Global Professional Service Networks and their Members: Global Interactions and Cooperation or Lone Wolves for Autonomy?

1. Introduction

Many of the top global auditing/professional service firms providing services, such as audit and assurance, consulting, and tax services, have constructed global networks (KPMG International, 2005). The evolution of global audit and consulting networks was driven by the emergence of multinational enterprises that required audits of their foreign operations or assistance with all sorts of consulting-related matters. These multinationals required professional service firms with global resources (both audit and consulting), as well as technical and industry expertise to deal with the increasingly complex business and financial reporting environment facing such companies (Barrett et al., 2005; Bills et al., 2018; Downey & Bédard, 2019; Ege et al., 2020; Gupta & Polonsky, 2014; Seavey et al., 2018). Audit network clients often have subsidiaries in different countries with different social, environmental, cultural, tax, and accounting laws. Consequently, they require audit and consultancy services with respect to their subsidiaries abroad (Klaassen & Buisman, 2000, p. 439). Lenz & James (2007, p. 376) defined a strategic audit firm network as “a contractual cooperation between legally and economically autonomous audit firms, which are organized under the strategic leadership of one or more member firm for the joint fulfillment of international clients’ needs.” Members of these professional networks pay fees to belong to the network, and in return, have continuous access to the network and member firms’ resources. This paper examines the nature, characteristics, and challenges of these global networks, with a particular focus on the interactions among member firms and their management during international consulting referral engagements.

Few studies have discussed the nature and characteristics of global auditing/professional service firms and the relationships among their members, and/or the management of the network (Anderson-Gough et al., 2001; Bills et al., 2016, 2018; Carson, 2009; Saito & Takeda, 2014). Also, limited studies have provided insights into the nature, complexity, and challenges associated with actual international consulting referral engagements by such GPS networks’ members (Ege et al., 2020). Ege et al. indicated that members must adopt network policies for undertaking both assurance and consulting services and follow the governance rules and related codes of conduct. This was recently emphasized by the International Auditing and Assurance Board (IAASB, 2022a,b) when it issued its recent International Standards on Quality Management 1 & 2 (ISQM1 & ISQM2) requiring global auditing/professional firms to follow such standards when providing professional services. However, Ege et al. pointed out that even though GPS networks serve as a coordinating platform in implementing a network’s policies, member firms who are legally independent may have incentives to deviate from these policies. Thus, little evidence exists on how GPS networks monitor to ensure appropriate compliance and interpretation of their operating methodologies for their diverse services by disparate member firms, and how the networks evaluate the effectiveness of such practices to achieve their global strategies and objectives (Downey & Westermann, 2021). Even though global networks operate under a common brand and use standardized methodologies and technologies, member firms are still seen as autonomous entities that remain responsible for their own management and quality when providing professional services in concert with one another. Bills et al. (2018, p. 3) also stated that prior research did not specifically investigate how accounting practices (which again are a subset of a GPS network) leverage their association/network in practice. They listed primary challenges related to Accounting Associations and Networks (AAN) as “competition among members, the substantial time and commitment required to fully obtain membership benefits, mismatches between the size and expertise of member firms, and client confusion regarding AAN operation.” This is especially true if we assess the technical and financial resources available to the Big Four professional firms compared with other internationally affiliated professional networks. This is also consistent with Anderson-Gough et al. (2001, p. 101), who discussed the importance of the interactionist approach to the study of the technical knowledge base of professional expertise in the day-to-day aspects of life and work, and how people negotiate situations and roles to gain a social identity. Thus, researchers have stressed the importance of understanding how professionals construct their social identities and navigate their roles within global GPS networks. This approach provides insights into how, in the case investigated here, consultants interact during international referral engagements.

The research employs a real-life case study of a top 10 global professional service firm (with an assurance product offering) providing international referral services to a multinational European oil and gas company. It opens the black box of global networks through the analysis of the complex interactions and behavior among members and between members and senior global leadership when providing an international referral (Lawrence, 1997). The study incorporates theories of interaction, power, and commitment–trust. It also draws on Collins’ theory of interaction ritual chains (Collins, 1981) to analyze the deeper meanings associated with the work of consultants and auditors, providing insights into the complex interactions and behaviors among network members and senior global leadership. Important questions that may result from such deep understanding of interactions when providing consulting/advisory services are myriad and include the following:

Most of the literature on GPS networks has investigated the various aspects of the audit function and in particular the notion of audit quality (Bills & Cunningham, 2015; Bills et al., 2016, 2018), yet it has remained silent on global network issues when providing consulting/advisory services (i.e., Downey & Westermann, 2021; Ege et al., 2020).

The key contributions of this study include presenting new perspectives for member firms and regulators, and responding to calls for a better understanding of global networks’ operations, particularly in consulting services. The research highlights the context and undisclosed aspects of member/management interactions, examining trust and commitment among network members. It illustrates how disagreements may lead to one member benefiting more than others, as well as senior global leadership siding with one member due to the fear of losing an engagement. It also emphasizes the power dynamics within the network and the implications for the quality of services provided. By examining the multipartner context within a global network that faces different dynamics, the research addresses “the need for better accounts of the dynamic interplay between network structures” (Clegg et al., 2016, pp. 283 and 284) and the multiplexity of network structures (Bills et al., 2018). Lastly, by highlighting the practical challenges that all parties operating within global networks confront, this research adds to the body of knowledge by bringing to light the sometimes disregarded or underappreciated facets of the day-to-day delivery of expert consulting services. The findings underscore the importance of effective coordination and communication among network members to ensure successful international consulting referrals. The study highlights the need for timely and appropriate decisions by senior global leadership to resolve conflicts and maintain quality standards. Understanding and addressing cultural and management style differences within the network are crucial for enhancing cooperation and achieving strategic goals.

