Ours is a people business and in BDO it’s our people that count

BDO is celebrating its 50th anniversary this year, has grown impressively since 1963 and in 2013 has a workforce of 55,000 operating out of over 1,200 offi ces in 145 countries across the world. What are the major challenges you face as CEO of this international network?

I think there are five main challenges: fi rst, to ensure that BDO is winning in the ongoing consolidation taking place in the accounting profession – a process that has been gaining momentum over the past two or three years; second, to maintain the distinctive BDO culture of strong business and personal relationships; third, to ensure that the market will consider BDO to be synonymous with exceptional client service; fourth, that talented people will regard BDO as the employer of choice that can deliver an interesting career in a good working environment; and fi fth, that we can deal successfully with the constantly changing regulatory amendments.

What have been the most valuable insights gained in your two years as CEO?

I’ve learnt some of my most valuable lessons through my experiences with BDO partners and staff. For example: do the basics brilliantly. Big global networks can all look the same, but I fi rmly believe that we don’t all think the same – and we certainly don’t all feel the same to our clients. What matters most is how our clients experience us. Ours is a people business and in BDO it’s our people that count. It’s thanks to the expertise and high standards of our partners and staff that we are able to deliver exceptional service to our clients, and that we are continuing to grow our market share. Another thing I’ve learnt is that a tailored approach is key. I’ve witnessed fi rst-hand that service expectations aren’t the same the world over – in fact they vary dramatically from market to market. In India, for example, I saw that clients seek deep personal relationships, even expecting home visits. In Russia, clients will primarily want to speak to the most senior team members only. That’s why delivering tailored client service is so important. This remains at the heart of our business and will continue to bring us success. Finally, I’ve discovered that with challenge comes opportunity. Although, generally speaking, everyone is having to work harder to achieve growth in the current economic climate, I have also seen the opportunities a challenging environment brings. In tough times companies are fi ercely focused on cost, value for money and service, and I know that no other global network is set up to adapt to individual client needs as well as BDO is.

The size of BDO’s international network today is partly the result of mergers. How signifi cant have they been in this growth process?

There’s no doubt that mergers have been a catalyst for success in a number of BDO regions, particularly in 2012. We’ve seen growth pretty much across the board – from Eastern Europe to the Middle East, from Asia Pacifi c to Sub-Saharan Africa, and in the Americas. And I must add that much of this growth has been organic. Our strategy isn’t about trying to reinvent the whole accountancy profession, but about doing things exceptionally well – and delivering that consistently across all the countries we are represented in. How do we do things exceptionally well? First, by focusing on the quality of our clients’ experience; second, by hiring and developing great people; and third, by trusting our people to take responsibility locally for delivering a tailored, high-quality service that consistently meets – or even exceeds – our clients’ expectations. I believe that this will continue to set us apart.

How do you make tailored service a reality?

It’s simple: we do not believe in a top-down way of working. BDO is one of very few networks capable of offering such an approach to client service: no other entities are set up like BDO to adapt to individual client needs and provide the right service mix. In other networks, their service offering is good, but it tends to be uniform the world over – looking more like business built on their terms, rather than those of their clients.

Talking of mergers, how important is consolidation within the mid-tier of accounting networks?

I think it is fair to say that the market for professional services has undergone more changes in the past few years than in the two decades before. One key factor has been the growing trend to cross-border business. For years there have been predictions of rationalisation outside the largest networks and one frequently asked question is which of the so-called ‘mid-tier’ networks will survive. Here, I’d like to quote my colleague Tony Schiffmann, who is Managing Partner of BDO in Brisbane: “I expect very few of them – two, maybe three – have what it takes to maintain relevance on a global scale.” That, I think, is a very realistic assessment of the situation.

What does it take for such a mid-tier network to survive - and indeed succeed?

Tony identifi ed four factors, and I wholeheartedly agree with his analysis: fi rst, enough partners in leadership positions across the network who are passionate to effect change when it is needed; second, a network leadership with the courage to act in line with the agreed vision and strategy, even if it challenges the status quo; third, a credible global presence; and fourth, a clear brand differentiation from both client and employee perspectives. On all these counts I fi rmly believe that BDO is strongly positioned to look to the future with confi dence. And don’t forget that regulators and clients are constantly telling us that they want greater choice from professional services providers. I fi rmly believe that BDO is on course to strengthen our leading position within the mid-tier.

