Cruncher/35″/LK1st/mark2nd

By JILL ROSENFELD

Staff Reporter

Steven Hronec has built a career on the principle that you can measure just about anything.

“If it moves, we’ll measure it,” says Hronec, worldwide director of the “products” consulting arm of Arthur Andersen. “I find numbers very interesting within the right context. I think they tell stories but you have to understand the context.”

If numbers tell stories, Hronec’s figures tell quite a tale. In 1998, Andersen’s products-industry division, which is made up of clients in manufacturing and consumer products, brought $2 billion to the firm about 40 percent of total revenues, according to Hronec. Arthur Andersen’s consulting arm, meanwhile, grew at a rate of 43 percent a year, he said.

Hronec says he will measure anything from happiness to creativity.

“There are ways to understand every process,” he said. “You ask, ‘What does it mean? How do we know if we’ve achieved it? What are the processes for acquiring it?’ You measure happiness the way you measure anything else.”

Another way of looking at it, he says, is that if you pay them, consultants will do just about anything.

Hronec earned his MBA from Washington University in St. Louis, and joined Arthur Andersen as a staff accountant in 1972. He became a partner in 1983, just as the Big Eight accounting firms now the Big Five, following a wave of consolidation were moving aggressively into the consulting business.

Despite economic boom-and-bust cycles, consulting has been growing at the rate of about 14 percent a year for the last five years, according to Stephen Hansen, an assistant professor of accounting at UCLA’s Anderson School. Last year, it was a $73 billion industry worldwide.

“In the U.S., the industry is about the same size as the film industry, but only employs about one-third the number of people so you can imagine the salaries,” Hansen said. A top-level consultant, he said, can pull in well over $1 million a year.

And just like show biz, consulting has a culture all its own. Many employees of the Big Five firms don’t even have permanent desks or offices; instead, they work mostly from their client’s offices. Hronec is no exception: He travels 80 percent of the time and works from his Palos Verdes home the rest of the time.

Of course, there are plenty of people who wonder what consultants actually do. Hronec says Andersen’s consulting arm is a natural outgrowth of its accounting services, because accountants are afforded an inside view of a company’s finances. This allows them to turn around and sell so-called “value-added” services.

If a company is interested in getting an estimate from Arthur Andersen for consulting services, the local office sends in a team to examine the company’s needs as well as an indication of how much the project will cost and how long it will take.

Hronec only arrives for the presentation, several weeks later. After being briefed by the team that is on location and examining the company’s financials, he goes in with his associates and makes a pitch. The number of team members assigned can vary from one to 50, Hronec said, depending on the scope and complexity of the project.

Hronec works with 10 sales associates referred to, in typical consulting fashion, as “knowledge managers” in different offices around the country. If a project lasts six months, Hronec might visit the firm only three times: once to make the pitch, once to check on progress, and once to wrap up the project.

Depending on the goal, a team of consultants may start by interviewing customers and employees.

“In one company, we looked at customer complaints, and talked to customers on the phone, and asked what they liked and what they didn’t like,” said Hronec. “We found out bills were often late, and often wrong. So we followed a bill through the organization and found out that it traveled miles and miles through the organization, too many people handled it, and then it went out incorrect.”

Hronec may point to results, but success in business consulting often comes down to marketing, said Ken Merchant, dean of the Leventhal School of Accounting at USC.

For the last decade, according to Merchant, consultants have come up with a plethora of products they claim help businesses operate more efficiently.

“The best of the products are breakthroughs that change forever the way business is managed,” he said. “The rest are fads, marketing ploys that generate revenue for consultants but don’t do much for companies. And we can argue about which is which.”

Hronec has something of track record. He got his start working with manufacturing firms. Originally employed as a financial and accounting consultant, he was hired by a Texas-based manufacturer of construction machinery to figure out which of its product lines were the most profitable. The company used the same machines to make a variety of products, and wanted to know how to distribute the cost of the machinery.

Mark Young, associate dean and academic director of USC’s Marshall School of Business, said he remembers reading articles by Hronec in the ’80s.

“He was one of the very first people from the Big Five at the time, the Big Eight who really understood the mismatch between modern manufacturing and the types of accounting systems that were in place,” said Young. “Hronec helped devise new types of accounting systems to be consistent with the technology.”

Soon, Hronek and his colleagues began examining “just-in-time” manufacturing, and wondered how they could apply the concepts to an office environment.

“We called it ‘white-collar productivity.’ Now it’s called ‘reengineering,’ ” said Hronec. “For example, shortening the path that paper takes in the office, eliminating a lot of filing systems, making sure you understand what the internal or external customer needs, and eliminating all of the activities that don’t need to be done. It’s the whole concept of simplification.”

Hronec put it together in a book, “Vital Signs,” which was published in 1993.

His work with Arthur Andersen is now focused on “performance measurement,” a system that tries to predict and ensure the end result. A lot of attention is given to employee satisfaction, which is seen as an important predictor of employee motivation, and hence performance.

“Motivating employees is a very basic thing businesses want to do,” said Hronec.

One of his biggest current clients, Korea’s Samsung Co. Ltd., is busily implementing suggestions by Hronec’s team. The conglomerate hired Arthur Andersen in 1997 to help reorganize six different divisions which include businesses as diverse as an auto maker, engineering firm and apparel manufacturer and get them to work together more efficiently and productively.

Hronec said he expects Arthur Anderson’s involvement with Samsung to be ongoing for years. “One thing,” he said, “leads to other things.”