Doing Adaptive Work at KPMG Netherlands

The highly successful KPMG Netherlands provides a good example of how a company can engage in adaptive work. In 1994, Raud Koedijk, the firm’s chairman recognized a strategic challenge. Although the auditing, consulting and tax-preparation partnership was the industry leader in the Netherlands and was highly profitable, growth opportunities in the segments it served were limited. Margins in the auditing business were being squeezed as the market became more saturated, and competition in the consulting business was increasing as well. Koedijk knew that the firm needed to move into more profitable growth areas, but he didn’t know what they were or now KPMG might identify them.

Koedijk and his board were confident that they have the tools to do the analytical strategy work: analyze trends and discontinuities, understand core competencies, assess their competitive position, and map potential opportunities. They were considerably less certain that they could commit to implementing the strategy that would emerge from their work. Historically, the partnership had resisted attempts to change, basically because the partners were content with the way things were. They had been successful for a long time, so they saw no reason to learn new ways of doing business, either from their fellow partners or from anyone lower down in the organization. Overturning the partners’ attitude and its deep impact on the organization’s culture poised an enormous adaptive challenge for KMPG.

Koedijk could see from the balcony that the very structure of KPMG inhibited change. In truth, KPMG was less a partnership than a collection of small fiefdoms in which each partner was a lord. The firm’s success was the cumulative accomplishment of each of the individual partners, not the unified result of 300 colleagues pulling together toward a shared ambition. Success was measured solely in terms of the profitability of individual units. As one partner described it, if the bottom line was correct, you were a good fellow. As a result, one partner would not trespass on another’s turf, and learning from others was a rare event. Because independence was so highly valued, confrontations were rare and conflict was camouflaged. If partners wanted to resist firm wide change, they did not kill the issue directly. Say yes, do no was the operative phrase.

Koedijk also knew that this sense autonomy got in the way of developing new talent at KPMG. Directors rewarded their subordinates for two things: not making mistakes and delivering a high number of billable hours per week. The emphasis was not on creativity or innovation. Partners were looking for errors when they reviewed their subordinates’ work not for new understanding or fresh insight. Although Koedijk could see the broad outlines of the adaptive challenges facing his organization, he knew that he could not mandate behavioral change. What he could do was create the conditions for people to discover for themselves how they needed to change. He set a process in motion to make that happen.

To start Koedijk, held a meeting of all 300 partners and focused their attention on the history of KPMG, the current business reality and the business issues they could expect to face. He then raised the question of how they would go about changing as a firm and asked or their perspectives on the issues. By launching the strategic initiative through dialogue rather than edict, he built trust within the partner ranks. Based on this emerging trust and his own credibility, Koedijk persuaded the partners to release 100 partners and non-partners from their day-to-day responsibilities to work on the strategic challenges. They would devote 60% of their time for nearly four months to that work.

Koedijk and his colleagues established a strategic integration team of 12 senior partners to work with the 100 professionals (called the 100) from different levels and disciplines. Engaging people below the rank of partner in a major strategic initiative was unheard of and signaled a new approach from the start: many of these people’s opinions had never before been valued or sought by authority figures in the firm. Divided into 14 task forces, the 100 were to work in three areas: gauging future trends and discontinuities, defining core competencies and grappling with the adaptive challenges facing the organization. They were housed on a separate floor with their own support staff, and they were unfettered by traditional rules and regulations. Hennie Both, KPMG’s director of marketing and communications, signed on as project manager. —