Richard Ivey School of Business The University of Western Ontario IVEY W12631 TEAM COLLAPSE AT RICHARD, WOOD AND HULME LLP Leah Noble wrote this case under the supervision of Professor Gerard Seljts solely to provide material for class discussion. The authors do not intend to Mustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, NGA 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mall cases@ivey.uwo.ca. Copyright @ 2012, Richard Ivey School of Business Foundation Version: 2012-01-23 INTRODUCTION James Michaels was astonished! The audit team for the Spector Industries Limited (Spector) engagement - an important client for Richard, Wood and Hulme LLP - was rapidly falling apart. Two members, Jody Ellis and Kira Dee, were fired the day before, presumably because they did not pass their chartered accounting qualification examination. Consequently, team morale was low and the other team members were concerned about their own job security. Ellis and Dee were universally liked and had an excellent reputation at the firm. From the start, team members had difficulties in completing their work. Michaels and a number of other team members questioned the commitment of particular individuals. Arvind Patel's constant complaining about work procedures was a real irritant to the remaining team members. Two other individuals, Scott Ireland and Heather Goodman, were annoyed several of their colleagues in the office were given time to study for their first professional examination, while they worked full-time on the Spector engagement. They wondered if they would be fired if they did not pass their first examination. Predictably, both Ireland and Goodman told their team members they would not be working on the upcoming weekend as they felt they had to study for the exam. Michaels had requested if additional staff could be added to the engagement to assist the team since it had fallen behind schedule. The response was disappointing - some senior colleagues felt adding new team members unfamiliar with the client would only cause further delays. This response frustrated the junior team members who believed they were working at maximum capacity. The audit started on November 3, 2008 and was supposed to be completed by November 19, 2008. The deadline was a strict one, but the audit was less than 50 per cent finished by November 12, 2008. Michaels was disappointed by the lack of leaderships displayed by the partners in the firm.Page 2 9B12C002 Michaels did not understand why the team had been so unfocused since the start of the engagement; he was not sure how he would pick up the pieces. What would he tell the client? Numerous questions swirled through Michaels' head as he pondered how to keep this audit on track and his team together. THE HISTORY AND CULTURE OF RICHARD, WOOD AND HULME LLP Richard, Wood and Hulme LLP (RWH) was a mid-sized professional services firm that offered clients audit and taxation services. Three friends - Chris Richard, Genna Wood and Lauren Hulme established RWH in 1998. Prior to founding this firm, the partners met at Crombie, Gallagher and Polevoy LLP (CGP). CGP was a large multinational professional services firm with an excellent reputation. CGP was known for its strong mentorship program, where each employee was assigned a mentor to assist with their career development. Although Richard, Wood and Hulme enjoyed their time at CGP, they sought to branch out and start their own professional services firm. RWH's mission was to deliver excellent client service and improve clients' internal controls. Teamwork and collaboration amongst RWH employees was essential to fulfilling this mission, as clients expected RWH to complete the work efficiently. Clients often viewed audits as burdensome, but recognized their importance to adhering to financial reporting standards. The Canadian economy strengthened in the mid 2000s and public companies faced increased financial reporting requirements with the onset of Sarbanes-Oxley in the United States and similar legislation in Canada. Due to these developments, RWH was forced to increase the size of its staff. Between 2003 and 2006, RWH grew from 20 to 75 employees. RWH enticed new graduates to join the firm by offering competitive compensation packages and extensive professional training programs. Every client-facing employee at RWH was either a chartered accountant (CA) or in the process of obtaining their chartered accounting designation. Audits were completed by teams of employees. An employee at R WH could work in as few as three and as many as 12 teams during the year. RWH preferred to hire individuals who could work effectively and efficiently in teams. Audit engagements had fixed deadlines to meet financial reporting requirements and the client fee was a flat fee as prescribed by the profession's rules of professional conduct. With more effective and efficient employees, the firm could accept more profitable work. R WH had terminated only a handful of employees since the firm began. These individuals were terminated because they did not work effectively in teams. Intolerance for individuals displaying poor teamwork behaviours reinforced RWH's team-oriented culture. For example, Kelly Stevens was terminated in 2007 because she did not complete her assigned tasks before going on vacation. Stevens' left her teammates in a lurch and they were forced to take on additional work to meet the audit deadline. Although this was Steven's first demonstration of poor teamwork, the firm was unwilling to tolerate this behaviour. Employees generally approved of these terminations due to the importance of teamwork in completing firm audit deadlines. R WH's culture also valued continuous improvement. After