Stratafin Inc.: Auditing Change

It was a chilly winter day in June 2010 Ben Adams, Chief Executive Officer (CEO) of StratAFin Inc., reflected on the previous Friday’s company event when all the staff had spent the evening learning the diski dance, the official dance to celebrate the upcoming World Cup football tournament. The South African nation was united in its excitement about hosting this prestigious international sporting event held every four years in a different country, and the StratAFin atrium reflected this energy.

The vast central area in the building was festooned with flags representing all the participating countries; the colour and diversity of the flags mirrored the diversity of employees and job function within the firm. All the staff, from the most senior to junior levels, had embraced the diski dance evening with great enthusiasm. This made Adams reflect on the profound changes that both South Africa and StratAFin had undergone in the last decade.

Adams had loved the adrenaline rush of leading his firm through large-scale change for the last seven years. his dilemma now was whether he had done enough to align the company with the new operating environment in South Africa or if at this point there was a need for radical change. If so, did he have the right team, culture and business model in place to implement it? In the 1994 general elections, the African National Congress (ANC) was voted into power, and Nelson Mandela became the first democratically elected president (see Exhibit 1).

In the eyes of the international community, South Africa was no longer “the polecat of the world.” The new government inherited a country in which the provision of basic needs (housing, health, education, access to water and electricity) for the majority of the population was insufficient. 

South Africa remained a rapidly developing state, the economic powerhouse of Africa. Furthermore, the 2010 World Cup football tournament encouraged much more global interest in the country, which promised interesting possibilities for South African businesses.

ACCOUNTING FIRMS RESPOND TO GLOBALIZATION

In 2002, South African accounting firms sere facing many challenges. Many clients were consolidating in order to be globally competitive, and their expectations were growing due to global exposure, resulting in fierce competition between accounting firm trying to differentiate themselves. This often required accounting firms service portfolio to expand. Many accounting firms accepted the intrinsic risks of expansion in the knowledge that this should yield an increased reputation, a greater client base and larger profit. At the same time,

 there were international changes in terms of the introduction of International Financial Reporting Standards (IRS) 3 StratAFin was formed through the merger of three prominent South African accounting firms in 1998. It had offices in Centurion and Cape Town, South Africa and an association with firms in Nairobi, Kenya and Lagos, Nigeria. The merger allowed the firms to consolidate their offering , to large corporate clients and to reposition itself as a full service corporate accounting firm.

The traditional model of an accounting firm featured a chairman/senior partner and a managing partner who ran the firm. This was the model that existed in 95 percent of accounting firms around the world. Typically, these would be men and women who had been practicing accounting for many years and who were respected and had credibility within the financial environment. 

The challenge experienced with this model was that two people at the top of the earnings scale were then removed from practicing and billing hours. As a result, within StratAFin, there was strong motivation to change this and to retain the senior partners in their area of expertise. As the world flattened with increasing globalization and foreign investment into South Africa picked up wit the end of the apartheid era, StratAFin positioned itself more towards doing business with multinationals operating in Africa.

It wanted to offer a more personal experience than was offered by the Big Four international accounting firms to become essentially as African accounting firm that would use its understanding of the operating environment as part of its distinctive offering. StratAFin acknowledged, however, that if it wanted to play in a global arena, it had to operate as a First World leading accounting firm. It also recognized that pursuing growth as a strategy would bring greater complexity. As Adams stated, “the complexity of pursuing growth meant that the day-to-day challenges of the organization called for full-time professional management focus.

Question 1 

Discuss how should Adams and his teams keep the organization aligned with changes in the environment? Support with THREE (3) relevant answers. (15 Marks)

Question 2 

Evaluate whether radical change is a viable option at this stage of the change process? Justify your response with TWO (2) points. (10 Marks)

Question 3 

Assuming all of you in the group are in the management team of this company, recommend THREE (3) action plans what should all of you do as leaders in order to sustain the momentum of change? (15 Marks) 

Question 4 

Analyze the challenges faced by StratAFin during change transformation process. Support with TWO (2) relevant answers. (20 Marks)