When accounting goes unaccounted for
“[T]here are plenty of industries where there are four big players. The world just has to get on with it.”
~ John Griffith-Jones, chairman of KPMG in the UK and co-chairman in Europe on the concern that four accounting major accounting firms are not enough.
From a Klynveld Quaker:
In recent meetings with PA Business Unit leadership with all audit staff (i.e. A and SA’s), we were told that of the 32 inidivudals up for promotion to Manager in the combined three offices (Philly, Harrisburg, Pittsburgh), that 22 were officially promoted. Of the 10 that weren’t, at least 1 just came back from international rotation, and either 2 or 3 (can’t remember which) hadn’t passed the CPA exam and therefore couldn’t be considered for promotions. All raise and bonus theories were squashed (as to hard percentages), though we were told to expect some form of raise as well as variable comp at FYE.
So just a shade better than two-thirds of the Keystone KPMGers eligible for manager will be in the new manager class. As you may remember, this is pretty close to the breakdown for one office in the Rockies but a little less than an office in the northwest.
Since the firm has four months to go in its fiscal year, the fact that the local leadership wouldn’t even give a hint comes as no surprise. That said, it hasn’t stopped people from speculating about what they think the increases will be. We encourage you to share what you know, what you’ve heard, or your own wild-ass guess. And keep us updated with the latest in your office.
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A few weeks back we presented the BusinessWeek ranking of accounting programs that found Notre Dame at the top. At first we just figured Touchdown Jesus had something to do with it but now we have reason to speculate that a divine carpenter had nothing to do with it.
Since KPMG Chairman-elect John Veihmeyer was recently named alumnus of the year by Notre Dame’s accounting department, some people might assume that JVeih did a little lobbying of the BusinessWeek folks in order to earn the top spot and perhaps this is South Bend’s thank you for the kind words.
Whether this back-scratching theory has any weight to it is up for a debate but what we know for sure is that some lucky Irish students/future Klynveldians got to hear JV speak recently at Notre Dame Stadium and some inspiring words were shared:
During his remarks, Veihmeyer used his own educational roots and career experiences to remind students what a unique opportunity they have had at Notre Dame and how it will benefit them on the road ahead. His audience listened in rapt attention. While the average college student would have paid just to have dinner in Notre Dame Stadium, these students knew that getting career advice from the Alumnus of the Year and CEO and future Chairman of a Big Four Accounting Firm was priceless.
From the sounds of it, the speech was the KPMG equivalent of this:
Can we have a show of hands who takes a list of employers published by Time Warner seriously? Fine. To hell with you; for this particular exercise we’ll assume that the list is 100% accurate.
Here’s the breakdown for the Big 4 on the CNNMoney’s 100 Top MBA Employers, Where MBA students say they’d most like to work:
#12 – Deloitte
#44 – PricewaterhouseCoopers
#45 – Ernst & Young
#75 – KPMG
So Deloitte dominates when you look at the Big 4’s performance. To put it in a little bit of perspective, Deloitte ranks ahead of The Blackstone Group and Morgan Stanley while the rest of the Big 4 rank behind the State Department.
Is this possibly due to the fact that they are the only firm to keep their consulting (not Advisory) practice in-house? Do they simply do a better job of selling their firm? Or is it possibly because male-patterned baldness is not discriminated against in leadership positions?
Or maybe we’re making too much of this. All the firms have a spot on the list and Google beats everybody’s ass with extreme prejudice, so is this one of those “it’s just a thrill to be on the list” moments, which results in the fliers all over your office and in the halls of Career Services at B-schools?
But forget all that for a minute. What’s really surprising (or perhaps not) is that the expectation of MBA graduates whose preferred field is public accounting are expecting an average salary of $59,176 for their first job after graduation. That amount is less than those for academic research ($79,590), education/teaching ($76,138), government/public service ($77,943) and “Other” ($92,110). Oh, and it’s behind “Auditing/accounting/taxation (corporate)” at $64,841. The average salary for preferred fields is $90,990.
Five years after graduation, those same graduates expect to make $92,075. Again, dead last. The average salary being $157,324.
Whether this says more about the state of the accounting profession or the firms that court those seeking accounting focused MBAs, we’re not really sure.
But in the grand scheme of things, it might just say that Deloitte’s position on the list may be – gasp – meaningless.
100 Top MBA Employers [CNNMoney]
Last week we were notified that KPMG’s Summer Blast would soon be in full swing and that details would be forthcoming.