each audit - ranging from a week to a couple of months - employees were given formal feedback within a week of completing the engagement. Formal performance appraisals were completed annually. Feedback was sought from employees both senior and junior to the employee being appraised. These performance appraisals then determined the employee's base salary and bonus. Bonuses rewarded employees displaying technical improvement (e.g.,Page 3 9B12C002 increased knowledge of Generally Accepted Accounting Principles (GAAP) and the financial reporting process), delivering excellent client service (e.g., responding to client concerns promptly, meeting client deadlines, or learning about clients' businesses) and working effectively in their various audit teams (e.g., taking on work beyond originally assigned tasks as required, meeting internal deadlines, or performing well with teammates). Some employees found the review process to be fair and transparent, but others believed the process was confusing. For example, some employees received reviews concerning issues previously unmentioned by the staff. RWH maintained a modest office space. Since most of the employees completed audits at client sites, RWH utilized a system allowing employees to sign into the office for the day. For example, an employee's telephone extension would be transferred to a client's office for the day. RWH did not offer employees extravagant perks. Employees respected these austerity measures as they believed each dollar the company saved allowed for larger year-end bonuses. Since audits and other financial reporting work occurs quarterly for some clients and annually at a minimum for others. RWH preferred to have continuity in its audit teams each year. Team continuity allowed employees to understand the preferred working styles of their colleagues. Clients also preferred to see the same employees each year because there was a steep learning curve to understanding each client's business. RECENT CHALLENGES AT RWH When the North American financial crisis began in 2007, RWH found it challenging to obtain new clients. Other professional service firms experienced the same issue. As the financial crisis reached its climax in the fall of 2008, some of RWH's clients went bankrupt, while others fought to reduce their audit fees. Providing superior service became even more important to retain clients and collect audit fees. Financial reporting requirements had changed over the past few years. The Sarbanes-Oxley legislation that was passed in 2002 in the United States was not as lucrative as previously expected. In 2008, clients began to bicker with the partners at RWH to reduce their audit fees and were unwilling to accept standard annual rate increases routinely charged by most professional services firms. In early 2008, R WH actually found itself with a surplus of employees and a dearth of clients. Junior employees were often idle at RWH offices without work to complete. RWH began to lose money. The firm considered the imbalance between employees and audit work to be temporary because the conversion of Canadian financial reporting standards from GAAP to International Financial Reporting Standards (IFRS) in 2011 presented attractive new business opportunities. In the fall of 2008, RWH began the year-end audit of Spector. Although Spector was not one of the largest clients based on audit fees, RWH considered the company an important client because several prominent Canadians sat on Spector's board of directors. When RWH's bid to become Spector's auditor was approved by its shareholders in 2003, Wood became the lead partner on the engagement. Wood focused on building and strengthening the client relationship. As the lead partner on the engagement, Wood was personally liable for signing the audit opinion. By signing the audit opinion, Wood certified - in her professional opinion - the financial statements of Spector were free from a material misstatement and she was personally liable if this proved to be incorrect.Page 4 9B12C002 THE HISTORY OF SPECTOR INDUSTRIES LIMITED Spector, a residential real estate company, was founded in 1975 in Toronto, Ontario by Andy Robertson and Dave Mcphee. Over time, the company established a reputation for building luxury residential detached properties and Spector won several industry awards for its innovative designs. By 1993, Spector was actively building residential detached properties in western Canada, and by the late 1990s, Spector was engaged in residential real estate developments across the country. In 2003, Spector participated in a successful initial public offering (IPO) and raised CDN$275 million. These funds allowed Spector to enter the booming condominium markets of Vancouver and Toronto. Entering these markets also required Spector to assume construction loans in excess of CDN$20 million in some instances due to the significant development costs associated with condominium construction. A construction loan is a short-term loan commercial real estate developers often enter into, secured by a mortgage on the property being financed and meant to cover the cost of construction. Spector frequently entered into construction loans that disbursed funds as needed to assist in managing the company's cash flows. By the mid 2000s, housing loans and credit were relatively easy for consumers to obtain. Demand for condominiums continued to grow. Despite favourable market conditions, Spector experienced difficulty making inroads into the Vancouver and Toronto condominium markets. Consumers still associated Spector with luxury residential detached properties and there was intense competition among condominium developers. Pre-construction sales (e.g., sales of condominium units made before a condominium building is fully constructed) were 50 per cent to 80 per cent lower than the industry average. Initially, this did not concern Robertson and Mcphee. They believed, as development progressed and Spector gained increased brand recognition in the condominium market, pre-sales would naturally increase. By the end of 2006, Spector had three condominium developments under construction in Vancouver and two condominium developments under construction in Toronto. Pre-sales for these units were stagnant for the last three months of 2006 and were about 50 per cent lower than the industry average. Robertson, Mcphee and their management team began to worry about selling units, managing Spector's cash flows and the company's financial performance In 2007, Spector launched a promotion to increase pre-construction sales. Spector began to sell condominium units in buildings still under construction - referred to as pre-construction sales - for deposits of less than 5 per cent of the condominium unit's value. The industry average for condominiums usually required deposits of approximately 25 per cent of the condominium unit's value. Consumers reacted favourably to the promotion, and by the middle of 2008, all five condominium developments were over 80 per cent pre-sold and nearly complete. By November 2008, Spector's portfolio of assets included a mix of high-end condominiums and several residential detached property developments all under construction. THE SPECTOR AUDIT TEAM MEMBERS AND THEIR JOB DESCRIPTIONS Spector's year-end audit began in November 2008. The audit team members and their team roles are listed below. The team was diverse in terms of gender, work experience, age and educational background. Genna Wood, MBA, HBA, CA Wood was a founding partner of RWH and the engagement partner on the Spector audit. Wood was responsible to the firm and client for the overall completion of the audit and for signing the audit opinion.Page 5 9B12C002 As a founding partner, she was involved in business development activities for RWH in addition to her audit responsibilities. Since RWH was losing money, she was under tremendous pressure to retain and bring in clients. Adam Nguyen, MBA, HBA, CA and Keri Feldman, MBA, HBA, CA Nguyen and Feldman were senior managers. Both were responsible for assisting Wood with client relations and reviewing audit engagement work. Nguyen and Feldman worked together on the Spector audit to ensure all professional standards were met and that all employees complied with RWH's internal policies. Typically, they had three audits running at the same time and had to allocate their time among all three. Occasionally, they spent the full day at Spector with the team and on other days, visited different clients or worked in their offices at RWH. Nguyen and Feldman reported to Wood on a periodic basis throughout the Spector engagement. Jody Ellis, MBA, HBA Ellis was a senior associate. She was expected to pass her last chartered accounting qualification exam this year. Although she had written the examination in September 2008, the results would not be released until November 2008 during the Spector audit. Ellis had written the final chartered accounting qualification exam the year before and narrowly failed. Although the pass rate was not disclosed, the majority of writers passed the examination each year. Ellis had an excellent reputation at the firm and was well liked among junior staff. She reported to Nguyen and Feldman on a daily basis. Ellis was responsible for managing the senior associates, who lacked her work experience, and the junior associates. Junior associates primarily directed their questions to Ellis and the other senior associates. Ellis had gained lots of experience managing teams over the last five years. She was responsible for reviewing the work of the junior associates and co-op students while also completing her own audit work. Ellis was a primary contact for the client, meeting with them on a daily basis to provide status updates. Kira Dee, B.Comm Dee was a senior associate. Dee expected to pass her last Chartered Accounting qualification exam in November 2008. She had written in the prior year with Ellis and also failed. Dee assisted the junior associates and co-op students with resolving questions in addition to completing her own audit work. Dee and the other senior associates were encouraged to delegate work to the junior associates when possible. James Michaels, HBA, CA Michaels was a senior associate. Michaels had the same team duties as Dee. He passed his last chartered accounting qualification examination in November 2007. Michaels had been a member of the engagement team for the past three years and was very familiar with Spector's business. Heather Goodman, BBA, Mariana Faust, HBA and Scott Ireland, HBA Goodman, Faust and Ireland were junior associates. All three had two years of experience with RWH and were writing their first chartered accounting qualification examination in December 2008. The junior associates completed less complex parts of the audit engagement independently and worked collaboratively with the senior associates on more complex areas of the engagement. Their annual performance reviews primarily assessed their ability to complete their work efficiently and assist senior associates. Adrian Noth, Arvind Patel and Caleb Oldman Noth, Patel and Oldman were co-op students interning at the firm for their first or second co-op term. They primarily took direction from the senior associates and assisted in completing their work. Since they were still learning about financial reporting at school, these individuals were often given discrete