HOW HAS A FIRM posting £418m in profits found itself in a position where it needs to look at cutting 3% of its workforce?
For KPMG, it would appear to be a case of simple maths.
The profit figure, relating to its last financial year (ending 30/09/11), equated to an average profit per partner (PPP) of £690,000.
The previous year saw a higher profit and fewer partners, hence £750,000 per partner.
Where are the cuts coming from at KPMG? Below partner level.
Big Four firms can talk all they like about the efforts they make in recruiting grads and opening up opportunities for the non-university-educated, as they have in response to KPMG's travails.
But from the outside, it seems clear that the engine room of KPMG's business is likely to take a hit. The cost-cutting will no doubt look to improve the PPP figure, yet surely the most important thing is that quality of service to the client is maintained.
Bearing in mind that PwC and Deloitte partners saw a fall in PPP during the last year (E&Y doesn't supply figures), KPMG's latest action does send a shiver down the spine.
As an aside, one wonders how new KPMG chairman Simon Collins felt about fronting up to staff on this issue, bearing in mind he was initially meant to take over from John Griffith-Jones in October.
Kevin Reed is editor of Accountancy Age
Whilst striving to cut costs to ensure the PPP gets back to last years levels one wonders if the failed attempt to outsource the IT function and possible costs of any future legal ramifications from contractual disputes have been taken into consideration?
Posted by: ade cooper, 24 Aug 2012 | 18:59
As an ex-'KPMG'er, all I can say is "here we go again". Usual cycle - downturn; panic and cut staff and recruitment to protect partenrs struggling on £750k and in the upturn; panic and recruit people who aren't really up tot he job at too high a salary.
Still, if it all gets too much you could always become chairman of Barclays.....
Posted by: Winston Smith, 29 Aug 2012 | 08:41
When I joined KPMG many year's ago, they took pride in their staff and their image as an employer of choice. They now appear more like an American style hire & fire outfit . All I can say is that "If they are not loyal to their staff in the difficult times, they shouldn't expect them to be loyal when the good times return" - maybe they don't care any more which would be a great shame
Posted by: Paul Woodhead, 29 Aug 2012 | 15:20
This is classic Big 4 mindset, from the very same Firms that claim to be "People First" and implore staff to complete questionnaires to put them at the top of all the Best Places To Work Surveys. As soon as there is a dip in activity the staff always have to take a hit to protect Partner profits which have increased at an exponential rate to relative to staff remuneration over the past decade. Partners are supposedly well rewarded because of the risks they were but in the age of limited liability there don't seem to be and most clients find senior managers perform equally, if not better, as the trusted advisor.
Posted by: Sash, 29 Aug 2012 | 19:23
I believe that partners' expectations in respect of the PPP figure were unrealistic and their current measure is a result of their disappointment.
Posted by: Martin, 30 Aug 2012 | 10:18
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