TPTB obviously sensed your anxiety about the details and we’re happy to report that we have the details via the Silicon Valley office. And KPMG SV seems pret-tay, pret-tay excited that two days out of your (presumably) five day week will be spent sporting only 50% of the biz casual uniform.
This Summer, Have a Blast on Us!
Our firm is slightly ahead of plan at this point in our fiscal year, and it’s due in large part to your hard work, teaming, and market development focus. Looking ahead, your continued commitment is critical as we push to meet our business objectives for the year.
In appreciation of your efforts, and to help you to recharge your batteries so we can meet the challenges ahead of us, we’re excited to announce KPMG’s Summer Blast!, a program of food, fun, and perks that lasts all summer long and features:
• A Summer BBQ gift that includes a selection of steaks, chicken breasts, sausage, burgers, and gourmet franks
• The return of Summer Weekend Jumpstart
• The introduction of firmwide Blue Jeans Fridays – Given our office already enjoys Blue Jeans Fridays, as part of Summer Blast, the Silicon Valley Office will also have Blue Jeans Mondays for the duration of Summer Blast!
• The return of the Vacation Photo Challenge
To redeem your BBQ gift and see what all the fun is about, visit our Summer Blast Web site. And keep checking out the site in the coming months to see what’s hot this summer.
We hope this Summer Blast! helps you to enjoy and recharge this summer, so we can all pull together as a team, do our best work, and finish 2010 even stronger than we started it.
Have a great summer! And thanks again for everything you do for the firm, no matter the season.
Typically there is some sort of acknowledgment of the vegetarian/kosher crowd but this particular message glaringly omits it. We’re sure there’s an alternative but in the event that you non-meat eaters are SOL, please inform.
Speaking of meat, some Klynveldians had made it known that they’d prefer to buy their own flesh for consumption by way of a bonus or something like that. If you’re staying with that narrative, kindly elaborate further.
(UPDATE): We’ve now learned that if you want vegetarian and/or kosher options, you’ll have to ring up Omaha Steaks yourself. You vegetarians can expect an uncooperative customer service rep subsequent to your, “I don’t eat meat,” revelation.
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How about one more convo with the KPMG leadership this week? As one commenter mused earlier, the lack of past CEO spreadsheet-side chats were too few and far between so we figure we’re doing a you a favor by this passing ��������������������round, John Veihmeyer and Henry Keizer kick around lowballing fees, outsourcing and the firm’s new paperless audit technology:
Inquisitor 1: Can you talk a little bit more specifically about what we’re doing right now to compete with firms that are reducing their fees so drastically that you have to wonder how they are even covering costs?
Keizer: To me, the first and foremost guiding principle is – make sure you’re giving the most absolute best client service. I think to the extent that you do have great service, we’ve got to be able to have very transparent and open discussions with our clients as to what are our economics? Where are we? What is the competitive information? What is market pricing, as opposed to the offer that came in unsolicited? And find a way to meet the objectives of what we need, and what our client needs.
Maybe we will, in fact, have to drop a price in, let’s say, our audit offering. But then are able to say, but why can’t we maintain the same or higher KPMG spend? Let’s look at who’s doing your tax compliance work. Let’s look at who’s doing your SAS70? Those types of discussions do allow us to compete successfully without having a case where it’s just about price.
Not sure who transcribed this thing but it’ll work for a Friday. First off, Inquisitor numero uno is obviously under the impression that KPMG would never lowball its fees. Even though other people have suggested exactly that.
Keizer Soze then reminds his little friend that it’s really not about the money, it’s about providing the best client service imaginable (sacrificing life, limb and/or dignity) which will result in more work for the firm. It’s a self-perpetuating cycle, really.
Inquisitor 2: Is there more plans to outsource positions in the U.S. to India?
Veihmeyer: I think as you look across the entire scope of our activities, and I think the most important one is – how do we serve our global clients – making sure that we are competitive in the marketplace and can think about how we execute a lot of our engagements differently to be successful. I think we will continue to look for opportunities to source talent, source resources, source skills, anywhere in the world it makes sense. I don’t see it as exchanging a position here for something offshore.
I think we see this as a very key strategy to make sure we are as competitive as we can possibly be in the marketplace—which I think will have one primary impact to the U.S. firm and that is create more opportunities for our people here. And why is that the case? Because we will win more work, we will be competitive in situations that we otherwise wouldn’t be competitive in, if we didn’t have that capability. And that’s what creates opportunities for our people.