simple tasks.Page 6 9B12C002 The co-op students required a high level of coaching and support from senior associates to complete their work efficiently and effectively. These individuals were essential members of the team, completing very detailed audit work and generally very eager to learn. THE SPECTOR AUDIT TEAM'S PAST PERFORMANCE The 2007 audit team was composed of all of the same members as the 2008 team, excluding the co-op students. The team also had the same demanding two-and-a-half week fixed deadline to complete the audit engagement. Six weeks of planning was completed by Ellis - the lead team member - before the audit. Diligent planning was considered essential to meeting the demands of the two-and-a-half week deadline. Planning for an audit involves three mains tasks. First, the planner gains an understanding of the client's business so appropriate tests can be performed during the audit and to also help the team exercise professional judgment when completing its work. For example, when Spector entered into new construction loans the team had to understand the nature of these contracts to develop tests ensuring the associated liability was not understated in the financial statements. Second, planning involves determining financial statement line items that may be susceptible to manipulation by management and developing tests to audit these and other financial statement items. With Spector, there was a high risk of overstating sales revenue, the value of assets under construction and receivables from pre-construction sales, along with understating liabilities. These accounts were material to Spector's financial statements. Changes in these accounts would impact the company's net income, earnings per share and net asset value - important measures for investors and analysts. Third, a detailed project plan is developed, assigning tasks to team members and stating how long each task should take. Since the Spector audit team was a large team, this step was important to ensure the team worked efficiently. At the beginning of the 2007 engagement, Wood and Ellis addressed the team. Each made it clear the deadline was firm and teamwork was required to meet the deadline. Each clearly outlined the interim deadlines for each individual on the team and advised each person was responsible for meeting their interim deadlines. Wood also stated the team was responsible for the overall deadline; if one person did not meet their interim deadlines, the whole team would have failed in her eyes. Wood explicitly stated Spector was an important client for the firm and the fixed audit deadline had to be met. Wood also clarified that all questions were to be first directed to Ellis and the other senior associates. If they could not address them adequately, then Ellis would escalate the questions. Wood emphasized Ellis would review everyone's work first, followed by the senior managers and partner. Having several levels of review is a well-established industry practice. Wood ended the meeting by underscoring the importance of teamwork, stating performance reviews would generously reward those who exhibited commitment to the team's goals and the firm's mission to delivering excellent client service efficiently. Michaels felt inspired and motivated by Wood and Ellis' commitment to Spector's deadline, the emphasis on teamwork and their passion for client service. Michaels and the rest of the team worked five days a week from 8:30 a.m. to 11:30 p.m. Additionally, the team worked from 10:00 a.m. to 4:00 p.m. on Saturdays. The 2007 team worked very well together. Members felt supported by their colleagues and were committed to finishing the audit by the fixed deadline. For instance, when Dee fell behind, MichaelsPage 7 9B12C002 volunteered to take on some of Dee's work so she could meet her interim deadlines. All teammates displayed a willingness to assist each other and were committed to the deadline. The team easily met the deadline and ended the audit with a strong sense of accomplishment. Wood, Nguyen and Feldman continually thanked the team throughout the engagement for their hard work, excellent teamwork and commitment to client service. Junior team members in particular appreciated the positive acknowledgement they received on a daily basis from senior members of the team. The engagement team successfully met the demanding two-and-a-half week deadline. Michaels felt the team could not have worked any harder than it had during the audit. He was very proud of the high level of commitment, cooperation and collegiality the team displayed during the engagement. THE SPECTOR AUDIT TEAM IN 2008 Ellis was well respected and a top performer; however, she had not passed her last professional accounting exam. For Ellis to be promoted at the firm in the next year, she had to pass her last examination. Thus, in 2008, Ellis was away on six weeks of paid study leave during the summer and unable to plan the Spector audit engagement during this time. Since this examination was only offered once a year, Ellis and others on study leave were expected to fully commit to studying for the examination during this period. Typically, planning was completed by the most senior associate on the team several weeks or even months ahead of the audit. Emma Watson, hired in the spring of 2008, was assigned to planning the engagement. Watson had extensive experience at another firm and this engagement was her first major assignment at RWH. Watson spent six weeks planning the engagement, but left the firm at the end of the summer. Watson did not like RWH's team based and performance driven culture. When Ellis returned from writing her examination, she discovered the planning was incomplete. A