The rest of this paper is structured as follows. Section 2 provides a detailed background on the nature, composition, activities, and strategies of GPS networks. Section 3 discusses the research methodology. Section 4 provides an overview of the case study and discusses the findings. The last section presents conclusions and recommendations for future research.

2. The Nature, Internationalization, and Strategic Features of GPS Networks

Most nations in the world allow national firms that are either entirely or mostly owned or managed by locally qualified experts to operate as certified audit firms. Entry into international foreign auditing businesses is hampered by local understanding of country laws and regulations. However, these companies get beyond these obstacles because they are members of an international audit network. These days, most medium-sized and large audit firms serve clients beyond their own national borders as a part of an international network of independent firms (Bills & Cunningham, 2015; Bills et al., 2018; Carson et al., 2022; Saito & Takeda, 2014; Seavey et al., 2018). Some researchers explain the development of the strategic management of professional firms as reflecting the P2 model representing professionalism and partnership, and the GPS network (GPN) showing the emerging archetype (Greenwood et al., 1990) (Cooper et al., 1996). Similarly, Brock (2006, p. 160) explained the operations of professional service firms as ones where “power rests in the hands of professional experts, managers administer the facilities and support the professionals, decisions are made collegially, change is slow, and strategy is formulated consensually.” Because of this, the ties between network members are essentially nonhierarchical. Members frequently have a high degree of operational autonomy in managing their businesses, and they are linked by resources including data, materials, money, services, and social support (Bills et al., 2018). Monetary autonomy also exists between member firms insomuch as each member firm has a separate pool of earnings that it distributes to its partners. It is often the case that the lead member firm will negotiate overall fees with the client and likely take most of the profit, providing just enough profit to the other member firms to keep them interested and motivated to perform their tasks on the engagement.

The above developments in the organizational structure of firms were the result of deregulation and competition (with increased litigation), technological developments, and globalization (Brock & Powell, 2005; Brock, 2006; Bills et al., 2018; Collins, 1981). Baskerville & Hay (2010, p. 290) confirmed Brock’s suggestion that “the globalization of professional services was not only a driver for structural change of accounting firms, but that such firms contributed to the impact of globalization through their own internationalization strategies.” The provision of management advisory services (MAS) or consulting was a product of this impact, bringing additional expertise to the activities of firms with performance-based reward schemes. This is especially true given the movement by many GPS networks to establish separate global entities or divisions within their existing networks to provide MAS. Baskerville & Hay (2010) indicated that “the shift by accounting firms toward becoming GPNs was consistent with the recent self-identification by the leaders of such firms as networks (rather than firms).” At the same time, Perera et al. (2003) asserted that the demand for larger auditing firms to provide services for multinational clients in several places resulted from the deregulation of global economic systems, which permitted corporate clients to grow their operations in new nations and regions. Several scholars (e.g., Bills et al., 2016, 2018; Carson & Dowling, 2012; Downey & Westermann, 2021; Ege et al., 2020; Greenwood et al., 1993; Mao et al., 2017; Macve, 2020; Miller, 2006; Watts & Zimmerman, 1986) listed numerous benefits of membership in an accounting association and GPS network. These include the desire and ability to develop business in new markets, including international corporate finance and transfer pricing; more opportunities to leverage geographical and geopolitical relationships between large national practices and other regions in diversified professional services; economies of scale related to spreading costs to charge more competitive prices for various services while investing in technology and training; branding used for marketing purposes; cooperation; and bonding provided by many partners to ensure high-quality assurance and consulting services to local and worldwide clients. Other benefits include advanced and updated professional service manuals, networking, exchange of expertise and recommendations for best practices and benchmarking data, and continued professional education to enhance technical proficiency and soft skills (Bills & Cunningham, 2015).