In a word: Yes. As for why – Dammit, we’re a $20 billion firm (but not really, we’re actually a network of independent firms operating under a global cooperative. Ask Tim Flynn; he’ll tell you) and our competitors play hard ball. We’ve got to create other jobs overseas to keep up with those guys. Will that affect you? No chance, Blanche! If it does, it just means your life will be infinitely better because KPMG has business it didn’t have before.
Inquisitor 3: eAudIT – how is it going? What challenges have we faced? And how are clients, employees, and recruits receiving the deployment?
Keizer: e-AudIT is on track for deployment. We released the software in April, the 2010 version. Training schedules will be rolling out over the next several months.
It is the tool that accomplishes three major things. One, it allows us to do things more efficiently. It moves us from a work paper format to a work flow.
And lastly, there’s always been a great appetite of our professionals, how do I tap into the knowledge that KPMG has? e-AudIT is the platform now, to actually make that knowledge available to our professionals.
I think e-AudIT puts us in front of our competitors in terms of a platform that’s truly the best that’s out there. I believe when we look back, it will be the single most important ingredient to us providing the type of service, meeting our regulatory and professional requirements, and having our people feel good at how we have enabled them to really be high performance professionals.
[Jesus, easy with the rapid fire, Inquisitor tres; Hank isn’t a speed listener]. Paperless auditing has moved into KPMG lock, stock and barrel. We’re only 10 years into the 21st Century and we’re ready to start fixing bugs in this thing for the next ten years.
It’s far superior to anything the other firms have because you’ve been training on it over in Monty and we haven’t heard a single complaint. Someday you’ll be able to tell your grandstaff that this was the absolutely most exciting time to be at KPMG because that was when things got serious.
It’s been, in the words of one source, “a hell of a week” at KPMG. John Veihmeyer & Co. have been on a whirlwind communications tour, people up for promotion are getting the good/bad news and the whole summer blast thing has people soiling themselves with excitement.
Since they’ve been on such a tear, we’ll update you with a little more news out of the House of Klynveld, returning to promotion and compensation news.
First the bad news – we’ve learned from multiple sources that newly promoted SAs in the audit practice won’t be getting much of a merit increase for their new positions. The news is that the new promotees will receive an early 1.25% increase later this summer that will be followed up by another increase, although those raises will be subject to the firm’s performance in the last part of the fiscal year.
Now the good news – After hearing from a couple offices in the west, most of the SA3s that are up for the promotion to manager seem to be getting the bump. From one office in the northwest:
Despite rampant speculation about widespread non-promotion of seniors to manager, only 3 (of around 15) 3rd year seniors didn’t get the bump. One CPA licence issue, and two performance issues. Nothing out of the ordinary even in a regular year, let alone in one where the holdbacks are supposed to be so numerous that they are creating a new 4th year senior training.
The percentage of SA3s in a Rocky Mountain office that are getting promoted is a little lower with approximately two-thirds of the class getting the bump. So far, only the (un)lucky (i.e. non-promotees) ones have received the news while the new managers continue to sweat it out. For this particular office, the decision to promote/not promote was a little more confusing that its counterpart in the northwest.
Based on the information we’ve gathered, each office is essentially given a number of promotees by the boys at 345 Park and the local office leadership is tasked with figuring it out from there. Criteria for promotion to manager (as we understand it) is that 1) the eligible SA needs to be “ready to be a manager” and 2) they need a business case (i.e. have clients to serve).
In the case of this office, it sounds like this was scrapped. Rather, it was decided that historical rating was the determining factor and not the criteria we outlined above. In other words, if you received high ratings (“EP” at KPMG) as an SA1 and SA2, that was more important than whether you actually have clients to work on as a manager. If you were in the meaty part of the curve (“SP” at KPMG), despite your strong “business case” you are SOL. Our source told us that, in the past, they were always told that “my historical rating would not be a determining factor when it came to promotions.”
So basically it boils down to how your particular office is doing. If you’ve got a strong market with plenty of clients, things should go fairly smooth (with a few exceptions). If you’ve got a competitive or shrinking market, your odds of getting the bump go down, in some cases, way down.
As always, keep us updated with your office’s developments, and congratulations and good luck to the new SAs and Managers!
Because we asked around and no one has a clue.
But we’ll take a stab at it:
A) More communication blasts from JVeih and Co.
