People and culture

In Audit, we’re building a culture of ‘High Challenge, High Support’, which is part of the firm’s Culture Ambition. It’s where our people embrace Our Values and demonstrate a mindset of professional scepticism. This is key in delivering high quality audits. To nurture this mindset, we are focused on empowering our people. This means providing them with the right support, as well as opportunities to develop their skills and gain relevant experience.

We recognise that having the right culture will help us deliver our People Strategy: to Empower our People to build purposeful, fulfilling careers in an environment where they can thrive. Having the right culture also drives audit quality, delivery and growth.

The Culture Change Programme in Audit is now in its third year. We have matured our programme of work, building relevant resources, local networks and mechanisms to embed the firm’s Culture Ambition within the business. We have been highly encouraged by the extent to which this is resonating with colleagues - they welcome the opportunity to co-create impactful culture resources that build a vibrant workplace and support in the delivery of our Audit strategy. We have had positive and regular engagement with the FRC since we commenced our Culture Change Programme in 2020 and more recently over the course of the last year as part of the FRC Thematic Review in respect of Scepticism and Challenge. We have received positive feedback from the FRC on our Culture Change Programme. They have highlighted many areas of good practice we have implemented, whilst noting our focus is now on further embedding change. The FRC’s Thematic Review has also highlighted recommendations which we have taken into account as part of our plan for the year ahead.

…significant progress has been made in delivering the Culture Change Programme, which we consider to be well-designed, with the focus now on embedding the cultural collateral in individual practice groups.

Audit Quality Inspection and Supervision Report, FRC (July 2022)

…the firm’s investment in initiatives to improve audit quality, including a Culture Change Programme, is having an impact.

Audit Quality Inspection and Supervision Report, FRC (July 2022)

We are proud to have worked together with the Culture Change team to script, film and produce ‘challenge and support’ training resources for auditors, by auditors. We are releasing additional resources this autumn to demonstrate how to effectively work with our specialists and offshore colleagues.

Rich Pinks, Audit Director

To be effective, our culture programme must be consistent, both across Audit itself and with all the other areas of our firm. To that end, we continue to ensure that Our Values and cultural mindset are driven from the top, with leadership demonstrating and communicating a commitment to quality, ethics and integrity which can cascade down through the organisation.

We have aligned the cultural change activities in Audit to firm-wide activity whilst recognising the Audit programme is wider in remit and may require additional areas of focus. What is clear is that our culture ambition of high challenge, high support is understood by our people and is driving the right behaviours and outcomes.

Our Audit culture change team (a small group of dedicated specialists) is aligned and integrated with teams across Audit and the firm to bring consistency in ambition and messaging, with a joined-up approach. Our culture change professionals bring value to teams across Audit by guiding and supporting their culture activity focus - sharing insights and lessons learnt.

Leaders are key in setting the tone and embodying the Values we aspire to – and they also need to be accessible and available to colleagues. That is why we have continued to give colleagues the opportunity to share their views with leadership, through a variety of mechanisms such as open forums and informal events. Examples include sessions with Cath Burnet, Head of Audit, through visits to our offices up and down the country, getting to know Audit colleagues better and listen to their feedback and ideas on a wide range of topics including career development, KPMG Clara workflows, use of technology and the future of Audit. Both Cath Burnet and Mick Davies, Head of Audit Quality (until 30 September 2022, when he took up his new role of Chief Operating Officer, Audit) also spent a week visiting KGS colleagues and leadership in KGS’s Indian offices in Gurgaon and Bangalore to speak to the 2,200 Audit colleagues there and hear what has been going on locally. Feedback received shows that those colleagues welcomed the opportunity to discuss issues that matter to them and hear directly from the UK Audit practice leadership. Our open feedback philosophy is helping us build a strong culture from the bottom up as well as top down.

Another significant event was the launch in March of “Talking Audit”, an internal hub for sharing, listening and connecting, with a monthly video featuring leadership and colleagues updating Audit team members on what is going on in the practice and in the profession.

On a more operational and day-to-day level, there are a number of opportunities for leaders to ensure they can engage with their teams and support our culture ambition in their management approach. Measures include quarterly performance management conversations (as a minimum), coaching, culture surveys and ‘Town Halls’.

