Deloitte CEO Cathy Engelbert Enjoys a Commanding Lead Among the Big Four

Cathy Englebert is a featured speaker of Chief Executive’s 2015 Talent Summit, Sept. 30-Oct. 1, 2015, in Dallas. Click here for more information

“Running a professional services firm is like herding cats,” Ed Kangas, a former Deloitte Touche Tohmatsu CEO, once remarked. “Everyone thinks he is smarter than you and can run it better.” The partnership model of professional service firms sets them apart from most companies. The firm’s “product” is human ingenuity and its knowledge base. It is also uniquely challenging from a leadership perspective. Deloitte Global, with 210,000 employees in over 150 countries, is the largest of the Big Four, with more than $34.2 billion in revenue. It’s also the only one to retain its consulting arm.

Every four years, a nominating committee of 12 partners scours the firm for its next U.S. CEO and chairman. As of March, Catherine Engelbert became its current CEO, the first woman to lead the $14 billion U.S. arm of the firm, which has more than 60,000 people across more than 100 offices nationwide. A 29-year-veteran of the firm, she started with Deloitte Haskins & Sells in its Philadelphia office and ultimately rose to run its audit practice. What caught the partners’ attention was her focus on clients and innovation, particularly investments in Deloitte’s people. “I was a line client-service partner working with large companies mostly in the pharmaceutical industry,” she recalls. “I could see how they were evolving with the pace of change in technology. I thought we could bring some of that inside.”

“What caught partners’ attention was Cathy’s focus on clients and innovation, particularly investments in Deloitte’s people.”

Engelbert, who studied computer engineering at Lehigh University and who is raising a 13-year-old son and a 17-year-old daughter, was spotted early in her career by then-CEO Mike Cook, who asked her to join his steering committee. “Mike had daughters at the time who were coming out of college,” says Engelbert. “He said, ‘I see that my own company isn’t really retaining the best women.’ So, this set me on my path and I stayed in touch with him off and on.”

That path hasn’t always been easy. “At times it’s been di cult raising two children and doing this,” says Engelbert, who served as her daughter’s middle school basketball team coach. “But I have had some great sponsors who said, ‘Cathy, you need to go do this because if you do this, you’ll get to the next level in your career.’”

Engelbert believes investing in innovation and expanding the firm’s global footprint are among Deloitte’s biggest challenges. To that end, the firm intends to hire 24,000 people in 2015. Deloitte’s human capital transformation practice is also expected to play a bigger role going forward.

While Engelbert didn’t necessarily anticipate becoming CEO, she has always aspired to be a leader. Her father, an engineer with RCA who worked on various NASA projects, was a major influence on her personal life, as was her aforementioned mentor Mike Cook. Her husband, a West Point graduate, flew helicopters in the U.S. Army and joined Mobil (now ExxonMobil) around the time she joined Deloitte.

A four-year term as CEO doesn’t seem like much time given her long-term goals (Deloitte permits a second four-year term if re-elected.) “For me, it’s about differentiating yourself versus the competitors,” she says. “And it’s not just the traditional Big Four competitors, it’s the consulting competitors as well—the McKinseys, Bains, BCGs and IBMs, even.”

Chief Executive’s J.P. Donlon recently caught up with Engelbert in her Parsippany, New Jersey office.

Q: What is your vision for Deloitte?
“In the U.S., we serve over 80 percent of the Fortune 500, in some capacity, in one of our businesses. My vision is to maintain that client-centricity, but since we also see how these companies are evolving, to invest in people and innovation. So we’ll hire over 24,000 people over just the next year to serve our clients. We’ll also double our investment in innovation spend over the next three years. This is innovation in digital, cloud, 3D, cyber, artificial intelligence and analytics. There’s so much change going on with the way companies are thinking of marketing themselves. We’re well positioned because all our businesses serve those niches. Our vision is to differentiate ourselves in how we do this.”

Q: Tell us about the innovation categories and about what each specifically means to you.
A: “When you think about cloud, and about the traditional way that our technology practice operates around big ERP [enterprise resource planning] systems that companies have put in, it represents a huge change in the way companies operate. We are trying to evolve in a similar way. We look at the way companies are marketing themselves. Is everything going to be conducted through one’s smartphone now, rather than traditional advertising or media? The ecosystem of the digital economy is evolving. We intend to partner with companies and form alliances and collaborations in this ecosystem of emerging digital communication.

