KPMG will axe a tenth of its UK partners by Christmas following a review of individual performance, the latest in a series of measures to overhaul the Big Four firm. The one-off cull of partners comes as the accountant dramatically scales back its costs and restructures its operating model as it tries to recover from a reputational crisis and prepare for regulatory changes to the accounting sector.
KPMG has been scrutinised over its audits of collapsed outsourcer Carillion, a handful of controversial exits by partners, and regulatory fines totalling £20m in the past year. Bill Michael, chairman of KPMG, told partners at a recent “roadshow” that the firm would take a harsher approach to managing performance, said a person familiar with the matter. The firm plans to cut about 65 of its UK partners, said two people with knowledge of the situation, marking its biggest single cut of partners in several years.
In any given year, KPMG would expect roughly 45 partners to leave the firm, either through natural or forced retirement. However, this latest move is an active step being taken by the group during the first few weeks of its financial year. It is rare in the industry. KPMG UK made profits of £356m in 2018, below five years ago when it made £414m.
Average pay per partner is expected to fall almost 10 per cent to about £550,000 when the firm publishes its 2019 results next month. The performance review looked at the amount of money partners had billed their clients as well as other factors, including the importance of their work to the firm’s future strategy. Tim Jones, who became chief operating officer in May, was given the task of drawing up a list of partners who would be let go. It initially named about 90 partners, according to a person familiar with the situation.
The partners who will be affected work across KPMG’s business, the person said. However, its audit practice, which has been recruiting heavily ahead of a possible forced break-up of the UK’s largest accounting firms, is the least likely to see departures. The exits will reduce KPMG’s current partnership from 635 members to about 570, although that number is expected to increase as the firm promotes more workers to partner level. The firm last made a similar move in early 2016 when it ousted 50 UK partners as part of a top-level restructuring.
A KPMG spokesperson said: “It is critical that our firm constantly evolves as we build the mix of capabilities required to service the changing needs of our clients. To achieve this, we are significantly increasing our investment in all of our core businesses — audit, tax, deals and consulting. This year we have appointed 50 new partners and 200 new directors, across all parts of our business.” KPMG launched “Project Zebra” this summer to save £100m in costs, including the potential closure of its Mayfair members club, recalling hundreds of employees’ mobile phones, and making about a third of its 630 personal assistants redundant.
The savings will help fund a £200m investment in its audit business over two-and-a-half years. The firm is also close to selling its pensions advisory business, which includes 20 partners and about 450 staff, to a private equity firm. Mr Michael has also sold and leased back KPMG’s UK headquarters in Canary Wharf, raising £400m.
Sourced from FT.com - written by Madison Marriage