KPMG Peat Marwick

1. KPMG Peat Marwick The Shadow Partner http://www.kpmg.com

2. Suggested Study Questions • 1. What are the challenges that KPMG Peat Marwick faces over the next five to ten years? What are the organizational implications of these challenges? • 2. How important is implementation of the Shadow Partner for KPMG? • 3. Why is the Shadow Partner project facing so much resistance? • 4. As Bob Elliott, how would you describe the benefits of the Shadow Partner to the partners? • 5. As a member of the U.S. Operating Committee, how would you evaluate the investment in the Shadow Partner?

4. What is the Shadow Partner? • An on-line “reservoir of practice and knowledge” (may be a vision or a system) - would provide partners of the firm with universal and immediate access to expertise currently contained in internal client reports, and external expertise contained in third-party data bases.

5. The objectives of the KPMG case: • Discusses a large professional (one of the Big six in the accounting industry) service firm’s vision for using information technology (IT) to address the challenges it it facing. • Confronted with over-capacity in its traditional audit business and a need to grow client-focused value-added advisory services, a senior management team develops an ambitious strategy for capitalizing on emerging networked IT capabilities.

6. Strategic Challenges • As clients began to view audit as an undifferentiated commodity, loyalty declined and price competition increased. • Increased pressures on the Big six to: • improve efficiency; - reduce litigation risks, • provide value-added services • reconcile conflicting cultures and business strategies • compete internationally • shift from current product-focused strategic and organizational orientation to a client-focused one.

7. Vision Mission, Principles, and Values Goals / Objectives Hierarchy of Leadership Tools Strategies Plans Tactics Figure: Hierarchy of Leadership Tools

8. Sustaining Value • Process Performance • Time • Quality • Cost • Flexibility • Innovation Potential • Stakeholder Satisfaction • Employee/Partners • Customers • Shareholders • Society • Benchmarks • Best of class • Best of bread • Reputation • Other • Sustainability • Resiliency • Flexibility Frame for Analyzing Organizational Impacts of the Shadow Partner Defining Direction Executing and Adapting Environmental Context andResources Units, groupings Incentives Authority Coordinating mechanisms Formal and informal power Purpose Core Values, & Core Competencies Boundary systems People Strategy Values and Behavior operation, processes Control Work Management processes Technology Information Policy Exhibit TN-3

9. Individual Intervening Factors Result Information • Alignment • Commitment • Mastery/ • Competence • Individual • Work Group • Organization Technology Task Level of Functionality Design Issues • Data • Information • Rules • Decision Making • How knowledge is apportioned between machine and individual • Level of interactivity between machine and individual • Degree & timing of feedback provided to individual Implementing the Shadow Partner Effectiveness Context • Environment • Organization • Work Group

10. Roles of the Shadow Partner • The vision of the Shadow Partner (SP) was to efficiently leverage the knowledge and expertise in the firm. • The SP would make available to all partners external databases and an ability to communicate with each other any place at any time using e-mail and voice mail. • SP would enable rapid development of value-added services that addressed client needs while also enabling management of the complexity that would come with customization.

11. Roles of the Shadow Partner (cont.) • Enable client-centered rather than product-centered information management and access. • Increase options for firmwide and external communication and coordination. • Codify expertise of the firm through interactive training packages (e.g., interpretation of tax laws) • Increase productivity through integrated management support tools (e.g., calendar and time management, project management tools etc.)

12. Sources of Resistance • Should KMPG proceed with the implementation of the system? • Resistance • costly? • risky? (experience with the technology) • benefits? • confidentiality and privacy (mutual trust) • sponsorship (from top management) • radical change (organizational culture ready?) • project size and structure

13. Recommendations • The alignment of people, technology, and work (IS?) must be assured within the context of the organization and the environment. • Changes may be needed in any one of the these areas to enable successful implementation. • Examine ways to redesign the IT to decrease the technology risk. • Implement the system as “revolution” or “evolution.”