On the other hand, Lenz & James (2007) identified four risks related to the membership of a global network. First, a network may be partially controlled, owing to the loss of ties among members and between members and the management of the network. Second, members may lose their identity and autonomy in decision-making because they share a common name or branding. Third, networks may be unstable because members can leave at any time without interference from the network’s management. Fourth, member firms can lose their competitive competence if the network is dominated by a strategic leader who determines their guidelines and available resources. Moreover, Bills et al. (2018) added competition among members, time and cost needed to obtain membership benefits, and mismatches between the size and expertise of member firms as other challenges faced by GPS networks. Baskerville & Hay (2010) reviewed studies on large auditing firms and noted a few explanations for the conflicting views of the effect of size on service quality. Most global networks, especially the Big Four, follow a cooperation strategy form that regulates the rights and duties of member firms, such as the use of the network name, exclusive representation in a specified territory, quality standards, and funding and creation of a strong institutionalized structure (Lenz & Schmidt, 1999). Member firms in the network share the responsibility of executing international assignments and function as global professional firms (Downey & Westermann, 2021). The case study is associated with a cooperation contract where contractual cooperation is organized between legally and economically autonomous member firms to jointly fulfill international client needs (Lenz, 2002). Each member firm preserves its own legal status depending on the specific jurisdiction in which it operates and, accordingly, preserves its legal autonomy, accepts contracts independently, and collects its own revenues (Niehus, 1992). In addition, the cooperation contract specifies some duties for member firms. These include considering worldwide quality standards and related reviews, acting upon the client’s request to engage foreign cooperation partners who are members of the network (the use of network branding), and financing the network through allocation of the required resources (Carson et al., 2022; Downey & Bédard, 2019; Lenz & James, 2007; Mandler, 1995; Niehus, 1992). At the same time, the cooperation contract specifies some rights for member firms, such as allowing usage of the network’s international name, joint resources, and know-how (e.g., network’ service manuals, databases, and software), permitting firms to make their own decisions with respect to the local market, and granting the right to exclusively deliver client services in national markets.

Furthermore, according to Lenz & James (2007), the degree of network integration determines the degree of company autonomy. The degree of autonomy that enterprises attain increases with decreasing integration levels. Through network-specific investments, material referrals, expensive exit fees, and other means, management forges connections to optimize integration inside the network; however, GPS networks might not be able to guarantee that their distinct procedures are applied consistently among affiliates, according to Ege et al. (2020). This could have a detrimental impact on the comparability of client financial reporting and the availability of other consulting services. The impact of commitment–trust, interaction, and power theories on cooperation contracts in GPS networks must therefore be examined and evaluated (Gutiérrez et al., 2003; Martin et al., 2004). According to the commitment–trust theory of relationships, commitment and trust are two essential components of a healthy partnership. Meeting expectations and keeping promises is a better way to build strong relationships with clients and/or business partners than focusing on maximizing profits in the near term. As a result, both parties’ demands are met and customers are satisfied, leading to the formation of mutual loyalty (Abosag et al., 2006; Brown et al., 2019; Hashim & Tan, 2015; Morgan & Hunt, 1994). To support the implementation of the commitment–trust theory, a communication loop or communication process should exist to facilitate communication and effective interaction between different parties in a business engagement to help transfer data, requests, and inquiries among parties involved, as well as to ensure clear and prompt feedback (Knechel et al., 2019). Also, several theories have been proposed to explain the nature of power and how it is distributed within a society. According to “Theories of Power and Society” (2016),¹ theories of power are based on class, gender, elite, and pluralism. According to the pluralist view of power, multiple groups of individuals share power and vie with one another to shape social norms and decisions. To understand the interactions and conflicts that arise between members and the management of the network under various power measures — such as legitimate, coercive, and expert power — this research employs a pluralist theory of power (Croteau & Hoynes, 2013; Ryan & Haugaard, 2012; Roscigno, 2012).

Based on the above discussion in the literature on several distinct aspects, characteristics, and strategies employed by global professional service networks, several research questions arise and are analyzed considering the actual implementation of such strategies in real-world situations. These include the following:

3. Research Methodology

This research follows the interpretative research (IR) approach aiming to “produce not only subjectivist, emic understandings of actors’ meanings, but also explanations, characterized by a certain degree of thickness” (Lukka & Modell, 2010, p. 462). Lukka and Modell further indicate that IR should convey a multifaceted view of social phenomena, described as “thick” descriptions or analyses providing “rich” insights, including the related analyses of interaction between people. Furthermore, to achieve an explanatory element of IR, the use of the philosophical theory of explanation (counterfactual conditionals and contrast class) in combination with abductive reasoning should be applied in line with the research problem and objectives (Greckhamer et al., 2008; Lukka, 2014; Malsch & Salterio, 2015). Lukka & Modell (2010, p. 475) confirmed that “by framing such explanations in an abductive mode of reasoning, contrasting them with more entrenched explanations, researchers may allow for multiple “truths” to emerge whilst clearly demonstrating how such “truths” are theory related and not reducible to a single way of representing the world.” They state that abduction relates to the skillful development of theoretically informed explanations based on new empirical observations about the issue being examined. Lukka (2014, p. 563) also emphasized the importance of contrastive thinking at the outset of the process as it helps researchers identify the interesting observation perceived as requiring explanation: “why was precisely this observation picked up in contrast to another one?” In practice, researchers should recognize abduction as an iterative or ongoing process, forcing them to constantly remain alert to alternative explanations, while ruling out explanations deemed less plausible as they move back and forth between theory and empirical data (Lukka, 2014). Moreover, Lukka & Modell (2010, pp. 463 and 466) explained how interpretive research can achieve thick explanations “by focusing on careful analyses of the sequences of actual events and actions in specific, local contexts due to their quality of being deeply rooted in the life-worlds of the people being studied.” Thus, to develop true, valid, informative, and strong explanations, researchers should attempt to gain a good understanding of how the explanatory factors of the issues under study produce research outcomes or results. Power & Gendron (2015, p. 154) emphasized that one of the most fundamental choices researchers need to make in the context of a particular investigation is to position themselves in terms of the trade-off between breadth and depth. At one extreme, this may mean an approach that emphasizes arriving at conclusions that are valid across a range of empirical situations (breadth). At the other extreme, it is an approach that seeks to account for the complexity of human behavior in specific situations or cases (depth). They indicate that the goal of the researcher should be directed to understand the process of “worldmaking” and the measurements of “reality” without bias or subjectivity associated with it and through which the social world is ongoingly accomplished.