Where colleagues have any concerns about any ethical or conduct issue, they are encouraged to speak to their manager in the first instance if they feel comfortable to do so – but a number of other routes are available. This includes our whistleblowing hotline, Speak Up, which is overseen by an external ombudsman and is completely confidential. We also have a network of Ethics Champions – colleagues based at each of our UK offices who are available should colleagues wish to discuss any ethical concerns. In the year to 30 September 2022, there were over 100 Ethics Champions (2021: over 120) nationwide who helped colleagues with 214 concerns they wished to raise (2021: 193). We are pleased to see that our colleagues also continue to use the Speak Up hotline where 45 separate matters were reported (FY21: 48). Members of our Audit Board also meet with people around the business several times a year as an important part of taking a temperature check on culture.

We are embedding our culture ambition by developing practical tools, resources and events that help our colleagues understand and apply it in practice. Our progress in 2022:

• Centrally-led activities and resources:
• • Audit Quality and Culture Awards (AQCAs). These awards now run three times a year, giving our colleagues more opportunity to be recognised ‘in the moment’. This recognition really matters to our people – we know because the winners have told us. The Spring and Summer AQCAs have been a huge success with over 1,000 individual winners. We use the results and stories to measure the impact our culture change programme is having across Audit.
  • CultureScope. We have continued to use this culture measurement tool in a targeted way to help identify our culture strengths and areas of focus.
  • We continue to embed Our Values and culture ambition across firm-wide activities, policies and processes.
  • Our bi-annual speaker series brings our culture ambition and expected behaviours to life through a diverse range of speakers from across industry. The series stimulates thinking and supports colleagues with practical actions, hints and tips that they can apply every day to live our culture and behaviours. This year our speaker series focussed on Curiosity which supports the right mindset for challenge and professional scepticism. To date we have had over 13,000 colleague views, live and on-demand for this content.
• Driving cultural change locally:
• • Our Culture Ambassador network has grown to 140 colleagues supporting the business. Their passion in delivering tangible culture change has resulted in over 300 value-adding activities, aligned to our culture plan, being carried out locally.
  • Coaching materials continue to be used locally and training is delivered to newly promoted managers and experienced hires. All of our Partners and Directors, and 75% of our Senior Managers and Managers, have attended this training. Newly promoted Managers attend the training on an ongoing basis.
• Supporting our people:
• • Our work on cultural change has put a spotlight on colleague wellbeing:
  • • We delivered an impactful campaign during Mental Health Awareness Week, with Partners and Directors setting the tone from the top through personal videos and conversations with colleagues at all levels.
    • We delivered our first Wellbeing Innovation Challenge (WIC), where we asked our Audit practice to submit innovative ideas to improve wellbeing for all in Audit. We launched the winning idea – Focus Time - from the WIC in December 2022.
    • We also launched an informative Audit Culture portal, a one-stop shop for Audit colleagues to access all culture resources, including wellbeing support.
    • We announced a new five-year partnership on the ‘Future of Work’ between KPMG and the University of Cambridge. It will reimagine the world of work, examine the big issues affecting the modern workforce and offer practical, research-backed solutions to employers - starting with mental wellbeing.
  • We returned to running our successful KPMG Audit University (KAU) in person this year where our Culture Ambition and expected behaviours was one of the core themes.

We believe that hybrid working is important in empowering our people and building the culture of the firm. Since November 2021, as part of the ‘Reconnection’ phase of KPMG’s workplace strategy, we have been encouraging colleagues in Audit (and in the firm as a whole) to make the shift to hybrid working by spending a minimum of two days a week working together, in the office or at an audited entity site. This helps ensure we continue to deliver high-quality audits and support the wellbeing of our colleagues by giving them the best of both worlds – the flexibility to be at home, and time in the office or at an audited entity where they can catch up, work with each other in person and learn new skills together. It is clear that our people have really felt the benefit of being back in the office with their teams, particularly in terms of coaching and team engagement. We will continue to embed hybrid working in Audit, investing in technology and infrastructure to support it, listening to feedback, and evolving our approach when required, to ensure our colleagues are engaged, supported and learning in their roles.

Driving quality through fair opportunity

One of the key drivers of quality is making sure we assign people with the right level of skills and experience to the right engagements. This requires a focus on recruitment, development, promotion and retention of our people, and the development of robust capacity and resource management processes.

