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Tony Oliver, finance director of recruitment firm, Adecco UK

Tony Oliver says his hair started going grey in 2004. Given he is the UK
finance director of recruitment company Adecco, you can understand why stress
has left its mark: the Swiss group, listed on the New York Stock Exchange,
recently became the first high-profile corporate victim of auditor and investor
jitters post-Enron and WorldCom.

Adecco’s problems began in January 2004, when its auditors Ernst & Young
refused to sign off its 2003 accounts because there were material weaknesses in
the internal controls of Adecco’s US operations. The saga ended five months
later after a substantive audit and an internal investigation failed to find
anything materially wrong with the group’s accounts. Ernst & Young finally
signed off Adecco’s accounts on 1 June 2004 and Adecco was presented with a bill
for EUR100m by the auditors, banks and lawyers for cleaning up the controls – a
figure roughly equivalent to one-third of Adecco’s 2003 profits.

In the UK, thousands of miles from the problems in the US, Oliver and his
finance team were subject to the same gold-plated audit even though he says
there have always been good controls in the UK. Oliver had to keep the books
open for five months, co-operate with auditor and lawyer demands, and
communicate with clients and financial advisors – all while trying to run the

“It was a huge distraction for the finance function, and for me personally,”
Oliver says. “We were on a permanent audit so we were permanently reviewing
calculations, provisions and estimates. And then Ernst & Young pushed
through additional requests globally, so that meant additional work and testing.

The internal investigation, audit and the looming spectre of Sarbanes-Oxley
(as a foreign company listed in the US Adecco has until the end of 2005 to
comply) has meant that in the UK alone Adecco has devoted between 4,000 and
5,000 man-hours to compliance over the past year.

So what exactly was so wrong with the company’s internal controls? Oliver
says there were some issues in the US that needed to be addressed, such as IT
systems security, reconciliation of payroll bank accounts, accounts receivable
and a lack of segregation of duties in its US branches. But the real problem was
timing. “They (Ernst & Young) were right to raise an issue if they thought
there were material weaknesses in control in the US,” Oliver says. “At the time,
the uncertainty – especially against the backdrop of recent situations – created
a supposition that delays to accounts equalled a failing balance sheet. But that
wasn’t the case, so it was unfortunate and expensive.”

Ernst & Young had replaced Arthur Andersen – the firm at the heart of the
Enron and WorldCom scandals – as Adecco’s auditors in 2003. Twitchiness over
accounting scandals, fuelled by Sarbanes-Oxley section 404 (on internal
controls), meant that Ernst & Young subjected Adecco to a more thorough
audit than they were accustomed to.

“I think the standards and expectations of audit had changed as a result of
Enron and WorldCom, therefore, what may have been OK for Arthur Andersen was not
(for Ernst & Young). Things had moved on,” Oliver says.

After the news that Ernst & Young had refused to sign off its accounts,
Adecco’s share price fell by nearly 40%. Adecco management launched the
investigation, called in an independent legal counsel to help reassure markets
there had been no financial wrongdoing and replaced its group CFO.

But did Adecco handle the situation badly? Some commentators have said the
company adopted a policy of silence and failed to communicate properly with
shareholders. Adecco is also facing a class-action lawsuit from investors, who
allege its management breached securities regulation concerning the publication
of its financial results between March 2000 and January 2004.

Oliver says it is never easy to communicate at times of crisis, and he
believes that Adecco’s hands were tied to an extent and it did everything
possible to reassure investors. “The difficulty is how do you communicate to the
markets in a period of uncertainty? It’s a challenge. The markets want
reassurance that the outcome from the extra audit work will mean no material
adjustment to the accounts. But until the process has been exhausted, you can’t
say that,” he says.

In the UK, Oliver made sure that communication with clients and stakeholders
was his first priority after he was briefed about the control issues. While
Adecco’s global finance team was talking to the group’s lenders renegotiating
its syndicated loans, Oliver was on the telephone to his key financial

“It was either the first or second week of January when we (in the UK) were
briefed by conference call. The first thing I did was ring my audit partner and
the banks. Communication was the most important thing,” Oliver says. “I spoke to
the bankers within half an hour, so the relationship director at Barclays could
proactively approach his risk committee to discuss it with them. He wasn’t
finding out through the press.

“I have always had strong relationships with bank and audit, and it’s at
times like this that it actually shows,” Oliver says. “I started with a strong
relationship with our auditors and I exited with an even stronger relationship.
As an FD if you aren’t close enough to your audit partner to actually understand
their needs and concerns, and vice versa, then it’s a risk to the company.”

Oliver spent the following months working with lawyers and auditors and had
to realign his team, from his financial controller downwards, to ensure the
additional auditor’s demands were dealt with smoothly.

“The audit had to be the priority for the finance function. We tried to
minimise the impact on the rest of the business,” he says. “Again, communication
was important. My financial controller was under a lot of pressure, so we had to
manage priorities and choices, and flex the resource where it was needed. We
tried to spread the additional workload as widely as possible.”