Our research uses a real-life case study to examine the research questions and understand the behavioral aspects of the interactions between member firms’ partners and senior global leadership in a global professional service network. The case study was executed in one of the top 10 global professional auditing networks using personal contacts with two partners of local member firms. It explores an international referral engagement in the provision of accounting and tax services for a multinational European oil and gas company. This case study investigates a specific accounting service that is unique to the global professional accounting firms compared with consulting services provided by other professional networks such as Boston Consulting Group, Booz Allen Hamilton, and McKinsey Consulting. The researchers were allowed access to all monthly financial statements prepared for the four newly established companies, the records used to record business transactions, and all correspondence made between the local firm, the leading European member firm, and the regional director of the network. A case study was used because of its embedded flexibility and ability to investigate complex and evolving relationships within actual global business enterprises, linking theory with practice (Gupta & Polonsky, 2014).

The data are composed of narratives of more than 150 emails and 24 files containing the working papers for the monthly financial statements prepared for four client companies with all its supporting documents, including related analyses as well as tax returns prepared and submitted to the appropriate government authorities. Data collection and extraction of relevant information related to the research objectives took around two months, with time spent on the local member firm’s premises to go through all the files starting in early 2020. In addition, four semistructured interviews with the local partner, two managers, and the regional director of the global auditing network participating in the execution of the international referral were conducted. Interviews, lasting between one and one-and-a-half hours, with partners and audit managers provide close access to practitioners and may reveal how they think about specific issues (Gioia et al., 2012). Interviews, which were recorded and transcribed, aimed to clarify issues discussed among the local and lead partners of member firms and the management of the network and were undertaken after analyzing the correspondence and fieldwork documents. The questions posed in the interviews were related to the results of the email correspondence content analysis and the nature and reasons for the disagreement between the local partner and both the lead partner and regional director of the network. Fieldwork notes were used to record and analyze interactions between member firms’ partners and senior global leadership of the network. The researchers signed a confidential and anonymous letter confirming that they would not disclose information about the identity of the global auditing firm and its members, as well as all related correspondence. Examining email correspondences along with the results of the interviews was used as part of a triangulation process to compare and interpret information and reveal any contrasting views between interviewees’ responses and email records (Hoque et al., 2013). Once the data had been collected, they were manually coded following the sequence of events associated with the various emails exchanged between all parties in the case, as well as all supporting documents.

4. Overview and Analysis of the Interactions Among the Network’s Member Firms

4.1. Overview of the case under study

The international engagement was referred from a European member firm of the global professional service network to another member firm (among other members in 23 countries participating in the engagement) in a developing country. The local member audit firm is among the top 10 professional service firms in its country. The engagement was to provide bookkeeping, compilation, tax, and related consultancy services to a multinational European company operating in the oil and gas industry for three years, ending in 2019. The European (lead) member firm of the network won this engagement as a worldwide tender. The contract was for a five-digit figure fee (in euros) to provide numerous services to four newly established energy companies. During the negotiation with the multinational client, the lead-member firm collected most of the required information from the local member firm in relation to the local accounting standards and the types of taxes to which the client is liable. This placed the lead member in a strong position to monitor the quality of service provided by the local member firm. The engagement included the requirement that the monthly financial statements for the four local companies be sent by email, with copies of trial balances, ledgers, and subsidiaries, within seven days after the end of each month. Based on analyzing corresponding emails, the local audit firm submitted monthly financial statements and detailed observations for missing documents and requested explanations for some companies’ banking transactions or transfers from the head office of the client to its newly established subsidiaries before the required deadlines during the contract.

4.2. Analysis of the interaction aspects of the GPS network and its members

In qualitative research studies, applying ever-evolving qualitative methods could be enhanced by an improved understanding of practitioners’ work realities as experienced in the field. However, Power & Gendron (2015) noted the difficulty of researchers accessing auditing firms to undertake research studies related to the operations and activities of these firms. They indicated that even though firms are keen to criticize research for being too removed from the realities of practice, “they tend to remain cautious in providing researchers with access to what they view as sensitive data.” (Power & Gendron, 2015, p. 151). Professional service firms consider working papers for audit and other consulting services as sensitive data preventing researchers from accessing, under the notion of protecting the confidentiality of their clients’ information and documents. It is believed that member firms of a network should cooperate to promote branding and offer high-quality professional services, resulting in financial benefits to all members participating in any international referral. This was not the case as evidenced by the actions and decisions made by members of the network regarding the engagement under study. The lead and local partners exchanged emails concerning the requested set of documents to be submitted by the due date. The local partner’s email was sent to the lead partner:

Kindly find attached the financial position of companies taking into consideration the following remarks:

The lead partner accepted the points raised by the local partner and promised to improve communication while placing pressure on the local partner to complete the work early. However, he did not provide any justification for the missing documents or the delay in replying to the observations sent for the accounts earlier:

