Mike Rake admits it is going to be a tough job following Colinfee income of #1bn by the end of 2000. He tells Jon Bunn how. Sharman as UK senior partner of KPMG.
Sharman, in his five years at the firm’s London helm, has raised its profile, shepherded its audit arm into the protection of a limited company, overseen impressive annual growth and guided KPMG to the brink of merging with Big Six rival Ernst & Young.
But now, following E&Y’s shock decision to ditch the merger plan, Sharman will focus on his role as KPMG’s international chairman, leaving Rake – his former number two and chief operating officer – to lead the UK’s 617 partners.
Rake has the confidence of the partners, who gave him their overwhelming approval before the vote was rubber-stamped at last week’s UK board meeting.
In return, he plans to double the firm’s market share in tax and corporate finance (to 20%) and triple it in management consultancy, with 15% of the market the initial target.
Half-year figures out last week revealed consultancy has already grown by 46% this year. Rake reckons it could well double in size by the year-end.
Overall, Rake is confident UK fee income will top #1bn by the end of 2000.
His backing by the partners is the key to success during his five-year term, especially as Rake came in for some criticism from a handful of anonymous partners over the collapse of the merger talks.
‘If you have 600-plus partners, there will be some who will disagree with you for all kinds of reasons,’ says Rake. ‘But the majority of our partners are extremely positive.’
To make sure his colleagues stay committed, Rake is adopting a three-pronged approach: to create an enjoyable working environment, provide challenging work, and ‘have a level of profitability that gives a return for the level of risk we ask partners to take’.
To meet the final objective, KPMG is remodelling its pay structure along corporate lines with bonus and performance pay. Rake believes this will allow it to continue poaching top City players such as David Beever, formerly of Warburgs, and NatWest Markets’ Nicholas Fry as chairman and vice-chairman, respectively, of the corporate finance team.
Much of the impetus for change emerged from the merger talks’ aftermath.
‘We discovered we needed to work much more as a UK firm,’ explains Rake.
As a result, the firm has scrapped its regional structure, which has been criticised by competitors as divisive, and become a true UK partnership.
Plans for a UK executive of six key partners were approved this week and Rake also plans to bring in a team of ‘non-executive directors’ to act as business advisers.
But, good advice aside, developing the firm is going to cost KPMG a large bundle of cash – money it does not have readily available. Sharman recently revealed the firm is seeking to raise global finance to fund an ambitious programme of investment, mainly in IT.
New strains and pressures
Debt instruments will be used to pay for a series of new programmes, including a run-out of Microsoft Exchange to 20,000 staff by 15 September. Such investment, says Rake, is vital to keep up with client demands. ‘Their needs and expectations are increasing all the time,’ he adds, ‘and we must have the ability to invest very quickly in Russia, China or wherever.’
Although the full extent of UK investment has not been finalised, Rake is considering niche acquisitions and is ‘looking at a number of legal opportunities’, with a tie-up with a well-known law firm likely to take place soon.
Central to Rake’s philosophy is the need to make KPMG’s UK operation fit snugly into the firm’s global jigsaw. He brings a clear pedigree of international experience to the UK, only having returned from worldwide postings in 1989.
A partner in Brussels for seven years, he became senior partner in the Middle East in 1986 and maintains strong links with his foreign clients.
His talk is littered enthusiastically with ‘global visions’ and ‘internationalisations’ marking him out as an ardent follower of the Sharman gospel.
And the international chairman was unstinting in his praise for Rake, who turned 50 in January. ‘Mike will have a strong and experienced team to support him in his ambitions for the UK firm,’ says Sharman. ‘I know his own international experience will be invaluable as I seek to weld a more dynamic and unified KPMG worldwide.’
The greater success Rake is pursuing for the firm will undoubtedly create new strains and pressures. He is keeping a keen eye on the goings-on at the Andersen behemoth and is at pains to stress the same messy fate does not await KPMG and its consulting arm. ‘Andersens has been phenomenally successful, but it was inevitable it would end up like this. Our consultants value working as part of KPMG and there is no pressure to split at all,’ he says.
Rake’s greatest challenge will be ensuring that pressure does not boil over in the next five years.
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