KPMG hasn’t earned its stripes

Azebra can no more change its stripes than a leopard its spots. The largesse of KPMG UK in the past extended to free phones for all and a party graced by celebrity chef Jamie Oliver. Now the embattled accountancy firm has launched an economy drive named Project Zebra. KPMG aims to bring in zero-based budgeting (ZBB), the sort of nit-picking austerity it might usually recommend to clients but not adopt itself.

There are two small snags. First, ZBB does not work. Second, KPMG has always given short shrift to thrift. Fans of ZBB over the years included former US president Jimmy Carter and Brazilian private equity firm 3G. The latter used it in the slash ’n burn model that boosted margins at AB InBev and other groups. ZBB worked brilliantly there

until suddenly it didn’t. Witness the spillage of ketchup and red ink at Kraft Heinz.

KPMG’s well-paid partners can do better at supper time than tinned macaroni. But austerity is the order of the day at work: cutting personal assistants and free phones to help save a modest £100m. Staff and other operating expenses account for more than four-fifths of net revenues of £2bn at KPMG, seen as the weakest of the UK’s big four accountants. That compares with just 68% at PwC, whose numbers include the Middle East.

At KPMG, automation will help centralised back offices perform tasks, and disruptive technologies such as Skype and WhatsApp will allow employees to work from home. KPMG has a list of about 150 economy measures.

There is the rub. ZBB is easy enough in a listed multinational controlled by private equity. It is harder in a professional services partnership. Here, the jealousies of big fee earners are kept in uneasy check by an emollient lead partner and a shared bottom line. Accountants are good at poring over client spreadsheets, less keen to limit their own fiefdoms. /London, October 22

© The Financial Times 2019