What can you offer clients that nobody else can?

If we compare our business case with that of our mid-tier competitors, BDO undoubtedly covers more countries than any other. Outside the dominant four networks, BDO is the only truly global network. We have strong member fi rms in all the important economies around the world and our network is very well balanced. One thing that differentiates us from other networks is that many have a clear Anglo-Saxon dominance – which is not a criticism, but BDO recognises that other parts of the world have a great deal to offer, and that’s why it’s so important to have a well-balanced network such as ours. Another distinguishing feature is our system of government: one fi rm, one vote. It’s a very fair system that ensures that our largest fi rms cannot dominate the decision-making process. If the right things are proposed, they will be approved across the board. Likewise, our Global Board and our Global Leadership Team are made up of people from throughout the network, with no dominance from any particular part of the world.

What distinguishes BDO in practical terms?

Three things: relationships, culture, and exceptional client service. Let me go into more detail. BDO is a people business that relies on relationships. Of course it is business-critical to cultivate close relationships with clients, but within the network itself these relationships are just as essential. BDO partners know each other well – we make sure of that – and it is these personal, trusting relationships between BDO partners and their fi rms that smooth the way to more effective and higher-quality cross-border cooperation.

This leads me to BDO’s distinctive culture, which I believe is just as important to our present and future success. If you look around the international network, you see that our partners and fi rms are always willing to help each other out. BDO’s unique culture is defi ned by the cooperation and relationships between our partners and fi rms. It is this culture that makes BDO much more than a referral network. Our firms are not part of BDO simply to increase their international referrals, but because they believe in our vision: to be the leader for exceptional client service. It’s client service that holds the key to keeping ahead of the competition. It’s client service that matters to the bottom line. And it’s exceptional client service that differentiates us.

Let me quote my colleague Allan Evans on that. He’s the Global Head of Clients and Markets at BDO and understands more than most what client service means in practice: “Because technical excellence is a given in the top fi rms, the only way to differentiate is through exceptional service. Our exceptional service programme has a whole range of different strategies, which we undertake on a truly global level.”

Is exceptional client service a true differentiator for BDO?

Many of our big competitors have a ‘playbook’ when it comes to client service: 95% of the solutions and policies are pre-planned. The problem with this, in my opinion, is that it leaves little room for fl exibility and what we at BDO call client service instinct. We actively train and empower our people to make the right client service decisions. But for this to be effective, our people need to be responsive and not have to check with, for example, a global HQ before taking a specifi c decision. You can only do that by trusting people to have the skills, experience and mind-set to take responsibility. And that is exactly what we do.

How important is trust in building and maintaining client relationships?

Trust is essential – and doesn’t come easily. It can only be built up over a number of years, and comes from being very close to your clients, understanding their needs and reacting to them in a proactive way. Trust is also based on combining a good business relationship with a good personal relationship, which I believe is one of BDO’s key strengths. The fact that a number of clients have been with BDO for decades speaks for itself.

The 2012 BDO Ambition Survey was the third time BDO had conducted thought leadership research through interviews with CFOs of mid-sized companies operating internationally. What did the fi ndings tell you about how these CFOs view international growth prospects?

Interestingly, more than two thirds of the CFOs we interviewed saw customer service as a vital element for international success, with Brazilian, British and South African companies ranking this most highly. But more signifi cantly, our survey shows that the risk-reward dynamic is changing as ambitious CFOs face greater risk for the same reward – the economic crisis has cut their appetite for risk compared to previous years. Macroeconomic worries are leading 66% of them to increase investment in what they perceive as safe haven markets. In their approach to overseas investment they were sticking to what they know in 2012, rather than taking bigger risks that could lead to greater returns.

The appetite for risk varies considerably, however, from country to country. The biggest risk takers are the Russians, the Chinese and the Japanese. Those least likely to take risks come from Brazil and France.

Which markets are perceived to be safe havens?

