Lessons learnt from the aborted merger with Ernst & Young have given sleeping giant KPMG the boost it needed to get on with building a global consulting practice. “The consulting practice will grow at about 50 per cent this year and we are looking to achieve well over #200m in the UK this year. Globally we expect around $3bn,” says Alan Buckle, who has been made chief operating officer within the new executive at KPMG Management Consulting. “We learnt a lot from looking at ourselves: we have a strong reputation for the way we work with clients and we have asked ourselves how we could make sure that things work better all the time,” he says.
Buckle believes that the failed merger (which fell through two months ago) gave the firm the wake-up call it needed to move forward, and helped it highlight the opportunities available in the marketplace. Now KPMG’s engines are on full steam ahead.
“The merger model was about building a global consulting practice with Ernst & Young. Now the merger is off we have got the whole establishment at KPMG aligned to what we need to start driving forward,” said Graham Oates, head of solutions within the new consulting executive at KPMG.
“We were going to do it in the merger talks anyway, so we said now let’s do it, it is the moment of change.”
A six-person UK executive has also been set up on the initiative of Mike Rake, who will take over from present incumbent Colin Sharman as KPMG’s new UK senior partner on 1 October.
The executive, which will report straight to Rake, has the clout to push through the firm’s new vision for the future. That vision is not just grounded in concepts gleaned from the merger talks, but also on programmes KPMG developed through Project Globe, begun three years ago. Its aim was to develop programmes that would help KPMG become a truly global firm.
“Our focus is going to be on getting the organisation aligned to the right objectives, and with the right processes,” says Buckle.
The firm’s existing model is based around industry sector offerings in the financial sector; manufacturing, retail and distribution; infrastructure and government; and information, communications and entertainment, all integrated with audit and tax. In addition, two consultancy centres in business transformation and implementation consultancy are positioned directly below the industry sectors. Centres of excellence in financial management, value-based management, benchmarking and strategy aim to stimulate thought about new products and new approaches.
“We want to be a professional services firm adding value to clients and one of the best ways of doing that is integrating our service offerings around our clients through strong industry knowledge and industry solutions,” says Oates.
He explains that consulting now plays a central role within the firm: an example of this is the way the firm incorporates consulting activities around giving tax advice.
“We are using a consulting type approach to tax business that on the face of it is as far away from consulting as anything else,” says Oates.
He says that instead of offering straight tax advice, it is following a programme whereby the firm is rewarded on results over time.
Oates says that about four or five years ago the whole business strategy at a global level within KPMG began to move and the firm began to understand that audit was not a sustainable growth, high-margin business.
Partners realised that a firm like KPMG needed to focus around higher value business and consulting to prosper. The firm was equally clear, however, that tax, corporate finance and corporate recovery were also major businesses opportunities.
Going to market through its industries and following an integrated approach is the key to its UK and global strategy. An example of this is the way it has developed its financial services sector over the last three years.
The firm decided to focus its sales efforts around its top 20 accounts’ teams, measured on the amount of pull-through the teams achieved for the rest of the practice. The model consists of a top 20 accounts’ management programme and a client service team.
“The former was a multidisciplinary programme, so it was not just about consulting, it was about creating a multidisciplinary account team that could provide services to those top 20 accounts,” says Steve Sherman, newly appointed to the position of head of sales within KPMG’s consulting executive. “Because we managed to create such good relationships internally with our audit colleagues we can actually leverage on that for consultancy work.”
Sherman believes that the model put in place three years ago in the financial sector has been the most successful. And the firm has applied it in other industry sectors and will continue to apply to select segments in the future.
KPMG is moving towards a model where services and industry offerings (or solutions and segments as they are now called) willl feed into and be based around client issues like EMU and post-acquisition integration.
KPMG believes using the model across selected industries is the way of the future. Whatever industry sectors it decides to focus on, KPMG wants to have processes in place that will allow it to tailor solutions to meet the needs of each client.
Combining industry focus with strong solutions around business issues is its aim. An example of this is customer centric management in the financial sector, which looks at issues facing retail banks, helping clients learn how to focus on customer needs, Sherman says. “Customer centric management is essentially turning an organisation around to be truly customer focused and this is particularly appropriate in retail financial services,” he says.
According to Buckle, KPMG aims to focus on particular industry segments where it can see rapid success and then build solutions focused around those industry segments.
All the internal decisions about which industry sectors to focus on are still up in the air and the business planning process will not be finalised until late August. Buckle says the firm is about to start a planning exercise to establish which will be its priority segments in the future.