The stream of exchanged emails between the local partner and both the client and the lead partner forced the local partner to send the following email while displaying his frustration for the duplication of efforts and additional costs to his firm. He also requested more work organization between the various parties:

No reply was received from either the lead partner or the client’s management concerning recommendations sent by the local partner. This shows the first signs of miscommunication between both the lead and the local partner of the network that will later affect the proper execution of the international referral. Suddenly, the lead partner requested the allocation of one of the consultants in the local audit firm to be in direct communication with the client and the lead partner of the engagement. Even though each member firm has its own structure for managing engagements, the lead partner suggested that the local member firm follow his approach. He also preferred restricting the role of the local partner to the most significant issues, allowing his firm and client to interact directly with his subordinate(s). Such a decision illustrates early commitment and trust issues toward the local partner, indicating that the latter’s management and decision approach is not in line with lead partner’s point of view for the effective and efficient execution of the referral engagement. To convince the local partner, the leading firm assured him of improved future cooperation if he agrees with their requests.

The request to allocate a junior consultant and restrict the role of the local partner came from the lead partner and not the client, as evidenced by the emails exchanged between the lead and the local partner without any significant interference from the client representatives. This request was seen by the local partner as “violating the basic principles associated with the cooperation contract highlighting the duties of the members in fulfilling their responsibilities within the network whilst maintaining their independence and quality standards.” Despite this, the local partner coordinated the name of one of his consultants to liaise with the manager in charge of the client’s local head office but insisted that all correspondence coming from the client must be directed at him. He wanted to ensure that the quality of services was in accordance with his firm’s policies and that no additional services were provided without payment of the appropriate fees. Such action and decision by the local partner to liaise a consultant with the lead partner and the client indicates a strong commitment to follow acceptable recommendations presented by the lead partner to help with the effective and efficient execution of the engagement. Surprisingly, a later email was sent from the lead partner threatening to terminate the engagement if the local partner did not allow for an exception to his quality control policies.

The local partner replied with explicit wording that all correspondence must be directed to him, as the partner responsible for the engagement. He further explained that he was not intimidated by the threat of the lead partner concerning losing the engagement:

The lead partner then sent an email to the regional director of the network complaining about the local partner’s attitude:

The regional director of the network exercised more pressure on the local partner in his follow-up email.

Based on the documents examined, the claim for delays in work by the regional director was, in the opinion of the researchers, ill-founded. Ironically, while both the lead partner and the regional director of the network insisted on restricting the local partner’s role, the lead partner continued to be fully involved in the day-to-day execution of the engagement, as evidenced by the various correspondences examined. There is a clear indication here that senior global leadership was seen to be siding with one network member, while using their power of authority to protect the continuation of the international engagement, with no consideration given to the welfare and the autonomous style of management of another member. The local partner explained his firm’s position to the regional director of the network:

The regional director of the network confirmed the need for the local partner to agree to the lead partner’s requests given the efforts and investment placed by the network for such referrals, as well as the rights of the lead partner in this respect. Once again, this indicates a clear use of power of authority by senior global leadership, coercing one member of the network to follow instructions required by the lead partner, while believing that such instructions are vital lead to the success of the referral engagement:

At the same time, the lead partner replied confirming the local partner’s misconception of the nature of requests made for a junior representative and that the efforts and costs realized by his firm are high and not comparable to those of the local member firm:

In addition, the lead partner defended himself displayed his frustration on the mistrust by the local partner of his firm’s behavior and approach to manage the engagement:

The local partner’s reply to the lead partner, cc’ing the regional director confirmed his persistence:

The lead partner repeated his threat directed at the local partner to terminate the engagement:

The local partner further explained the unreasonable requests by the lead partner for services outside the scope of the agreement and that financials would be delivered on time as usual. The researchers noticed through the frequent, almost daily exchange of emails between all parties several requests for conference calls to discuss the issues related to the client’s financial reporting and tax aspects that never took place. This further indicates dysfunctional behavior and a breakdown in the communication loop between all related parties. In addition, there was an extensive stream of inquiries through the exchanged emails about local accounting, and tax issues without justifiable reasons, as explained by the local partner when interviewed.

The local partner also confirmed that his firm joined the network based on the concept that member firms will maintain their independence in running the operations and activities of their firms with full autonomous decisions for all types of engagements, including international referrals. Such freedom to manage their own businesses will not affect or contradict the network’s strategy for promoting branding and market share worldwide. In his interview, the regional director explained why the local partner should follow lead-partner decisions:

Finally, the local partner received an email from the lead partner, terminating the engagement.

The lead partner, in a follow-up email, confirmed that upon submission of the documents, books, and records of the four companies, the fees for the last two months of the assignment would be paid. However, based on examining later correspondence no payment of the fees was made even after a year following termination of the local partner’s contract. The local firm sent a legal warning to the client’s local head office requesting payment of fees without taking the step to sue the client immediately. This occurred with the full knowledge of both the lead partner and the regional director of the network. The local partner was left frustrated as he felt “betrayed from the lead partner and the regional director as based on firm policies concerning termination of assignment, clients’ documents and books are only returned after fees being paid.” To avoid legal action against the network’s client, the regional director communicated with the local partner asking for an amicable solution to save the global engagement.

