Management column - KPMG demonstrates how a cultured attitude makes globalisation work

When, in 1997, accountancy firms KPMG and Ernst & Young revealed that they were planning to merge there was widespread disbelief – and not just because the proposed deal smacked of me-too-ism in the wake of the previously announced tie-up between Price Waterhouse and Coopers & Lybrand. Most informed comment concentrated on the fact that the two organisations were fundamentally different in style, structure and general approach. In short, it was felt that their cultures did not fit.

Whatever was behind the eventual decision to call off the KPMG/Ernst & Young merger, it is likely that – in one form or another – this difficulty of amalgamating two different ways of doing things must have played a part. Certainly, we have a clue in that Colin (now Lord) Sharman, one of the architects of the planned merger, says in the introduction of a new book called Living Culture (Random House, #16.99, by Jan Thornbury) that “culture permeates everything, and is a key factor in the success of any major project”.

Indeed, there is an even bigger clue because that book is devoted to how, since 1997, KPMG has set about defining what it is and what it stands for. It describes how a fragmented international organisation has turned itself into a focused business operating with a core set of values to show, in practical terms, how others might follow suit.

Of course, this is not the only book of its kind. There are dozens with the word “culture” in the title – usually in association with “transformation” or some close variant. But Living Culture has the clear advantage that its author led the KPMG culture change process and that Lord Sharman contributes asides throughout. And, if the newspaper headlines are anything to go by, Living Culture could find a ready audience. Hardly a day goes by when the financial press does not contain at least one article throwing up questions about the challenges of dealing with the cultural issues deriving from all those mergers and acquisitions that the late-1990s economic boom has driven.

For example, to stick with the professional services field for the moment, a recent Financial Times article on Cap Gemini’s takeover of Ernst & Young’s consultancy arm concluded that the move was strategically sound but that “cultural differences” had made it perplexing. In the same newspaper, on the same day, an article looking at the spate of tie-ups between UK and German law firms warned of the need for “awareness of cultural differences”.

This kind of scepticism is doubtless linked to the cautious atmosphere in the world’s stock markets. Just a few months ago, bold deals were acclaimed as the inevitable result of extraordinary developments in technology and the overwhelming need for scale. But now investors who have been stung by the bursting dotcom bubble are more circumspect about management claims of what can be achieved.

Synergies, strategic fit and cost savings are all very well. But what the markets increasingly want to know is, will the deal work? More to the point, in this increasingly fast-moving world, will it work quickly?

In other words, “cultural difficulties” has become a convenient catch-all in much the same way that “musical differences” has come to cover a multitude of reasons why rock bands break up.

But there is a real issue here. In the current business environment, in just about every sector, organisations are seeking to brand themselves as standing for something. Again, this is partly a reaction to another flavour of the month – the somewhat over-hyped notion of a talent war.

And yet it also represents a long-overdue realisation on the part of those for whom business has always been a case of “it’s the numbers, stupid” that creating a sense of purpose has at least some role to play in the success of their grand designs.

Lord Sharman is quite right to say in Living Culture: “Although globalisation has technological roots and economic drivers, the challenge of becoming a successful global business is primarily an issue not of technology or economics but, rather, of culture.” It is also worth pointing out that cultures cannot be created overnight. KPMG says it knows that building its culture is a lengthy and on-going process. But one wonders whether everybody engaging in culture change programmes really accepts that.

It is no surprise to see that this volume’s short bibliography mentions James Collins and Jerry Porras and their book, Built to Last: Successful Habits of Visionary Companies (Random House, #14.99), which is one of the most talked about business books of recent years. It looks at Hewlett-Packard, the California-based computer and electronics business, which nearly bought PricewaterhouseCoopers’ consulting arm. The official reason for the collapse of the deal at the end of last year was the downturn in the technology stocks market. But you cannot help but think that maybe Carly Fiorina, the company’s chief executive, remembered the consulting business’s heritage just in time.