B) Flying all Klynveldians to watch Phil Mickelson continue his Grand Slam tour (and in the process, win back his love).
C) Pool parties at your local OMP’s pad.
D) Doing some hallucinogenics and running through a sunflower field:
E) You tell us.
From somewhere deep inside 345 Park Ave:
“Damage control beginning – 3 managers and 3 SAs out.”
It’s our understanding that this is the audit side of the house in financial services. No indication at this point whether it’s promotion de-nied related or if it’s has something to do with the unconfirmed compensation rumors we’re hearing.
If you’ve got details on comp, promotions, or lack thereof, email us with the details.
KPMG Leadership has been on a communication rampage this month, answering questions from inquiring Klynveldians about the firm’s performance and compensation.
This time around, th d by COO Henry Keizer) discuss their roles in the firm and the election process because, presumably, it might make for a good ice breaker at your upcoming Memorial Day BBQ.
Inquisitor 1: Congratulations on your new roles – Chairman and Deputy Chairman. What can you tell us about the process that you go through in having that occur? And what’s the differentiation between your two roles?
Flynn: The board has a responsibility to have a succession planning process in place to elect the Chairman and Deputy Chairman. That is then put to an up or down vote of the partners for ratification. Chairman and Deputy Chairman are – today – a five-year term jointly and then a three-year second term, should they so choose. The board elects them to a second term.
John and I were elected in June of 2005, for a five-year term. I was elected as Global Chairman on October 1, 2007. I came to the conclusion through the fall that I really couldn’t do both roles full time.
In recognizing that in a complex, changing world today, we really need a full-time U.S. Chairman and Deputy Chairman to take care of what has to get done here in the world that we’re in—and as well, we’ll talk more about it, but we have to evolve the global firm, a $20 billion organization – shouldn’t there be a full-time executive team that wakes up every day on how to carry out the responsibilities of a $20 billion organization?
Veihmeyer: In terms of specific responsibilities – as Chairman, I’m the CEO. Henry chairs the Management Committee and a lot of what we talked about in terms of executing effectively and making sure that we are – from an operational standpoint – a very high-performance organization, Henry will lead through his role as Chief Operating Officer.
In other words – the process at KPMG isn’t exactly the electoral college. It’s basically a fight until the (near) death and the winner gets the thumbs up/thumbs down, Gladiator style, from the Board. Then they shake hands, slap each other on the ass, etc. and get back to work.
For this past cycle it does sound like T Fly was a little burned out from the globe trotting and keeping the peace Stateside so it was natural for JVeih to step up to the big chair for the U.S. after the terms expired. A $20 billion company is nothing to sneeze at so we thought that maybe we should start taking this “global firm” thing seriously (even though we’re all independent of each other and are legally not one firm) and let somebody tackle it full time.
Inquisitor 2: How will the succession process work within the next three months?
Veihmeyer: In terms of the specific things that have to take place, obviously we have some things around the leadership team that we have to get in place. Henry comes out of his role leading our Audit practice. So we will get all that in place as we lead up to early June, what team will be in place as we go forward post-June 10th, leading the firm. Henry…
Keizer: The transition that Tim and John described sets us up in a very good position to make sure as we move through fiscal 2010, we won’t be focused internally. It will allow us not only to continue to build on the foundation that we’ve built over the past several years, but more importantly, to really stay focused on making sure when we look back on 2010, it will be a year where everyone could say we’re on our way to recovery. The things that we all want, in terms of a more vibrant business, more rewards for our people, are all beginning to come back into the picture, and that that’s what we’re all committed to, I’m sure.
We’re taking applications for Hank’s position. You have to be able to stick to talking points, send out a mass amount of emails (via admin assistant natch) and smile a lot. Oh, and you can’t gush when Phil shows up for photo ops; you’ve got to keep it cool.
KPMG and PwC eye rating move [FT]
KPMG has casually kicked around the idea of getting into the rating agency business according to the FT who quotes John Griffith Jones, the firm’s UK Chair, as saying the firm was “‘passively considering it” and that “it is something that we talk about as a plausible thing to do. It is effectively something we would be proficient at doing.”
The FT also seems to think that the PwC is toying with the idea although it’s even more tepid than KPMG, “Richard Sexton, UK head of assurance at PwC, said it continually looked for areas to grow its business from its ‘core skills that include assurance, opinions and underpinning public trust.'”