detailed project plan was not prepared. Unfortunately, Ellis was involved in several other audits and unable to complete the planning for the audit at this time. Several of her teammates realized this, but were unable to help complete the planning due to involvement with other clients. Michaels expressed his concern regarding the incomplete planning to Ellis. She promised Michaels the planning would be completed before the audit began in November. During the fall of 2008, terms such as "credit market meltdown," "global recession," "housing bubble bursts," and "bailout" dominated the media. Michaels wondered if the financial crisis unfolding in the United States would impact the audit. He was primarily concerned with the impact of sub-prime mortgages, housing valuations, and the tightening credit market. Michaels privately wondered if it was realistic to complete the year-end audit in two-and-a-half weeks again this year, given the heightened risk of asset impairments prevalent during economic downturns. This would undoubtedly increase the scope of the team's work. Michaels expected additional testing would be required to determine the valuation of assets under construction. If the Canadian credit market froze, Michaels wondered if pre-construction purchasers could pay the balance of their deposit, especially troublesome given the low deposit Spector required. Michaels believed additional work would have to be completed on the value of these receivables. He also worried Spector would not be able to complete their five condominium construction projects if the Canadian credit market froze - the company was highly dependent on construction loans to manage cash flows. In the prior year, some of the loans had been with a United States credit institution.Page 8 9B12C002 When the audit began in November 2008, the planning was completed a few days beforehand, but this did not give the team time to review their assigned tasks in detail. This was an ominous start to the engagement. Nguyen arrived late to the opening team meeting, while Goodman, Patel and Noth missed the entire meeting due to an early morning relocation from RWH's office to the client site. These three team members did not check their email in the morning and did not have access to company smart phones. These devices were no longer issued to junior associates due to cost cutting measures undertaken by RWH when the firm began losing money. During the meeting, Wood spent the majority of her time updating the team on changes to Spector's business. She also spoke about the looming recession in Canada, the collapse of the credit market and housing bubble in the United States and the impact of these events on the audit. Michaels noticed fewer people present at the meeting than in 2007. He recalled the tax team was present the year before. The tax team assisted the audit team with analyzing future income assets and liabilities, and also completed Spector's annual income tax return. The tax team would need to know about the changes to the client's business as well. A large part of 2007's success was the client's dedication to completing the audit by the fixed deadline. The client had provided the team with the relevant information as needed and the team rarely had to wait. On the first day of the 2008 audit, however, the audit team did not receive any information from the client. It was not until the third day of the audit that the client finally provided any information to the team. Michaels wondered whether the team would meet the fixed deadline - too many little things seemed to go wrong. Michaels expressed his concern to Ellis, but she simply told him the team had to meet the deadline and did not engage Michaels in further discussion. On the fourth and fifth days of the audit, Dee left at 7:30 p.m. She informed the team she would work from home for another five hours. Noth and Patel, left as well to continue their work from home. In 2007, all of the team members had worked at the client site together all the time. Michaels was unsure about Noth and Patel actually working from home. Michaels had heard from other colleagues that these two co-op students shirked work during previous engagements. Due to the financial crisis unfolding in the United States and spreading globally, the team considered this audit to be far more complex than the prior year's work. For instance, Spector had changed assumptions from the prior year to reflect the new economic circumstances and had changed some accounting policies as well. Due to these developments, the junior associates and co-op students asked the senior associates many more questions than expected, distracting these associates from their own work. Dee and Michaels also had to address several questions from the tax team regarding changes to the client's business in the current year. Compared to 2007's audit, the team was now far behind. Michaels expressed concern to both Ellis and Nguyen, but they both informed Michaels they were not yet concerned with the team's progress. During the second week, a growing sense of frustration spread among the team as they struggled to finish their work. Some members stayed until 11:30 p.m. while others left around dinner time to work from home. Animosity between those who stayed at the client site to work and those that went home began to grow more pronounced. Dee felt particularly frustrated when asked to complete some follow-up work from a previous audit engagement by a senior manager outside the Spector engagement team. Dee already appeared to be working the longest hours, however, some team members believed she only worked such long hours due to a chatty disposition, constant email checking and general