“The ecosystem of the digital economy is evolving. We intend to partner with companies and form alliances and collaborations in this ecosystem of emerging digital communication.”

“Cyber is a key area for us. Cyber conjures high-profile breaches, but for us it’s about methodology. Is it vigilant, resilient and secure? Many companies don’t know whether they have had a major breach into key systems. I was at a client the other day where they were talking about a credit card file breach being worth $1 per record, whereas healthcare records are worth $10 each. Looking at how different industries are being targeted for cyber [theft] is an important part of the way we look at cyber. Understanding how resilient you are once you are breached is an important capability and an important emerging business for us, as well as important methodology for ourselves.

“We’re also examining the impact of such things as 3D and wearables. One of my partners tells a story about how he was able to print out a Barbie house for his five-year-old daughter on a 3D printer and how different things have become when you can print out a 3D car and other things. So 3D is something we’re looking at too, because it represents a different delivery mechanism to the consumer. Then there’s analytics. Like everyone, we’re investing in analytics and how they can be used in business. We want to help our clients use big data to drive their strategy. We are keenly listening to clients who are successfully using this as an enabler. In the process, we are refashioning our services to help them.”

Q: Much of this sounds like it’s coming from the consulting side of Deloitte.
A: “Yes, but our innovation is across our businesses. Believe it or not, in the audit and tax traditional businesses, we’re innovating around the use of artificial intelligence.”

Q: How does artificial intelligence help with tax and audit?
A: “Let me offer one example. Our clients have thousands of contracts on the tax side. If you’re serving a partnership, they have hundreds of K-1s. Artificial intelligence involves machine-reading that can rapidly examine contracts. Traditionally, we used to audit only a sample of those contracts; now we can look at 100 percent of them in seconds. We used to manually review them and highlight them, now we can feed them into a machine and tell it what we want it to read—maturity dates, extension options, or different provisions.

“This is going to be huge in financial services when looking at derivatives and other contracts where one can find anomalies. It also allows one to assess risk in a different way than before. Our clients who are seeing this love it, and our people who don’t want to manually review and highlight things, are also excited.

“We want to help our clients use big data to drive their strategy.”

“Apps on your smartphone: Instead of doing inventory counts on the audit side with manual tallies, which we were still doing six months ago, now we have an app which will download  information right into the company’s SAP or ERP system and be able to do a count right there and feed it right back to corporate. It identifies whether you have a difference. It’s another enabling technology tool that takes the manual, rote tasks out of the audit.”

Q: Dow Chemical’s Andrew Liveris recently told us that the biggest impediment to business is the complexity of our tax code and the briar patch of regulations, many of which are at cross purposes. While I’m not suggesting that Deloitte supports an overtaxed, overregulated economy, one has to concede that your profession benefits from the fees it is able to command due to this situation. How can you fulfill your mission to help your clients, who would like a more simplified world, when that would go against your own self-interest?
A: “I don’t think it goes against our self-interest. The intersection of regulatory risk and strategy is where we play well. We help companies respond to regulatory risk and strategy. We look at the regulatory environment—we’re regulated as well—and not just our audit business, but across our businesses in different ways. Andrew makes a great point, but the companies that can solve that intersection that I describe, that have the right strategy moving forward, make the right investment and put the regulatory part of this in the context of managing risk and driving forward with a strategy, will come out on top. We can help them get there. I understand some may view complexity as a business opportunity for Deloitte. But in the end, we’re about helping clients solve their complex business problems.”

Q: Would Deloitte join others in trying to roll back overregulation and lobby for tax reform?
“We absolutely have a public interest and a public obligation to help companies drive towards what they want. We’re obviously involved in Washington and with the U.S. Chamber with public policy issues such as tax reform and another Homeland Investment Act, where companies are incentivized to invest more in U.S. manufacturing and create more U.S. jobs with the right tax environment here. I realize some may not think so but we look at public policy from the benefit of our clients.”

J.P. Donlon :J.P. Donlon is Editor Emeritus of Chief Executive magazine.