assigned to the account. A manager might be assigned to several accounts, depending on the size and scope of the work. This was especially true in the case of tax preparation projects, where it was not uncommon for a manager to be assigned to 8 to 12 clients Likewise, senior and staff accountants were assigned to multiple account teams. Ruby Sands was the office manager responsible for assigning per- sonnel to different accounts at the Green Bay office. She did her best to assign staff to multiple projects under the same manager. This wasn't always possible, and sometimes accountants had to work on projects led by different managers M&M, like most accounting firms, had a tiered promotion system. New CPAS entered as junior or staff accountants Within two years, their performance was reviewed and they were either asked to leave or promoted to senior accountant. Sometime during their fifth or sixth year, a decision was made to promote them to account manager. Finally, after 10 to 12 years with the firm, the manager was con- sidered for promotion to partner. This was a very competitive position. During the last five years, only 20 percent of account managers at M&M had been pro- moted to partner. However, once a partner, they were virtually guaranteed the po- sition for life and enjoyed significant increases in salary, benefits, and prestige M&M had a reputation for being a results-driven organization; partner promo- tions were based on meeting deadlines, retaining clients, and generating revenue. The promotion team based its decision on the relative performance of the account manager in comparison to his or her cohorts One week into the Johnsonville audit, Palmer received a call from Sands to visit her office. There he was introduced to Ken Crosby, who recently joined M&M af- ter working nine years for a Big 5 accounting firm. Crosby was recruited to man- age special consulting projects. Sands reported that Crosby had just secured a major consulting project with Springfield Metals. This was a major coup for the firm: M&M had competed against two Big 5 accounting firms for the project. Sands went on to explain that she was working with Crosby to put together his team. Crosby insisted that Zeke Olds be assigned to his team. Sands told him that
Transcribed Image Text:Case Moss and McAdams Accounting Firm Bruce Palmer had worked for Moss and McAdams (M&M) for six years and was just promoted to account manager. His first assignment was to lead an audit of Johnsonville Trucks He was quite pleased with the five accountants who had been assigned to his teum, especially Zeke Olds. Olds was an Army vet who returned to school to get a double major in accounting and computer sciences He was on top of the latest developments in financial information systems and had a reputation for coming up with innovative solutions to problems M&M was a well-established regional accounting firm with 160 employees located across six offices in Minnesota and Wisconsin. The main office, where Palmer worked, was in Green Bay, Wisconsin. In fact, one of the founding mem- bers, Seth Moss, played briefly for the hometown NFL Packers during the late 1950s. M&M's primary services were corporate audits and tax preparation. Over the last two years the partners decided to move more aggressively into the consult- ing business. M&M projected that consulting would represent 40 percent of their growth over the next five years. M&M operated within a matrix structure As new clients were recruited, a man- ager was assigned to the account. A manager might be assigned to several accounts, depending on the size and scope of the work. This was especially true in the case of tax preparation projects, where it was not uncommon for a manager to be assigned to 8 to 12 clients Likewise, senior and staff accountants were assigned to multiple account teams. Ruby Sands was the office manager responsible for assigning per- sonnel to different accounts at the Green Bay office. She did her best to assign staff to multiple projects under the same manager. This wasn't always possible, and sometimes accountants had to work on projects led by different managers M&M, like most accounting firms, had a tiered promotion system. New CPAS entered as junior or staff accountants Within two years, their performance was reviewed and they were either asked to leave or promoted to senior accountant. Sometime during their fifth or sixth year, a decision was made to promote them to account manager. Finally, after 10 to 12 years with the firm, the manager was con- sidered for promotion to partner. This was a very competitive position. During the last five years, only 20 percent of account managers at M&M had been pro- moted to partner. However, once a partner, they were virtually guaranteed the po- sition for life and enjoyed significant increases in salary, benefits, and prestige M&M had a reputation for being a results-driven organization; partner promo- tions were based on meeting deadlines, retaining clients, and generating revenue. The promotion team based its decision on the relative performance of the account manager in comparison to his or her cohorts One week into the Johnsonville audit, Palmer received a call from Sands to visit her office. There he was introduced to Ken Crosby, who recently joined M&M af- ter working nine years for a Big 5 accounting firm. Crosby was recruited to man- age special consulting projects. Sands reported that Crosby had just secured a major consulting project with Springfield Metals. This was a major coup for the firm: M&M had competed against two Big 5 accounting firms for the project. Sands went on to explain that she was working with Crosby to put together his team. Crosby insisted that Zeke Olds be assigned to his team. Sands told him that
