6 Reasons to Like Accenture

Accenture (NYSE: ACN  ) lacks a big-name CEO, but that doesn't mean it doesn't have a strong management team. It has a deep bench of talented executives, which it has developed internally. Its operational track record and financial stewardship are both excellent. Its leaders are part of a strong, healthy corporate culture and senior management incentives are fair.

1. Deep management bench
Accenture doesn't have a "star" CEO like Steve Jobs or Elon Musk. Instead, the company relies on its deep roster of talent to continually replenish its executive ranks. Accenture trains and sells business professionals as its core business. This results in a deep roster of managerial talent that is mostly internally generated. A typical member of the management team has 20 years or more working with clients, learning and implementing best practices, and developing business acumen.

2. Internally developed leaders
The ability to develop leadership is a key component of a successful, sustainable organization and Accenture does well in this important metric. Accenture's management team is mostly internally generated. Of the 15 key executive officers mentioned in the most recent 10-K, 13 are Accenture-lifers with over 20 years of experience with the firm -- several have 30 years or more experience.

3. Strong operational track record
The easiest, most quantifiable way to measure management is to assess the operating track record of the business. Accenture's management has a strong track record of generating growth and maintaining profitability. Accenture has grown sales 8.5% annually over the past 10 years, including both the post dot-com collapse in IT spend and the general malaise of "Great Recession." Across the same period, operating margins never fell below 10%, and return on invested capital never fell below 46%.   

4. Shareholder- friendly capital allocation
Even a great business can be disappointing for shareholders if managers aren't honest, prudent financial stewards. Again, Accenture's management scores high here. It has a proven track record of generating cash and returning it to shareholders via dividends and repurchases. Since its IPO in 2001, Accenture has returned 93% of its free cash flow to shareholders. And, shareholders should expect this tradition to continue. The dividend was increased 15% in November; and in the most recent earnings report, management promised to return at $3.7 billion to shareholders in the coming year.

5. Healthy corporate culture and employee buy-in
Accenture is a "people business." If senior management can't foster a healthy corporate culture and keep employees happy, it's not likely to succeed. Fortunately, results in this area have been generally positive. For the last five years, Accenture has been named to Fortune's list of "100 Best Companies to Work For." And, according to Glassdoor.com, 93% of the employees approve of CEO Pierre Nanterme and 80% of employees would recommend the company to a friend.

6. Reasonable incentive structure
Incentives drive management behavior, that's why it's always worth examining corporate compensation policies, which are disclosed in proxy statements. While I wouldn't call Accenture's executive compensation policies exceptional -- they are a bit convoluted -- I will say the company has a fair, workable structure. For senior executives, particularly CEO Pierre Nanterme, the majority of pay comes in the form of equity. And, most of the equity pay vests over a 3-year period based on meeting targets for operating income and total shareholder returns.

Foolish bottom line
The quality of management is notoriously hard to measure, which is leads many investors to ignore it. I believe that's a mistake -- management is an extremely important determinant of a company's success. That's why I always make an effort to assess management before investing. In the case of Accenture, I'm confident in the management team. Hopefully, they'll live up to my expectations.


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