The local partner replied, showing the miscommunication of information to the regional director:

A final reply came from the regional director, showing his misunderstanding of the whole situation, a lack of communication, and insistence that the lead partner and the network are not responsible for the payment of the fees:

The regional director further insisted that due to the local partner’s unwillingness to offer some flexibility and sacrifice to the network’s success, he can only be blamed regarding the termination of his contract:

The regional director also argued that:

Finally, when asked that the network sacrificed one of its members to maintain the referral with its related branding and other financial benefits his reply was$:$

Several behavioral, professional, and ethical issues have emerged from the interactions between the leading and other members of the engagement and the network’s management. This resulted in the termination of the engagement related to the one-member firm of the network based on the lead member’s request, the nonpayment of the remaining fees for this member firm, and the hiring another local consultant from outside the network to assume the assignment responsibilities for the remaining contract period. The research also shows how disagreements among members of a network without an appropriate decision made by senior global leadership of the network may affect the proper completion and quality of international referrals. Thus, such results highlighted appropriately using real-life case study shortcomings and dysfunctional behavior in an international referral engagement in a GPS network. Unfortunately, the international referral that started between several members of this GPS network for the provision of advisory/consulting services ended with one member losing it engagement due to coercive pressures by senior members, disagreements, misunderstandings, and a lack of trust and commitment displayed by all members of the network.

5. Discussion and Conclusion

According to Gibbins & Jamal (1993, p. 452), “there is no clear understanding yet in the accounting and auditing research literature of what accountants and auditors do cognitively in their everyday environment. Part of the reason is a lack of willingness of researchers and perhaps auditors (sensitive about both firm and client confidentiality, as well as other factors) to embark on field research using real situations.” This was also emphasized by Power & Gendron (2015, p. 148), who indicated that the practice and problems of GPS networks and their related activities “are a source of continuous curiosity and fascination to scholars, and necessarily amenable to many different kinds of investigation.” Thus, research studies should explore the implications of the interactions among members of a GPS network on the conduct of diversified tasks as consultancies. The literature should explain how a lead firm in a network and other member firms communicate and cooperate among themselves to enhance the branding of the network while maintaining the quality of the services provided. This research further confirms that the existing theories on their own are insufficient to explain the complex nature of the subjective perceptions and interactions among members of a global network. Using a real-life international referral of a GPS network, it attempts to shed more insights and understand the contextual aspects focusing on the behavior of member firms and the management of such network.

Successful companies usually maintain and nurture energetic relations with all involved parties (employers, employees, and business partners) to create and stimulate customer awareness and retention, as well as effective collaboration between different businesses and partners in the supply chain (Noe et al., 2006). The factors needed for good and healthy business relations include trust, loyalty, communication, and the power for good and fair decisions and actions. Trust is required to foster employee satisfaction, cooperation, motivation, and innovation. Loyalty helps companies to form strong and lasting relationships with all stakeholders, which in turn leads to higher customer satisfaction and retention. Moreover, creating effective communication protocols and processes early in business engagement helps smooth and improve planning, projects, and policymaking, as well as strengthens internal and external business relations. Strong business relations provide a competitive advantage, while weak relations can lead to dissatisfied customers, negative reputations, and limited growth. Pentland (1993, p. 610) using auditing as an example, explained the three levels at which we can achieve comfort in business aspects: within the members of the engagement team, within the operating structure of the firm, and between the firm and the stakeholders. Within members of a global network, comfort is realized through professional communications, trust, and cooperation among members while performing the required engagement task, whether auditing, assurance, or other consulting services.

Unfortunately, all business parties in this international referral case failed to build relationships based on loyalty and trust. They also failed to establish an effective communication process or means to minimize communication barriers early in the engagement to achieve comfort and avoid subsequent future failures. In addition, there was no effective communication loop to facilitate the transfer of information and/or inquiries between all related parties, as well as ineffective feedback that hindered the communication process and created tensions and inappropriate reactions. This is consistent with Lenz & James (2007) and Bills et al. (2018), who identified the risks associated with the membership of a global accounting network, namely, that a network may be partially controlled due to loss of ties among members and between members, and the management of the network. Members may lose their identity and autonomy in decision-making because they share a common name or branding. Interpreting the disagreement between the lead and the local partner demonstrates a cross-cultural communication barrier. Kvantaliani & Klimina (2011) stated that “cross cultural communication is a process through which a person can exchange, negotiate, mediate the communication of cultural differences through language, non-verbal gestures, etc.” Due to the involvement of different parties in the engagement, with diverse cultures and backgrounds, cross cultural communication becomes an integral part to the success of such engagement (Bills et al., 2018). This success is stalled by the presence of several barriers that would delay the success of the business communication process and may even lead to its failure, as in this case under study (Sunderland & Trompeter, 2017). The communication barriers could be personal values, forms of hierarchy, presentation styles, behavior, and individual orientation versus group orientation. If no attention or efforts are made to illuminate such barriers, serious threats and difficulties would affect the efficiency and effectiveness of business engagement. This was evident in the present case, as there was no proper identification of the appropriate form of hierarchy among partners involved in the engagement and no suitable behavior orientation guided by the regional director was provided to member firms. Similar findings were provided by Carson et al. (2022) and Downey & Bédard (2019) who highlighted the risks related to coordination and communication failures when interdependent teams operate in diverse and complex environments.