14. flexibility culture Success or Failure Factors of IS Succeed Continuous Service speed quality innovation or Business Improve Change Management Survive Radical Technology Organization Management culture (Behavior) (Human) (Strategic Advantage) • Structure • attribute • decision-making • operation • Ethically Acceptable • Socially Responsible • Politically control uncertainty Risks Benefit overcome enhance strategy I S A Digital Society Ability & flexibility to compress time and space and to expand organizational knowledge and then increase 1) choosing strategy 2) organizing the business 3) organizing the systems management area The Driver & Servant HUMAN ADAPTABILITY [ organizational change] ------Radical Change

15. Efficiency Effectiveness Innovation (Automate) (Informate) (Innovate) [Doing the things right] [Doing the right things] - creativity -Proper utilization of resource -Attainment of goals - property of culture {Make Money} {Save Money} Objectives of MIS (Cont’d) [ organizational change] ------Radical Change Evolution of change A FIRM/ORGANIZATION: Restructuring Competitive Advantage Re-engineering Cooperative Advantage Electronic Market: flatten the organizational hierarchical structure “ Revolutionary significance lies in generality” e.g., steam engineers--triggered the first Industrial Revolution Computers--Seem to be triggering a second one.

16. IT Yesterday, Today and Tomorrow Today Information age People proc. Communication Perspective Information Effectiveness “doing the right things” Tomorrow Knowledge age Knowledge proc. Connectivity Reality Innovation Performance/ Innovation “creativity” Yesterday Computer age Computer proc. Computing Accuracy Automation Efficiency “doing things right”

17. Vision Mission Policies Goals Time Horizon Metrics Values Objectives Time Horizon Metrics Values Strategies Tactics Figure Stages of Information-Systems Strategic Planning

18. Three Types of Planning • Strategic Planning • It deals with the development of an organization's mission, goals, strategies, and policies. • Tactical Planning • It involves the design of tactics, the setting of objectives, and the development of procedures, rules, schedules, and budgets. • Operational Planning • It is a planning done on a short-term basis to implement and control day-to-day operations.

20. Planning Terminology • Vision • A vision is what an organization wants it to be, and it is a message that every employee should not only hear, but should also believe in. The company’s vision is about its values, beliefs, quality, and the future. • Mission • A statement of the basic purpose or purposes for which the organization exists. It tell an organization what it is, why it exists, and the unique contribution it can take (what it does not do, as well as what it does). For example, the utility company could be: "To supply energy to consumers."

21. Goals vs. Objectives • Broad statements of the ends the organization intends to accomplish in order to fulfill its mission. Objectives are more specific, measurable elements of a goal. For example, the utility company might have increased profitability and energy utilization as goals, measured by objectives such as specific increases in earnings per share and kilowatt hours used. • Strategies vs. Tactics • Strategies are general approaches that show how goals should be achieved, and tactics are more specific guides to actions that would implement strategies. For example, a company strategy of "becoming the low-cost producer in its industry" would probably require a tactic such as increasing investments in automation.

22. Policies • General guidelines that direct and constrain decision making within an organization. For example, many organizations have a policy of "promoting from within" that guides managers in filling job openings that occur. Policies are implemented by rules and procedures which are more specific statements that direct decision making. For example, procedures to follow in hiring employees, and rules protecting employee job rights, would help implement a policy of promoting from within an organization.

23. Suggested Study Questions • 1. What are the challenges that KPMG Peat Marwick faces over the next five to ten years? What are the organizational implications of these challenges? • 2. How important is implementation of the Shadow Partner for KPMG? • 3. Why is the Shadow Partner project facing so much resistance? • 4. As Bob Elliott, how would you describe the benefits of the Shadow Partner to the partners? • 5. As a member of the U.S. Operating Committee, how would you evaluate the investment in the Shadow Partner? • 6. What advice would you give Tony Sapienza? What advice would you give Jon Madonna and Jim Brocksmith?