Stop playing the victim card, KPMG’s UK boss told staff on Monday. Bill Michael’s contribution to a discussion about pandemic working conditions infuriated employees. Michael has stepped aside while his comments are investigated. KPMG’s brand is in enough trouble without unforced errors from bosses.
Culture is a sticking point at KPMG. This was just the latest of several leaks that have exposed internal tensions at the firm. It was criticised for its handling of a bullying allegation in 2019. A string of accounting controversies raised questions over its values. A tough “forced distribution curve” appraisal system has riled some staff.
Tensions have increased with financial strains. In 2020, there was a 6 per cent drop in profits before tax and partner payouts. Staff are expecting negligible bonuses, while partners received an average of £572,000, about 11 per cent less than in 2019.
The state of its auditing division has been another source of stress. The unit generates almost a third of sales, a higher proportion than rival Big Four firms. KPMG has come under fire — and been heavily fined — over the quality of its audits.
The partnership is still awaiting the Financial Reporting Council’s investigation into its audit of collapsed construction company Carillion, a debacle that prompted government intervention. Mercifully for KPMG, a forthcoming white paper on audit reform is unlikely to be radical. Talk of “joint audits” of accounts has been dropped, in favour of a more limited plan to allow smaller firms to audit subsidiaries.
KPMG may be over the worst. Its audit business grew 3 per cent last year, as it took on new clients and fees rose. It has invested £184m in a three-year programme to improve audits. KPMG has already set up a separate audit board and stopped selling non-audit services to FTSE 350 clients. In the first quarter, there has been a general rebound, with a vaccine-led revival in business confidence.
Improving the culture remains paramount. The “forced distribution curve” system adopted in 2019 ranks team members from best to worst. It has been widely criticised for promoting infighting and horse-trading. On Monday, Michael talked up the importance of creating a culture where everyone can thrive. The “forced distribution curve” appears antithetical to that aim. Its own utility should be assessed unflinchingly.
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