this would be impossible because Olds was already assigned to work on the Johnsonville audit. Crosby persisted, arguing that Olds's expertise was essential to the Springfield project. Sands decided to work out a compromise and have Olds split time across both projects At this time Crosby turned to Palmer and said, "I believe in keeping things sim- ple Why don't we agree that Olds works for me in the mornings and you in the af- ternoons I'm sure we can work out any problems that come up After all, we both work for the same firm." SIX WEEKS LATER Palmer coukd scream whenever he remembered Crosby's words, "After all, we both work for the same firm." The first sign of trouble came during the first week of the new arrangement when Crosby called, begging to have Olds work all of Thurday on his project. They were conducting an extensive client visit, and Olds was critical to the assesament. After Palmer reluctantly agreed, Crosby said he owed him one. The next week when Palmer called Crosby to request that he return the favor, Crosby flatly refused and said any other time but not this week. Palmer tried again a week later and got the same response At first Olds showed up promptly at 1:00 P.M. at Palmer's office to work on the audit. Soon it became a habit to show up 30 to 60 minutes late. There was always a good reason. He was in a meeting in Springficld and couldn't just leave, or an ur- gent task took longer than planned. One time it was because Crosby took his en- tire team out to lunch at the new Thai restaurant Olds was over an hour late because of slow service In the beginning Olds would usually make up the time by working after hours, but Palmer could tell from conversations he overheard that this was creating tension at home. What probubly bothered Palmer the most were the e-muils and telephone calls Olds received from Crosby and his team members during the afternoons when he was supposed to be working for Palmer. A couple of times Palmer could have sworn that Olds was working on Crosby's project in his (Palmer's) office. Palmer met with Crosby to talk about the problem and voice his complaints Crosby acted surprised and even a little bit hurt. He promised things would change, but the pattern continued. Palmer was becoming paranoid about Crosby. He knew that Crosby played golf with Olds on the weekends and could just imagine him badmouthing the Johnsonville project and pointing out how boring auditing work was The sad fact was that there probably was some truth to what he was saying. The Johnsonville project was getting bogged down, and the team was slipping behind schedule. One of the contributing factors was Olds's performance. His work was not up to its usual standards. Palmer approached Olds about this, and Olds became defensive. Olds later apologized and confided that he found it difficult switching his thinking from consulting to auditing and then back to consulting He promised to do bet- ter, and there was a slight improvement in his performance. The last straw came when Olds asked to leave work carly on Friday so that he could take his wife and kids to a Milwaukee Brewers baseball game. It turned out Springfield Metals had given Crosby their corporate tickets, and he decided to treat his team with box seats right behind the Brewers dugout. Palmer hated to do it, but he had to refuse the request. He felt guilty when he overheard Olds explaining to his son on the telephone why they couldn't go to the game
Transcribed Image Text:this would be impossible because Olds was already assigned to work on the Johnsonville audit. Crosby persisted, arguing that Olds's expertise was essential to the Springfield project. Sands decided to work out a compromise and have Olds split time across both projects At this time Crosby turned to Palmer and said, "I believe in keeping things sim- ple Why don't we agree that Olds works for me in the mornings and you in the af- ternoons I'm sure we can work out any problems that come up After all, we both work for the same firm." SIX WEEKS LATER Palmer coukd scream whenever he remembered Crosby's words, "After all, we both work for the same firm." The first sign of trouble came during the first week of the new arrangement when Crosby called, begging to have Olds work all of Thurday on his project. They were conducting an extensive client visit, and Olds was critical to the assesament. After Palmer reluctantly agreed, Crosby said he owed him one. The next week when Palmer called Crosby to request that he return the favor, Crosby flatly refused and said any other time but not this week. Palmer tried again a week later and got the same response At first Olds showed up promptly at 1:00 P.M. at Palmer's office to work on the audit. Soon it became a habit to show up 30 to 60 minutes late. There was always a good reason. He was in a meeting in Springficld and couldn't just leave, or an ur- gent task took longer than planned. One time it was because Crosby took his en- tire team out to lunch at the new Thai restaurant Olds was over an hour late because of slow service In the beginning Olds would usually make up the time by working after hours, but Palmer could tell from conversations he overheard that this was creating tension at home. What probubly bothered Palmer the most were the e-muils and telephone calls Olds received from Crosby and his team members during the afternoons when he was supposed to be working for Palmer. A couple of times Palmer could have sworn that Olds was working on Crosby's project in his (Palmer's) office. Palmer met with Crosby to talk about the problem and voice his complaints Crosby acted surprised and even a little bit hurt. He promised things would change, but the pattern continued. Palmer was becoming paranoid about Crosby. He knew that Crosby played golf with Olds on the weekends and could just imagine him badmouthing the Johnsonville project and pointing out how boring auditing work was The sad fact was that there probably was some truth to what he was saying. The Johnsonville project was getting bogged down, and the team was slipping behind schedule. One of the contributing factors was Olds's performance. His work was not up to its usual standards. Palmer approached Olds about this, and Olds became defensive. Olds later apologized and confided that he found it difficult switching his thinking from consulting to auditing and then back to consulting He promised to do bet- ter, and there was a slight improvement in his performance. The last straw came when Olds asked to leave work carly on Friday so that he could take his wife and kids to a Milwaukee Brewers baseball game. It turned out Springfield Metals had given Crosby their corporate tickets, and he decided to treat his team with box seats right behind the Brewers dugout. Palmer hated to do it, but he had to refuse the request. He felt guilty when he overheard Olds explaining to his son on the telephone why they couldn't go to the game
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