Interestingly, a mix of the so-called BRIC countries – Brazil, Russia, India and China – as well as the older, established markets of the USA, the UK and Germany. Since mid-sized companies are the growth engines of global trade, their investment plans are defi nitely a boost for these seven countries. However, I must emphasise that these markets aren’t the only choice for entities looking to expand abroad.

The interesting thing is that emerging markets, including the BRIC countries, are now perceived by the CFOs we interviewed as established, rather than emerging investment markets. In our 2011 Survey 29% of these CFOs said they were investing or planning to invest in the BRIC countries. By 2012 that fi gure had risen to 45%.

Meanwhile, the two top investment destinations in 2012 were unchanged from 2011: China and the USA, in that order. But Brazil rose from the sixth spot in 2011 to third place in 2012, and Russia from eighth to sixth. A large percentage of the CFOs cited China’s market size as a key advantage, although rather fewer of them were attracted by cheap labour. Incidentally, investment in the USA, the UK and Germany saw a collective rise in 2012.

You mentioned China as the top investment destination. How is BDO positioned in that country?

BDO now employs over 7,500 people in China, where we have a 10% market share. We appointed a new CEO Asia Pacifi c in 2013 in order to help us continue growing in the Asia Pacifi c region, and of course in China. We fully expect our Chinese fi rm to carry on growing as a result of increasing investment in China, as well as the international expansion of Chinese companies.

BDO is fully committed to supporting our Chinese fi rm and the wider progression of the Chinese accounting profession. But the attraction of China as an investment destination remains tempered by challenges. In 2012, the World Bank’s Ease of Doing Business ranking saw China as 91st (lagging behind the likes of Rwanda and Kazakhstan). The views of the CFOs we spoke to also confi rmed this assessment, with cultural and language barriers and ethics identifi ed as the key risks when expanding into China.

However, I am always encouraged by conversations with the Ministry of Finance and the Shanghai Finance Bureau during my frequent visits to China. It is apparent that measures are being taken to address some of these challenges and facilitate doing business in China, and for accounting in particular, there is a clear focus on delivering better quality audits through ensuring more transparent fi nancial reporting, together with making sure auditors are capable of delivering them. There is also a real interest in improving the Chinese accounting industry by learning more from international practices and networks. I am proud of the fact that BDO is contributing towards this drive by sharing our knowledge and expertise at a local and international level.

It’s obvious how much time and effort BDO puts into researching changes in markets, regulatory and political developments, and then communicating this knowledge to the outside world. How important is communication in your business?

I think we need to distinguish between external and internal communications. From an internal, network viewpoint, it is very important that our global offi ce communicates with our fi rms as well as facilitating effective communication between them. The success of our network is partly based on BDO fi rms being able to share best practice, knowledge and expertise around the globe. Internally, you can’t over-communicate: people feel they’re part of a truly international network when they are regularly informed about what’s going on.

Externally, we communicate both at global and national level through press releases, sector-specifi c information, performance credentials and our web sites. In this way, clients get the best possible information as our partners keep them up to date and informed on specifi c tax, accounting and regulatory issues. That’s proactive communication that delivers exceptional client service through information that is of particular relevance to a client’s business situation.

In the year BDO celebrates its 50th anniversary, how do you see the future of BDO?

In the last ten years alone our revenues have almost tripled – from US$2.4 bil ion in 2002 to US$6 billion in 2012. I’m confi dent that we can continue our growth in years to come and am expecting revenues of around US$10 billion fi ve years from now. An enormous contribution to that growth will come from Asia Pacifi c – and especially China. Our fi rms in the mature economies are expected to realise substantial growth as well, primarily because of the opportunities presented by the ongoing consolidation in those markets. As the next important emerging market, Africa will make a contribution as well. This growth in revenues will be accompanied by a signifi cant increase in partners and staff, as well as in the number of countries we are represented in. That number went up from 100 countries in 2002 to 138 in 2012, and I believe we can grow to somewhere between 150 and 160 within the next three years.

But at the same time as expanding, it is vital that we continue to live up to our vision and to maintain our unique BDO culture. The exceptional understanding and personal relationships between our partners and fi rms will mean that we can continue delivering exceptional client service in all our countries. It’s our culture, our philosophy and our vision that have made Source: BDO Ambition Survey 2012 us what we are today. And they will also be the drivers of our future growth.