Key considerations include experience, accreditation, training and capacity in view of the size, complexity, industry and risk profile of the engagements and the type of support to be provided. This may include involving local specialists or those from other KPMG member firms. We know that getting this right also has a huge impact on the opportunities and career development of our colleagues from historically under-represented groups. We ensure that engagements and projects are allocated fairly.

Recruitment

All candidates follow a thorough selection process which, depending on the role, includes:

• Application screening.
• Competency based interviews.
• Fit and proper checks.
• Psychometric and ability testing.
• Qualification and reference checks.

Upon joining the firm, new joiners take part in an induction programme which includes training in areas such as: ethics and independence, quality and risk management, engagement management and people management procedures.

Recognising our success

Through our revamped Audit Quality and Culture Awards and also our People Awards, we have seen some excellent examples of individuals and teams living Our Values and setting the highest standards of professionalism and quality.

The Audit Quality and Culture Awards recognise and celebrate those individuals and teams who champion audit quality and demonstrate our expected behaviours. In FY22, we had over 1,000 winners and good news stories linked to our culture goals. These stories are used across our Audit practice to continue to embed our culture ambition and drive good practices.

The People Awards are a firm-wide awards programme celebrating our people and what they’ve achieved. The awards are a chance for us to recognise the colleagues and teams who have exemplified Our Values and the incredible impact they have. 21 individuals and teams in Audit were recognised in the 2022 People Awards.

Personal development and performance evaluation

We continue to place a strong emphasis on the personal development, performance management and fair reward of all colleagues within the Audit practice.

Our Open Performance Development framework supports partners and colleagues when thinking about career aspirations, progression and personal development needs via regular performance conversations and ongoing feedback from those they work with. In FY22, we developed a Career Pathways Tool to support colleagues’ understanding of what different teams in Audit do and the opportunity to build their career.

There is a clear focus on setting stretching goals and investing in annual performance reviews to help identify high performers who have the potential to take on more senior or complex roles. High performers are further developed through rotation opportunities, internal and global secondments and talent programmes.

We have reward and promotion policies that are clear, simple and linked to performance evaluation processes so that our people know what is expected of them and what they can expect to receive in return.

Audit quality is a key element of our performance evaluation, reward and promotion processes. More information on how we do this can be found here.

Putting quality at the core of performance evaluation and remuneration

Audit quality is the most important metric for measuring the performance – and by extension, the reward – of Audit Partners and professionals. The Quality and Performance Matrix we use to assess an individual’s performance looks at quality and how it interacts with other factors. An individual’s overall rating depends on the interaction of both.

We use a quality monitoring report to collate objective evidence of an auditor’s performance in relation to quality. Evidence includes indicators from reviews and inspections, and feedback on the auditor’s engagement with the quality process.

The Chief Auditor and Audit Risk Management Partner contribute to the assessment of performance in respect of risk and quality matters and this assessment is factored into the remuneration discussions for Audit Partners. The governance of this process is overseen by the Audit Board.

Auditors must be independent to do their jobs effectively. As such, everyone in the Audit practice, and staff from other areas of the firm that contribute to audits, are not evaluated, promoted or remunerated for the selling of non-audit services to entities we audit. There are no incentives for auditors to do this.

In 2022, 98% of colleagues between partner and manager level were awarded a quality rating consistent with no, or only limited, performance improvements necessary. The remaining 2% of individuals where more significant performance improvements were identified were provided with targeted improvement plans and goals.

Partner admissions

Our process for admission to the partnership is rigorous and thorough for both internal promotes and external hires. This includes a business and personal case for the individual candidate as well as an independent psychometric assessment. Our key criteria for admission to partner reflect our commitment to professionalism and integrity, delivering high-quality audits and being the best choice for the entities we audit and our people. In FY22 we also introduced Non-Equity Partners who go through the same admissions process as our Equity Partners. In our Audit practice, of the partners we promoted from within the firm this year, 36.8% were female.

Basis of equity partner remuneration

Our remuneration model drives and rewards behaviour consistent with our strategy and values, reflecting an individual’s performance over time as well as current in-year performance against their goals.