This case study demonstrates that all parties involved failed to provide the time, flexibility, and modifications or adjustments required to develop and reinforce an effective communication process. The local partner criticized the lead partner and the regional director’s coercive request to allocate a coordinator from the local firm to respond directly to the lead partner’s inquiries without the approval from the local partner in charge. In addition, the lead partner interpreted such criticism as mistrust and miscommunication between member firms, given that the lead partner follows such an approach in performing his firm’s referral engagement. Such miscommunication was not prevented, as no adequate and fair guidance was provided by the regional director of the network for the disputed issues. Furthermore, a failure to achieve effective and efficient cooperation among members of a network can affect the quality of the services provided, especially if there is an option to recruit an outside provider. This decision highlights a failure to apply the benefits of the cooperative contract concept for global auditing networks (Abosag et al., 2006). Moreover, the amount of autonomy placed on the local partner depended on several factors in addition to the interorganizational relationships, including how the lead partner would benefit from the engagement, the experience of the partners and teams involved, the flexibility in interaction among the partners and teams, and the resources provided by both partners and the network for the fulfillment of the international referral. Similarly, the data analyzed suggests that the local partner acted through his own viewpoint, influenced by local priorities, culture, resources, constraints, and the tone set during planning of the engagement with no clear decision-making authority. The case study also highlights the diverse levels of commitment placed by each member firm of the network in fulfilling its responsibilities toward the referral engagement. Moreover, senior global leadership was wavering between profiting for the network to the detriment of severing ties between the network and one of its members. Unfortunately, they decided to go with the former, which represents a negative deviation from the commitment–trust theory of relationships. They placed the blame on the local partner for not being flexible to the request of the lead partner and held him accountable for the possible risk of losing the entire international referral engagement.

Coercive power provides another scientific interpretation for the contextual aspects of the case under study, as it is based on one’s party’s ability to control others’ actions through the fear of negative consequences, allowing parties the ability to punish others through the withholding of resources or inflicting harm. The case study demonstrates the negative use of legitimate power and coercive behavior by those in superior positions such as the lead partner and the regional director in a particular culture based on a feeling of obligation to perform certain tasks to the detriment of the local member firm’s welfare (Bills et al., 2018; Croteau & Hoynes, 2013). The local partner was requested to follow all orders dutifully because of his inferior position compared with the lead partner, and the regional director of the network otherwise threatened to have his engagement terminated. This is consistent with Bills et al. (2018), who found that networks present more opportunities for power imbalance due to greater dependence on the lead organization (i.e., lead partner) for certain resources, as well as its authority over the management of the engagement. To ensure quality and no bias when providing the required professional services, the lead partner should have an incentive for greater caution and closer supervision of the affiliated team sharing in the execution of such services. Carson et al. (2022) also emphasized the varying effects of the bargaining power of the various parties involved in a multinational engagement to improve or impair the quality of professional services. At the same time, expert power, which is based on the perception that a person is highly qualified in a particular field, provides opportunities for both the lead partner and the regional director to dictate decisions and actions based on their perceptions of better knowledge about the referral engagement compared to the local partner. Sadly, expert power can be deceptive because someone in a position of authority can appear to have expert power even though they may not truly be knowledgeable in that area. In our case study, the lead partner and the regional director believed that they were more experienced than the local partner (whose firm is from a developing country) in managing the international referral, even though the latter might possess comparable knowledge that is overlooked because of his lower status and lack of authority.

This study makes several contributions to accounting and auditing literature. First, this research is among the first to use a real-life case study for an international consulting referral to understand multilayered issues related to the GPS network structure, contextual features of member firms or countries, and related engagement dynamics. The data used in this study reflect prime and actual evidence of the application of various theory constructs, showing insights in a global professional service network while illustrating how members firms interact in an actual international referral engagement. The case study helps to better understand the behavioral aspects of the interorganizational structure, risks and related challenges associated with membership in a GPS network, and the complex interactions between member firms’ partners and the senior global leadership of such a network. Mistrust and miscommunication among partners, mismanagement by the regional director, inappropriate use of power and authority, inappropriate cooperation among all parties to achieve the network’s referral strategies and objectives, and misunderstanding the intentions of the local partner affected the proper execution of such referral. Second, this study contributes to our understanding of global professional firms’ rituals both empirically and theoretically. Empirically, it uses correspondence data among members’ complex interactions in performing an international referral complemented by interviews to further explain the nature of such interactions. Little has been provided in the consulting field about actual engagement team and members’ interactions to provide an empirical basis for interpretative auditing theory with its related activities and services (Pentland, 1993). Theoretically, the microsociological perspective and triangulation of theories approach undertaken, including commitment–trust, interaction, and power theories on the cooperation contract in the GPS networks, offer an additional understanding and analysis of the interactions among members under study, and sheds more insight into the complexity and challenges of providing referral engagements. Third, the case study analysis reveals the significance of the status and position of member firms in a GPS network. It demonstrates how the lead partner’s strong influence and power over the execution and management of the referral led to the dismissal of a one-member firm because it did not follow the lead partners’ style of management and instructions. These findings support the notion that different partners have diverse objectives for the execution of international referrals (to clients), and some partners may use their strategic dominance and power within the network for their benefit by misusing other partners’ resources and technical expertise (Bills et al., 2018). Fourth, the study highlights miscommunication between member firms’ partners due to differences in their style of management, interpretation of the terms of engagement, their professional attitude toward the client, and the strength of their relationship with senior global leadership of the network. The findings also support previous literature findings that the replacement of the partnership professional model with a globally managed professional business network leads to the loss of each member’s autonomy. However, such loss was “unavoidable given the promised advantages of the international referrals and status, and the disadvantages of being left out of international affiliations with a major network” (Baskerville & Hay, 2010, p. 305). Fifth, the study provides evidence on how senior global leadership of a network may be seen as acting unfairly, siding with one member, and using power of authority to protect the continuation of an international engagement even if it affects the welfare of one member of the network. These findings are not consistent with the notion that organizations in a network must be dynamic by aligning efforts, enhancing flexibility, and increasing agility to achieve the fit and coordination required to sustain and grow the business by maximizing its core competencies and value creation (Bailey et al., 2010; Carson et al., 2022; Ege et al., 2020; Nath & Newell, 1998). This study offered concrete proof of how the network’s senior global leadership disregarded their leadership responsibilities, which include advancing the network’s image and operations and ensuring the wellbeing of all its members. Members should not be treated differently based on their country of origin, size, income, or any other characteristic unrelated to the values and guidelines of the network’s operations. This contradicts a study by Drazin & Van de Ven (1985), which discovered that to build robust structures and practices and eventually attain cost-effectiveness in the network, all participants in the network should share resources, skills, information, and activities.

