Running a professional company with offices in multiple countries always creates tension between global and local priorities. Professor Laura Empson and David Morley argue that what feels like a leadership challenge is actually a deeper and very human struggle.
In our podcast – Leading Professional People – and on these blogs, we often find ourselves confronted with a timeless and very human paradox that is at the very heart of what it means to run a professional company.
It is a paradox that resides in the human psyche.
On the one hand, we have the urge to establish ourselves as independent and autonomous individuals.
It is what psychologists like Carl Jung call “individuation” – the process of establishing our individual identity that begins in childhood when we begin to understand ourselves and separate from our mothers.
At the same time, there is an equally strong human instinct to seek validation and feel part of something bigger than ourselves by identifying with a social group with common interests and concerns.
This may all sound a bit wrong, but with this paradox of individuation / validation, managers of professional partnerships struggle daily to create a cohesive organization in which highly autonomous professionals feel at home, can be valued and supplied with energy.
For executives of global professional companies with a network of offices in many countries, the paradox holds true to a large extent in trying to reconcile the needs of the world with the needs of the local.
So this is not just a leadership challenge. It’s actually an ongoing struggle that goes to the very core of what it means to be human, which explains why it can be frustratingly difficult to be right.
Managers use different approaches to manage the inherent tension between the leader and the local office. This tension naturally becomes more complex as the organization grows larger.
However, what usually holds an organization together are governance structures, performance management systems, and the cultural norms that bind autonomous individuals together into a collective whole.
There may be other strong binders in it.
For some companies, it could be a collective commitment to quality – for example, a determination to pass work on to colleagues within the company who are confident they are providing customers with the same high level of service. If the quality deteriorates in one area of the company or in an office, there will be a reputation from partners everywhere that the market leader is fixing this flaw.
However, when a partnership grows too fast or too big, that highly effective peer pressure is watered down. Recent criticism of McKinsey has indicated that this may have been part of the problem.
This is why it was so interesting to speak to Philip Davidson, the global chief operating officer of KPMG (equivalent to the managing partner in the KPMG structure) on our latest podcast to find out how a huge professional company with an interconnected network does it from 150 member companies around the world, almost 12,000 partners and more than 200,000 employees.
These are very large organizations. Keep in mind that rival Big Four company, PwC, is actually in 50% more countries than McDonalds. Of course, the Big Four firms dwarf even the largest law firms and are very diverse companies. But perhaps they offer some pointers on how to address issues that affect all businesses once they grow past a certain size.
Philip explains that his job is to ensure that the company’s collective strategy is implemented by all 150 member companies and to assist, encourage and support them to execute the strategy.
The strategy is expressed in simple terms: “To become the most trustworthy and trustworthy company for professional services and to take market share from our competitors.” And it is supported by what he calls two pillars – “consistency and accountability”.
This gives the company a clear organizational principle. In such a large company that is practically a partnership of partnerships, implementing this strategy requires additional levers and systems.
Whether you’re a global law firm or a Big Four accounting firm, this is a balancing job. You need to create consistency at the global level, respecting local differences and promoting entrepreneurship, because after all, local offices are the closest to customers and the places where growth actually occurs. But they can also pose a reputational risk to the global company as a whole if something goes wrong.
Achieving quality must take place at both global and local levels. Investments in technology must also be made jointly. The cost of getting the right systems to run a complex global test or converting a large PLC is so high.
In order to ensure consistent quality worldwide, KPMG has set up a system of steering groups under the global main board that covers all areas of the company’s activities. You are responsible for managing the necessary tradeoffs across the network and constantly trying to balance global / local tensions for a number of key decisions.
These steering groups are made up of practice managers from the eight largest offices in the network and the three regions and are the main mechanism for cascading strategic goals down to the member companies. If tensions at this level cannot be resolved, they are returned to the global board of directors, led by the chairman and senior partners of the 24 largest companies.
Overall, Philip Davidson sees two great advantages in balancing the global and the local. The local partnerships help each other when another part of the federal government has problems. The distributed management system makes the company more agile and promotes a faster innovation cascade.
This approach represents a major change in governance practices for the company. It was introduced three years ago at a time of vulnerability when KPMG discovered that its South African company was in a crisis and faced other governance challenges that span the whole Industry concerned.
It’s a good reminder that crisis often presents an opportunity to make much-needed changes that otherwise would not have been acceptable within a partnership.
Philip mentions another important element in governance and strategic architecture – direct feedback from partners.
“I have soundboards whether I want them or not,” he told us. ‘I’ve been with KPMG for 34 years and have a strong network of people who work with clients every day. They’ll be quick to tell me if they think we’re going in the wrong direction. ‘
It may sound counterintuitive, but creating a feedback environment is clearly a critical part of creating cohesion around the world. Pushing back and challenging partners is a sign of healthy partnership / leadership dynamics and must not be knocked down or silenced.
This is particularly important for a professional company operating in many countries.
In the context of governance, performance management systems, and culture, it provides an important test of the senses and a way to ensure that the global and local are effectively balanced.
However, no leader should have any doubts about how difficult this task can be – or how rewarding it can be if done right.
Click here to listen to the latest Empson & Morley – Leading Professional People podcast, in which Professor Laura Empson and David Morley discuss the global local mystery with Philip Davidson.