Fit for chairmanship

Timing may not be everything in life. But like Lady Luck, it helps immensely to have a little on your side. Looking back at his firm’s performance in the past two years in which he has been running the show, Peter Smith, chairman of Coopers & Lybrand, both UK and International, might not demur at that statement.

To take the reins in May 1994, at a time of general economic revival for the profession, was undoubtedly good timing. The recent annual results – a 6% rise in gross fees to pass the # 700m mark and break the # 1m fees per partner barrier, a double first – show he has built strongly on his initial year’s 2.2% fee rise, after several year’s stagnation, and worse, for the firm. Coopers continues to lead its rivals in FTSE 100 audit clients, worldwide privatisation assignments and merger and acquisition deals.

True, Arthur Andersen may well soon relieve Coopers of its crown as the UK’s biggest accountant; Colin Sharman of KPMG or Nick Land of Ernst & Young may well capture more column inches; and the Joint Disciplinary Scheme’s investigations into Coopers’ Maxwell involvement may throw up something nasty in the future. But it is Peter Smith who is the accountant on Cadbury Two, and Peter Smith who is the accountant at the CBI, suggesting he has become the Establishment’s accountant par excellence. And even more important internally, it is Peter Smith who in the past two years of Coopers change has calmly reorganised the firm into new specialisms that deliver an even more client-focused approach than ever before and one which is clearly paying dividends for the partners.

At the moment – for perhaps the greater test is how Coopers stands when the economy next stalls – those who voted for him in an unprecedented public hustings to replace the charismatic Brandon Gough back in December 1993 will feel that they chose wisely.

Safe pair of hands

Yet Smith was a surprise choice in many ways, with his no razzamatzz, no pyrotechnics style contrasting strongly with his predecessor.

Though Gough had noted him as a potential successor in the preceding decade, other candidates had appeared more lustrous subsequently. Certainly, had Richard Stone not experienced a little local difficulty over Coopers’ involvement with Asil Nadir, he might have expected to succeed Gough.

But Smith, an urbane, somewhat shy, lifelong Coopers man, was seen as a safe pair of hands. The general view since is that he has proved all that and more. In fact, a not uncommon observation from insiders is that he has been ‘far better than we expected’.

People who’ve worked closely with him, however, have not been surprised at his progress. Insiders talk of his ability to get people to work together in multi-disciplinary teams. ‘Off his own bat,’ remarks one very senior former partner, ‘when he headed the London office, he formed special relationships with the management consultancy division . He worked closely with Pat Sherry, a former consultancy senior partner, to make this multi-disciplinary organisation much more client-facing. ‘

Observes a current senior colleague : ‘Peter is very good on details.

He can’t tolerate sloppiness or anything unprofessional But he’s also clear and straight thinking. He sets objectives, tells you what he wants done, and then let’s you get on with it. And he keeps a close eye on what you’re doing. “I seem to recall a conversation we had two or three months ago” is a phrase he uses when he’s politely chivvying you.’

Clients also see him as a high-class professional. Take Schroders, a key firm for Smith. As an audit and investigations specialist in the banking world, he inherited it from Gough’s predecessor David Hobson – and it helped provide him with an entree into corporate finance which stood him and Coopers in good stead. Its current finance director, Nick MacAndrew, never worked with him but knows him well through the contact Smith maintains with the bank. ‘Though he’s moved on to bigger and better things, he’s been very careful to maintain a relationship. He’s a very good client man, a good listener, and very good at delivering a hard message softly.’

Smith clearly has his fans, but he is the first to acknowledge he has been fortunate in the timing of his accession. ‘When I took over, the firm was extremely well positioned. About three years before, we’d completed the merger of Coopers and Deloittes. It was a very complex measure, but it had been very successfully bedded down during the recession. We were also at the bottom of the economic cycle for professional services firms and, as the largest UK firm, we were well placed to benefit from the pick-up in business. You couldn’t expect a better inheritance than that.’

Yet it was not a perfect inheritance. On the hustings, Smith made plain his concern that the firm was over-partnered. Once elected, it was incumbent on him to deliver the slimmer version he prescribed. In a decisively executed coup de grace, about 15% of the near-700 partnership found themselves invited to move on more swiftly than they had anticipated.

New breed of management

The rationale was unimpeachable, says Smith. ‘It was a difficult period, but a very necessary and important adjustment. UK plc had come through the recession in a slimmed-down form. On our part, there could be no presumption any more that just because we’d provided a service to an organisation for 100 years, you were entitled to that for another 100 years. There was some very cute and selective buying on the part of clients. A new breed of management had asserted itself. It had a much clearer view of what it wanted: it clearly wanted value, and wasn’t tolerant of incompetence, inefficiency and unnecessary expense.’

Accountants’ structures were preventing them from responding to this new client, says Smith. ‘I think the profession in the 1980s had it pretty soft. It didn’t seem like it at the time, but looking back I think the challenge to professional services was how many people you could get through the doors to provide the services clients wanted as they expanded. It was a very transaction-based environment, and pricing wasn’t actually a major issue.’

Cutting down partner-levels

Coopers had to readjust itself. ‘Against that environment, we had to ensure the services we were providing were to the point; and that we had the right people who would lead in the provision of those services in the years ahead. We, therefore, suggested to a number of partners that they might think about retiring under our early retirement plan – at 55 instead of going at 60. And we indicated to a number of partners that we didn’t see that they would be growing within the business because the needs of the business had changed. We thought their careers rested elsewhere, and most moved quite successfully. “The necessary positioning of the firm for post-recessionary opportunities” sounds slightly trite, but that’s what it came down to.’

Smith rejects suggestions that the downsizing should have been done at merger stage, two-to-three years earlier. ‘No, I think what was done was entirely appropriate. You’ve got to do this on the basis of good information, and there has to be an agreement about what constitutes the best. So, to have gone through the reshaping of the business as an immediate result of merger would have led very quickly to a structuring which would have been perceived as a takeover – which is perhaps what other people have experienced.’ He disputes that more Deloittes people were asked to leave.

Having got the right people, Smith and his team have invested heavily in developing them – one of the main themes of his chairmanship. ‘Fit for business,’ he remarks of the Coopers slogan, ‘means fit to serve our business clients, and fit to be business people in their own right.’

He has focussed intensely on helping partners deliver greater value for clients, both here and abroad – particularly abroad, perhaps, for international work is an increasingly dynamic part of the Coopers’ equation. Individually-tailored training programmes at Ashridge, Harvard and Insead help inculcate the essential global dimension to Coopers’ thinking. ‘Training and career development are top internal priorities,’ he remarks. ‘If we’re to attract and retain the very best people, we have to provide development opportunities.

I put out a challenge each year to all our people, including our partners – “If you’re not more employable to the market outside by the end of the next year, you’ve every right to leave Coopers.” So the objective for us to make certain everyone can look back and say: “I’m a better person because I’ve been at Coopers”.

‘The biggest satisfaction I get is from seeing these people grow and form teams which can win work in the marketplace – and knowing that they’re the best.’

CV: PETER SMITH 1946 Born; educated Mill Hill School and Southampton University (Bsc Economics) 1967 Joined Coopers & Lybrand 1970 Qualified; now, FCA 1975 Partner 1985 Partner in charge of a London audit division 1989 Attended Advanced Management Program, Wharton School, University of Pennsylvania 1989 Head of London office 1994 Chairman of Coopers & Lybrand UK (May) 1994 Chairman of Coopers & Lybrand Intl. (October)