inefficiency with her time.Page 9 9B12C002 On the Wednesday day of the second week, the client advised Michaels they were revising some forecasted financial information related to the pre-construction sales he had been reviewing to assess impairments related to assets under construction. This forced Michaels to restart his work from scratch, eliminating the 25-plus hours he had invested in his initial review. Goodman also noticed the client had hastily prepared some of her supporting documents; she requested the client to re-do the schedules, adding more time to her overall process. Following Goodman's incident, Michaels asked Ellis, Nguyen and Feldman if additional staff could be added to assist the team, as it had now fallen significantly behind schedule. Although there were staff idle in the office, Nguyen and Feldman believed adding new team members unfamiliar with the client would only cause further delays, as it would take time for these in these individuals to get up to speed. This response frustrated several of the team members who believed they were working at maximum capacity. Even the normally positive junior associates felt frustrated. These associates would be writing their first accounting exam shortly after the engagement finished. They knew that many of their colleagues were idle in the office and able to study for their examinations, while they were working long tedious hours, which made studying in the evenings difficult. On Thursday morning during the second week, Ellis and Dee received their chartered accounting qualification examination results. Both of them had failed the test. Since the results were publicly announced, the team was aware of these failures. Firm policy gave each employee receiving examination rules the day off; none of the writers came to work that day. Most team members sympathized with Ellis and Dee. The team believed it would be able to catch up over the weekend. Nguyen asked the team to work from 8:30 a.m. to 11 p.m. on Saturday and Sunday when he came to visit Thursday morning Michaels arrived early on Friday morning with a lot of work to complete before next Wednesday's deadline. However, to his chagrin, none of the other senior associates had arrived by 9 a.m. Around 9:30 a.m., Michaels called Feldman to inquire about the status of the other senior associates. Feldman did not return his call. Wood and Nguyen also did not return calls from Michaels. Michaels could not help but wondering - What is going on? As the junior associates and co-op students arrived, Michaels advised them to continue with their work. He told them that the senior associates were "probably running a little bit late." By 11 a.m., James began to think something was wrong. The team worked diligently until noon, when Faust suddenly stormed into the room. She told the team a friend, studying for her upcoming examination at RWH's office, saw Ellis and Dee being escorted out of the building by a team of security guards. It appeared both women had been fired. Not surprisingly there was a visible shock on people's faces! The junior associates and co-op students immediately began bombarding Michaels with questions about their own job security. Michaels was blind-sided. RHW rarely fired individuals. Ellis and Dee were top performers, who had always worked exceptionally well in teams. Michaels wondered how the audit would be completed without them. Previously, the senior managers had been unwilling to add additional team members. Michaels believed the senior managers now had no choice but to add new team members. How would this impact the team's efficiency and morale? Later that afternoon, Oldman publicly wished he had joined a competitor firm, Alpha LLP. A friend at Alpha told him their managing partner, in the wake of the morning incident at RWH, e-mailed the entire firm advising employees Alpha LLP was committed to supporting them through the chartered accounting qualification process. Patel complained he needed Ellis' assistance to finish his work. Patel's constant complaints annoyed several team members. Ireland and Goodman were already annoyed that theirPage 10 9B12C002 colleagues were studying for the first professional examination in the office; they both wondered if they would be fired if they did not pass their first examination. Predictably, both Goodman and Ireland told Michaels late that afternoon they would not be working on Saturday as they had to study for the exam instead. Michaels was not sure how he would pick up the pieces. What would Michaels tell the client? Ellis was one of the main contacts. Why had the partners and senior managers not returned his calls? Michaels did not understand why the team had been so unfocused from the start of the engagement. How had the team dynamics deteriorated so quickly? Around 5 p.m. Nguyen arrived to review the team's completed work. He had an attitude that could best be described as "business as usual." He did not even acknowledge the firings that had occurred. When Michaels asked Nguyen if Ellis and Dee had been fired, Nguyen told Michaels he did not know and sternly reminded the team they were to come into the office on Saturday at 8:30 a.m. Michaels was in total disbelief. Nguyen did not seem to care about the termination of his colleagues. He did not acknowledge the concerns of the remaining team members. The audit was still supposed to be completed the following Wednesday, yet it remained with less than 50 per cent of the work completed. Michaels was astonished that Nguyen, Feldman and Wood could ignore the crisis in the team. As Patel continued to complain he didn't know what to do without Ellis, Michaels tried to formulate a plan to ensure the team met its looming deadline