And yes, the skeptics are duly noted, as Jones said, “We are aware that people think we have conflicts of interest already. It probably makes it impractical. But if the world wanted another strong ratings player, there you are. Maybe the debate could be started off.”
In other words, we’re just thinking out loud.
Can we please get over the security issue? [AccMan]
As we’ve been touching on SaaS recently, some of you may be wondering about the issue of security. This issue rightly irks Dennis Howlett, as he points out, “We’ve had online banking for years. We have numerous other online services such as GMail. Does anyone think twice about using those?”
Further, would a company that was providing SaaS – whether for accounting, CRM, or ERP, payroll whatevs – that was having security issues really have a business? “SaaS accounting HAS to be secure. Why? Almost all services currently on offer are on a pay as you go basis. If the provider screws up then they’re dead in the water. Why would a provider be stupid enough NOT to build enterprise grade (and better) security into their platform?”
Just make sure to do you due diligence before pulling the trigger on anything. And don’t just rely on a SAS 70.
Who Knew? There’s an IFRS News Widget for Mac Users [CPA Trendlines]
For anyone that needs up to the second IFRS news on their Mac. Download here.
Hemingway and Tax [TaxProf Blog]
If you can make a tax story out of six words then you’ve got other talents (besides taxes) that need to be explored. Tax Prof put out the call for some brief tax tales. A few submissions:
“Deduct it. Fight Later. Then Settle.”
“Let’s do a delayed three-way.”
“I work. I file. I pay.”
Swiss banker turned whistleblower ended up with a prison sentence [WaPo]
Whistleblower Bradley Birkenfeld handed UBS to the DOJ and all he got was a nice 40 month prison sentence out of it.
While some people are still sweating out to hear if they’re part of the new manager class, John Veihmeyer and Henry Keizer did more casual chatting with the troops and this time it was about everyone’s favorite topic to bitch about – compensation.
Specifically, some e asking about raises for FY ’10 and 401k match. Strange thing is, JV has already addressed the issue of KPMG raises in a previous communiqué by saying:
“[B]y year-end, we fully expect that the pickup in market and business conditions will drive compensation increases for the vast majority of our people. Also, assuming we meet our plan, as we are on track to do, our goal is to enhance our variable compensation pool from last year—meaning higher bonuses than last year for EP performers as well as bonuses for deserving SP performers.”
Good thing he doesn’t mind repeating himself:
Inquisitor #1: I was just wondering, if it’s likely that employees will get raises this year?
Veihmeyer: We are very optimistic at this point that that is exactly what’s going to happen. We all need to stay really engaged in what’s going on in the marketplace at this point to make sure that the second six months of our fiscal year also tracks the plan that we put in place. If we do that, we are very committed to sharing the rewards appropriately across KPMG.
As we assess the market right now – means that the vast majority of our people will be getting compensation increases this year. We are just as committed to increasing that variable compensation pool to the maximum extent we can reflective of how our results play out over the next six months.
Keizer: And in terms of variable compensation at the EP level that will translate into larger rewards and our deserving SP performers will also receive compensation rewards.
I am confident – based on what we see out in the marketplace, the foundation we have within the firm, the indicators of economic vibrance that are coming back – that we will be able to reward our people better and to be able to restore some of the things that we had to eliminate in a very measured and prudent way.
And John Veihmeyer was just wondering why you didn’t read his previous statement (or websites where it might appear) on the matter. Since V seems like a nice guy he managed to say what he said before only this time without saying “Yes” outright. Whether the absence of this explicit confirmation is a cause for concern can only be determined by you. Hank chimes in about the bonuses, presumably so he doesn’t feel awkward (at least that’s how we picture it).
So what about the 401k match? Is that returning to pre-financial apocalyptic levels?
Inquisitor #2: You mentioned earlier that we recently brought back the Standing Ovation award into the Encore program. Can we expect to see a change in our 401K match?
Veihmeyer: With an eye toward maximizing the immediate financial rewards to our people – to a level that we all can feel good about – we have some goals and objectives around base and variable compensation that in our view will take precedence over 401K as we reinstate and are able to shift those rewards. But it’s something that if the circumstances change and our ability to reinstate some of those things evolve, we will continue to look at it.
In a word – No. First things first you rubes – We’ve going to get every single Klynveldian feeling great about their immediate financial rewards. Until that is accomplished, your retirement will have to wait. The time frame of “we all feel good” was not given.