Going global is goal that may prove elusive

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IF THERE is one thing you can always be sure of in the constantly evolving world of the leading international accounting firms it is that the Andersen organisation is up to something. It has not reported strong double-digit growth year in, year out by sitting around waiting for things to happen.

Nevertheless, the news that the accounting side of the operation, Arthur Andersen, was poaching the entire Canadian practice of rival Big Five firm KPMG was an unexpected act of audacity, even from a firm that has been picking up parts of rival practices for some time. In particular, it must have been a grave shock for the senior executives of KPMG, who have sought to move beyond the abandoned merger with Ernst & Young by establishing a true international structure.

However, even allowing for the fact that the Canadian partners are this week voting on whether to join up with Andersen, the move announced on 25 March is, stresses Mike Rake, KPMG's UK senior partner, a long way from a "done deal".

He and his senior colleagues have done their bit to confuse matters by bringing forward the announcement of a plan they insist has been in gestation for months - to create two giant firms out of more than 20 national practices in Europe and the Americas.

And they appear to be optimistic that even if the existing Canadian partners follow Spencer Lanthier, their chairman and chief executive, into the hands of Andersen, they can recreate a viable Canadian entity by means of Canadian partners currently working in various locations around the world.

But the announcement from Andersen suggests that it was the nature of the planned internationalisation being co-ordinated by Colin Sharman, the former UK senior partner of KPMG who is now the firm's global head, that precipitated the current crisis.

Although Mr Lanthier said he and his partners had "great respect" for their KPMG International colleagues, he also pointed to "concerns about the high cost of the reorganisation and the number of years it would take to complete".

The planned partial flotation of KPMG's US consulting practice - which emerged some weeks ago - only adds to the complexity in what seems to be a highly fluid situation.

The two KPMG firms - Americas (which, confusingly, is supposed to include Australia and New Zealand as well as practices in North America, Latin America, Mexico and the Caribbean) and Europe, Middle East and Africa - are designed to lay to rest long-standing accusations that KPMG is much more a loose federation of national firms than a true global entity.

Mr Rake says the company's plan, which it is envisaged will eventually see the creation of yet another, Asia-Pacific, region, "will give the worldwide firm the ability to deliver on a consistent global basis the products and services clients need to solve their problems".

The timing of the announcement inevitably gives the impression that KPMG is currently on the defensive - much as it seemed to be when it responded to the announcement in the autumn of 1997 of the plan to create what is now PricewaterhouseCoopers.

Yet it appears that Andersen is not moving from a position of total strength either. The long-running dispute between Arthur Andersen and the even faster-growing Andersen Consulting, which is to be the subject of arbitration, has undermined the idea that the Andersen Worldwide organisation has achieved the global integration that seems to have eluded everybody else.

If, as is now widely expected, this process ends with the two parts going their separate ways, Arthur Andersen would be left some way adrift from the rest of the Big Five. Accordingly, say observers, it will be looking to compensate for this by acquiring parts of other firms. If it succeeds in attracting KPMG's Canadian practice, other prizes might fall into its grasp, or so goes the thinking.

At the same time, though, it is widely acknowledged that the strong culture that has undoubtedly helped Andersen get to where it is today does not suit everybody. In particular, it has twice been involved in talks, later abandoned, aimed at bolstering its legal services arm through the addition of a respected City of London law firm.

All of this demonstrates just how difficult building a global professional services firm is. Observers at other firms are watching this particular episode with interest, no doubt aware that not everything is perfect in their own patches.

Many of the difficulties are similar to those confronting other businesses; cultural differences, varying regulatory regimes and the challenge of long-distance management.

But at the heart of the problem is the structure of professional firms. While it appears to be possible to create some kind of global "umbrella" that works for branding purposes, making something more concrete continues to be elusive.

It is an accepted fact that if you were seeking to build a global professional services firm from scratch you would not start with a partnership. Even in firms where significant amounts of day-to-day management are devolved to executive teams, partners still demand a say in important decisions and at the same time do not always feel they necessarily have to obey executive commands in the same way that employees in corporations do.

It is for this reason that Mr Rake, while claiming to be very optimistic that he and his colleagues can bring about the creation of the two all-encompassing firms by the end of the summer, is not suggesting KPMG is coming close to total global integration.

"I don't believe it's easy for a professional services firm to be global," he says. "The issues involved are extremely complex."