12 Mar 2020 | 03.01 pm
Interview: Seamus Hand, KPMG
Managing Partner says Big Four firm has to take some risks
12 Mar 2020 | 03.01 pm
When the economy grows, so does KPMG. But with competition intensifying from its Big Four peers, new managing partner says that the firm has to look beyond organic growth
The Big Four accountancy and business advisory firms have enjoyed extraordinary growth in recent years. According to data collated by FinanceDublin, the combined fee income for PwC, KPMG, Deloitte and EY increased by 60% in the three year period 2015 to 2018. At KPMG, the growth in the period was 38%, a creditable outcome but lagging behind its large peers.
KPMG partners tapped Seamus Hand (47) to lead the firm as managing partner from May 2019. From Donegal, Hand graduated from DCU and is a KPMG lifer, joining the firm when it was Stokes Kennedy Crowley. He made partner in 2002 after a stint in KPMG Australia, and his speciality is tax, particularly in the financial services sector.
Hand describes that tax advisory function as trying to provide as much certainty to clients as possible to enable them to make the best decisions. “Things are always changing in business and decisions need to be made, and what clients are looking for is as much certainty as possible,” he says.
Ironically, Hand is now charged with bringing a bit more uncertainty to KPMG itself. The firm has decided that it’s no longer good enough to stick with the knitting, and that it has to take some risks, as Hand explains below.
What makes up the KPMG business in Ireland?
Until recently our three business lines of tax, audit and advisory had pretty much a one-third split each in terms of revenue. We have seen greater growth in our advisory business, which spans deal advisory and consulting. Those two units are now around 40% of the business and the other two are about 30/30.
You tend to find that audit can be a bigger part of the KPMG business in some other countries. My view is that KPMG is an audit firm at heart. Certain parts of the business have greater growth potential, particularly in the consulting area around technology, but we absolutely see audit at the bedrock of what we do.
We take that role, and the public interest element, very seriously, and to provide a top-class audit we see having the broad skills that we have across the firm as being very important. Audit will always be our number one priority, and then we try to drive growth in the other areas as appropriate.
What is the role of the Managing Partner?
It is a management role, but it’s also about setting the strategy and ambition in the firm. Providing that leadership, particularly when there are nearly 3,500 people, is absolutely critical. There are also operational aspects, and I have a team around me that helps with a lot of that.
You always need to keep things moving. People ask me sometimes are we going to turn into a technology company, or are technology companies going to do what we do? While clearly there will be disruption in our market, we’ll never be a technology company. We are always going to be a people business that will use technology more and more.
I consider my most significant responsibility is trying to ensure that we hire and keep the right people. Hopefully, we can energise and motivate those people to achieve the firm’s ambition. That starts with the graduates we recruit, and giving them the right training and experience, and all the other people in the firm up to partner level. We now have 101 partners, and they are very talented and capable people. If you can keep those people happy, then you are going to be in a good place.
When you assumed the role, what was on your agenda?
We were coming off many years of good performance and I had to decide how do we build on this success. Maybe it’s human nature, but you sometimes look and see downside risk and worry about that more than the upside.
With the executive team, we firstly looked at the macro level: were we optimistic for the future, both for the economy and the various areas we are involved in. There were obviously opportunities to continue growing the business. That was based on our read of the growth prospects for particular clients and sectors.
However, our ambition was greater than what this bottom-up approach added up to, and we decided we have to do something different. It wasn’t just continuing to do all the great stuff we do with clients — we need to do something on top of that.
I appointed one of my leadership team as our head of investment, innovation and technology. We examined the other things we need to do, the inorganic investments we need to make, the new people and new service lines that we mightn’t have done in the past? We want to push the envelope, to take some chances.
How did clients feed into this new strategy?
Feedback from market research told us that while KPMG is viewed as a premier, professional brand, there was a perception that we aren’t as innovative or dynamic as we could be. The biggest change that the new strategy brought about was permission to go off and do new things. They won’t all work out, but more than anything else I’m delighted with the way that people have embraced the idea.
The first thing we did was to collate ideas from our people. Then we prioritised them and did some due diligence before deciding which ones to invest in. We have a huge number of things we want to do, and we are making good progress.
KPMG recently announced a new Sustainable Futures division. Did this come about from the strategy review?
Yes. We have been active in the renewable energy space for many years, and some of our partners have a very good understanding of the market, not just for renewables but also in the broader sustainability space. We have a good market knowledge to go out and assist clients around sustainability strategy and what changes they can make to their business process. I think that’s a huge opportunity for us, and a huge opportunity for Irish business generally.
There are many other things that we’re interested in. We recently recruited a new head of cyber who joined us from KPMG in Malaysia. The Big Four will generally be in the same markets, and it’s the quality of the people that sets you apart.
I have a huge amount of respect for our peer firms, and I think that we can learn from them, and vice versa. I would tend to consider myself more of a sponge than an adversary.
Artificial and applied intelligence is another focus area. We have huge amounts or data, and it’s how we can use that data with our clients to provide them with better information to make better decisions. The ambition is to bring data and analytics in partnership with the audit business so that we’re able to provide greater insights to our clients.
Do accountants have the data skills for what you have in mind?
Education is changing, and I think it should change a little bit more. I believe we need to invest more in third and fourth level education, and bring more specialist knowledge to bear. For example, if you have a business or accounting degree then you should be able to layer a specialism on top of it. We are working very closely with the universities to make that happen.
We have also worked in partnership with some of our KPMG international colleagues on a data qualification for trainees when they finish their audit qualification. I think that provides us and them with a valuable skillset.
I think there will always be a need for general business skills, and that bedrock will continue. However, more and more specialist skills will be required, particularly for the consulting business.
What is the KPMG culture as you see it?
Culture is very hard to define, because it’s kind of who you are, it’s your personality, it’s ever evolving. I think KPMG has a very entrepreneurial partnership approach. We collaborate very well within different parts of the firm. Then we bring that to our clients, and that’s the way I would describe the way we interact with clients — as partners. It’s very important to us that the client knows we are going to be with them in the trenches, and that pervades the way we work together.