“Where there are areas in which we consider ourselves to be behind the market leaders, serious questions are always asked about whether we should invest in improving our profile in that segment, or focus only on the battles we can win, keeping a watching brief on other segments in case circumstances change,” he says. “And, of course, there is always the option of exiting from some segments altogether. These issues will be discussed in the planning round.”
Eddie Oliver, who chairs the consulting executive, says the need for change was great; consultants were starting to think of themselves as, for example, manufacturers first and consultants second.
The new model, he says, will mean that consultancy decisions will be centralised and that consultants will report back to the executive, rather than each separate business unit.
This is a global process. KPMG aims to have these new processes and proposals in place in the next 12 months, so that it can draw on its resources worldwide.
“We are going to build the practice nationally and internationally more around the consulting value chain than we have ever done before,” says Buckle. “Some people will focus more on elements of the value chain, such as selling account management, and others will focus more on delivery.
In addition we will focus on framing big downstream solutions to critical business and strategic issues.”
One of the key objectives of the globalisation programme is sharing knowledge that has been developed in KPMG practices around the world.
“One of the biggest issues in technology consulting is that the service opportunity does not arise simultaneously throughout the world,” says Oates. “What happens is that an initiative arises and is developed in one area and then is disseminated to other parts of the world.”
Classic examples include the Internet and e-commerce, which are strongly developed on the west coast of the USA and are gradually moving into Europe and Asia-Pacific. The challenge for KPMG is to spot the important technological innovations as and when they arise and to match them up with those countries, economies and sectors that will achieve the greatest benefits from them.
From 1983 to the end of the decade the firm’s focus was on building a strong management structure. In the early ’90s consulting was more closely integrated with audit and tax. Now the firm aims to structure its practices so that its consultants can transcend international boundaries, working globally with clients. And it aims to increase knowledge transfer and knowledge sharing among its consultants.
“At a consulting level there is a lot of secondment but what we want to see is people right at the top level being seconded to other practices, building expertise: that is going to be quite a big challenge,” says Sherman.
He says the firm intends to set up an “account management vehicle” through its regional service centres in addition to its transfer programme. “If account managers do their jobs well then we are looking at a pan-European process which will pull through resources from the national practices to deliver solutions. That will produce a lot more mobility naturally.”
Over the years the firm has built common processes in the UK through MC2000 and common methodologies globally through Project Globe. Out of both projects it developed training programmes that have enabled consultants to obtain all the core consultancy skills.
KPMG’s new global business changes will require changes in the training programme, but essentially, Oates says, “the solutions are imbedded in the new model”. Consultants will be given additional training for solutions such as knowledge management but the BPR and SAP programmes are already in place.
While the focus is on knowledge leadership, aligning global processes and developing knowledge management, technology will also have to play a role to further those processes.
From an internal perspective KPMG is working on an international IT programme that is yet to be announced.
From an external point of view, the Microsoft/KPMG alliance will give KPMG the additional IT strength it lacks. “We will be looking at the opportunities that technology will allow us to take and that is part of our alliance with Microsoft,” says Oates.
“KPMG is very good at understanding business issues and Microsoft is very good at producing technology and what we are looking to do is develop one of these innovative solutions around that and probably with clients as well.”
With internal work processes and IT processes firmly in place KPMG aims to capitalise on openings in the market created by the divorces and marriages of its competitors. It believes that while its competitors are struggling with internal processes, it can put its new global plan in position and grow rapidly.
Alan Buckle, chief operating officer, KPMG Management Consulting: questions and answers
What is your major professional achievement?
A business like ours works on teams of people, built very quickly. The highest point is about bringing things together very quickly and driving forward results. And I am very proud of where I put a team together, moved on and started doing it again. It is not about individual achievement.
What would you do with an extra hour in the day?
If I had an extra hour in the day I would spend it with my best guys in the UK making sure that they are making the best changes possible.
And after that it has got to be about spending time with clients and putting in new proposals.
Which firm do you most admire?
I admire the companies that focus on what they want to do, where it is totally clear what their business is and that they are not distracted by other things. And, more importantly, that their people are heading towards that rather than getting embroiled in political stuff. Microsoft and Virgin do that.
Which word turns your stomach?
Which firms are most in need of your expertise?
The ones that are facing major changes or particular points in their development, for example where they need to find out how to tackle EMU, Year 2000 or M&As.
What do you see as management consultancies’ greatest faults?
I think where I have seen them be negative.
If you had a chance to change anything in government, what would that be?
Governments are organised on departmental lines. I would like to see them reorganise around their customers, people and issues.
What book are you reading at the moment?
Estates on the Edge by Anne Power, and one of the Tom Sharpe novels.
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