Oliver outsourced a lot of the extra administration, such as collating
information on contracts and deals, to other functions within the business which
gave his team enough flexibility to continue running the finances of the
company. “We made choices. We had top-down bottom-up communications, so if there
were a choice where we should be doing something with the auditors or for
another part of the business we had to manage expectations,” Oliver says. ”
Could we short-cut the work, could we get someone else to do it, could we bring
additional resources of the audit, could we buy a couple of days from the
auditors? It was a constant cycle to keep the whole thing on track in terms of
both compliance with the audit and actually managing the business. I think we
managed it quite well, but it was hard and relentless.”

Despite having spent a lot of time and resource, in essence, uncovering
nothing, Oliver is keen to stress that Adecco’s problems have made him and his
team better at their jobs, even if they suffered along the way.

“Sure, everyone has pressure. I think when you’ve got sustained pressure over
five months, that’s different,” Oliver says. “I think if anyone goes through
this they learn a lot. And even though they will not have enjoyed it, they will
have learned a lot about themselves. The next time they’re under pressure,
they’ll know what to do, and they’ll probably deal with it more effectively.”

Oliver says that Adecco’s internal controls and business processes have
improved immeasurably since the investigation – even if he hasn’t had time to
spend on the operational and commercial side of the business. “I guess what
really suffered was my focus and the strategic stuff,” he says.

As a sales-driven business that was perhaps not as open to finance-driven
initiatives before the investigation, Adecco has now embraced compliance
throughout the group. “As a company globally and as a function it really
provided a stimulus to us. We’ve got a strengthened audit committee, main board
and a new CFO. We’ve got a tighter processing framework for managing global
controlled compliance. We’re becoming a world-class finance function,” Oliver

And with Sarbanes compliance around the corner, all Oliver has to do is wave
the flag of compliance and his sales team buy in immediately. “In the past, if I
wanted to put something in place around control, I had enough credibility to get
that agreed. Whereas before there may have been a discussion or argument, now I
just say we have no choice, this is Sarbanes-Oxley, so that’s it,” he says.

Adecco now takes a global approach to managing risk and Oliver sits on the
group’s new CFO council, comprising CFOs from the major business units, the head
of its audit committee, the group heads of tax, legal, treasury and Adecco’s new
compliance and business ethics officer. “The council has been in place about
three or four months now and is a great step forward because you’re preserving
the strength of the local empowerment in local markets while also managing
overall global risk. It’s a major step in the right direction given some of the
issues in 2004.”

‘Local empowerment’ means that Oliver acts as finance director of a
standalone company and not a glorified financial controller. He has taken charge
of IT, property, procurement and legal issues in the UK, and has also assumed
responsibility for setting up financial departments in Adecco’s new businesses
in Nigeria, India and South Africa – areas where strong controls are especially

“The control framework is key – absolutely key. So you have sign-off limits,
and you’ve got a reporting and control process so you can actually ensure that
everything is done as it should. You also have to make periodic visits,” he
says. “But you have to get the right people in the key control compliance roles
– a CFO you can trust.”

A year after Adecco’s problems broke, Oliver can get back to running the
business. He still has Sarbanes-Oxley to contend with, but recent history has
already ensured that his control frameworks are top-notch. “I think we have
already learned the lessons,” he says. And as Adecco is a Swiss and not
EU-listed company, Oliver doesn’t have to contend with international financial
reporting standards, which he says is a relief: “I wouldn’t fancy both (IFRS and
Sarbanes) at the same time. We could do with a period of stability.”

Having learned the hard way, Oliver has some advice for other FDs on how to
cope during a crisis. The first is to make sure you communicate properly and
engender trust with your key stakeholders. The second is to have cash in the
bank to pay the legal bills. “We had approaching EUR1bn in cash from memory.
Cash in the bank certainly helps.”

The third is to get your priorities between your work and personal life in
perspective. Oliver has a small cottage in Norfolk, where he retreats to most
weekends to get away from the pressure. He also has a strict rule about turning
off his mobile telephone and handheld computer when he leaves the office. He
says that in the event the company needs him urgently, the board members have
his home phone number.

“I’m quite pleased I went through it because I can stand back and look at
myself and how I dealt with sustained pressure. What it taught me was that the
work-life balance is important, because it gives you the appropriate perspective
to stay effective over a sustained period of pressure,” he says. “I think I was
reasonably good (at my job) beforehand, but I’m a damned sight better after
having gone through this.”


Name: Tony Oliver
Age: 46
Qualifications: ACA


2000-: Financial and information systems director, Adecco UK
1986-2000: Financial accountant and finance operations manager, Whitbread
1984-86: Audit manager, Deloitte Haskins & Sells (New Zealand)
1981-84: Trainee accountant, Deloitte & Touche

Biggest challenge? Getting the balance right between control
and empowerment, pitching it just right so your people are empowered to do their
jobs and haven’t got 150 different compliance issues to deal with. Too much
compliance stifles initiative.

Biggest hassle? I would say Sarbanes-Oxley. It’s only short
term, but it’s probably the truth. It’s all under control, though.

Which company would you like to be FD of? A company where I
can really make a difference. I like an open, honest supportive yet challenging
culture, with very little politics. I know politics is inevitable, but I hate
wasting time on it.

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