Several research papers in the auditing literature have discussed interorganizational behavior and structure for an audit and other assurance services, where powerful regional network players can ask partners to please the client even at the cost of not being objective/professional. However, this should not be true for consulting assignments where professionalism is required but without an independent opinion. Thus, this research adds new evidence and contributes significantly to the auditing literature on GPS networks for the application of several theoretical constructs in consulting services rather than an audit and assurance, which, to the best of the researchers’ knowledge, is limited. Moreover, this research investigates the interorganizational structure of a GPS network in both developed and developing economies. It provides evidence that even though a member firm in an emerging economy might be more in need of foreign currency fees than a firm in a developed country, the qualifications and integrity of the local partner responsible for the referral may result in nonsubordination of his decision to powerful regional network players. This is especially true given that a few audit failures in some of the GPS networks may have affected the ranking of these networks worldwide, making the decision to replace a qualified, experienced, and independent member who objects to some of the network’s management decisions difficult to implement. Overall, our research offers rich insights into global professional service networks providing a scientific foundation for future research opportunities related to the structures and operations of such professional networks.

Several interesting thoughts regarding global professional service networks illustrate the shortcomings of the literature in this respect. For example, whether global networks can enforce their unique methodologies and technologies among member firms, given their differing governance structures and cultural lenses resulting in inconsistencies (Ege et al., 2020)? When a member firm of the network is expelled from an international referral, how does this affect its future relationship with members of the network and its management? What is the impact on the network’s profitability and ranking if it loses an assignment because of disagreement among its members over the style of management? Does the origin of the member firm, qualifications, and experience of partners help minimize the risk of disagreements likely to occur when members cooperate to execute an international referral? Could all the above be linked to corporate governance and the code of professional conduct or ethics? Researchers believe that there is a significant lack of case studies and survey evidence in such areas. Studying and analyzing more real-life cases and extended interviews may provide additional evidential inferences either to support or refute results derived in this research. Moreover, developing practices that allow member firms to become conscious of, relate to, and enhance empathy for firms’ contexts/differences may improve the efficiency and effectiveness of providing the network’s professional services.

Our field data and related findings provide information for current and potential member firms, regulators, and Forums of Firms in their assessment of global professional service networks’ operating and quality control structures. By studying the actual practices of how members and senior global leadership execute international referrals, we can provide a comprehensive analysis of how a network is expected to leverage members’ coordination to enhance the quality, effectiveness, and efficiency of their professional services. More work is needed to understand global network governance mechanisms and enhance the quality and consistency of practice throughout the world’s markets. Moreover, further research is needed to analyze how the rapid expansion of global networks can create weaknesses in quality control over members’ foreign operations. Since the findings of a qualitative study are specific to a particular environment and institutional setting, caution must be exercised when generalizing its conclusions. Such a limitation is not a concern per se for interpretivist researchers who do not aim at generalizing their findings, but through transferability and data saturation it provides readers with sufficient depth so that they have the capacity to project themselves into the situations reported in the study and relate the findings to their own positions (Malsch & Salterio, 2015). Through using the triangulation technique, which involves using multiple data sources in an in-depth investigation to produce understanding, this case study includes interactions among members of a single GPS network to provide accounting and tax services. Future research needs to focus, using cases and extended interviews, on other types of services in single or multiple networks and examine whether members’ distinct management styles affect their interaction.

Acknowledgment

The authors would like to recognize Dan Sunderland for his valuable comments on our paper.

ORCID

Mohamed Hegazy  https://orcid.org/0000-0002-4108-9297

Karim Hegazy  https://orcid.org/0000-0003-3576-3238

Mohamed Basuony  https://orcid.org/0000-0001-6691-4946

Note