Having introduced Partner Bands and a Unit Based remuneration model during FY21, this is now fully embedded across the partnership. The five bands outline the expected impact and scale of sustainable contribution to the firm at different levels of partner, with expectations and complexity increasing with seniority.

• Each member’s Unit allocation, including those who are on the Executive Committee, is determined with reference to the Partner Band descriptors: Quality (as the primary factor within the Audit practice).
• Sustained performance.
• Market value of skill set.
• Individual capability.
• Leadership qualities and overall contribution to the group.

The LLP Partnership Agreement requires that a minimum of 75% of the group profits, excluding the results of certain overseas subsidiaries (adjusted group), must be allocated to members. The Board’s discretion in respect of amounts not allocated is subject to a maximum retention of 25% of the accounting profits of the group for the period. Any proposal of the Board to retain more than 25% of the accounting profits of the group for the period is subject to a member vote.

During the year members receive monthly drawings and further profit distributions. The level and timing of the additional profit distributions are decided by the Executive Committee, considering the partnership’s cash requirements for operating and investing activities. Both the monthly drawings and profit distributions are reclaimable from members until the date on which profits are allocated.

As noted earlier, we also introduced Non-Equity Partners during FY22 who are remunerated in the same way as colleagues. As at 30 September 2022, there were 283 Non-Equity Partners and 503 Equity Partners in the UK firm.

Our trust and growth objectives are underpinned by an inclusive culture, which is critical to ensuring that we can thrive as a firm. This applies across KPMG, whether in Audit, Consulting, Tax or Advisory. Our new Inclusion, Diversity and Equity strategy ‘Our KPMG: A Fairer Future for All’ launched in February 2022 and is focused on leadership accountability, attracting and retaining talent, ensuring fairness in our systems and processes and using our collective voice for the better.

Our leaders are committed to driving change and are held accountable with set targets and action plans which they’re measured against regularly. As part of the strategy, we have set targets to 2030 to mark our long-standing commitment to change. We also remain committed to being transparent about our remuneration and pay gaps. In 2021 we became one of the first UK businesses to publish our socio-economic background pay gaps, and we continue to report on our pay gaps against each under-represented characteristic¹.

Examples of our commitment to date include: our Inclusive Leadership Board; a Black Lives Action Plan which has been in place for over two years; IDE training which was launched in 2022 to all colleagues; and our 15 very active employee networks. We are proud to have been recognised externally as a Times Top 50 Employer for Women, a Disability Confident Leader; a top 20 ranking in the 2022 Stonewall Workplace Equality Index; and to be the only firm to have ranked in the top three in the Social Mobility Employer Index every year since 2017.

Being part of the Black Heritage Talent Programme (BHTP) has developed my leadership and time management skills, created new career opportunities and helped to expand my network. It was the perfect programme to build my confidence in identifying my stakeholders and being my authentic self at work. The lessons learnt have been life-changing and I am happy to have participated in the programme

Esther Owusu-Ansah / Manager, Audit, KPMG in the UK

When considering our talent, we strive to attract people from all backgrounds at every stage of their career and empower them to reach their full potential. We’re setting targets for experienced hires across under-represented characteristics and are investing in insights and market mapping to help us reach these groups. We also continue to invest in programmes such as Access Accountancy where all our KPMG Discovery work experience places are for candidates from low socio-economic backgrounds. In 2021, the Audit practice also launched a Black Heritage Talent programme which has explored numerous themes with internal and external speakers to support colleagues in their career development and maximise their potential.

In our bid to build an inclusive culture, we have 15 Employee Networks open to all, providing a sense of community and learning experiences for those who want to increase their own diversity awareness or become an ally. They deliver a calendar of events throughout the year to celebrate key moments, where colleagues can voice their own lived experiences and provide vital feedback and insight to leadership.

¹ https://kpmg.com/uk/en/home/about/our-impact/our-people/inclusion--diversity-and-equity/addressing-our-pay-gaps.html

Continuing to measure our progress is key to success. We baseline and measure our culture on a holistic basis, using a variety of different sources of existing Management Information using our Firm-wide Culture Dashboard.

The sources of Management Information we use include:

• Our Global People Survey which gives colleagues from KPMG member firms an opportunity to express their views on a range of topics about life at KPMG. We use the responses to gather insight and identify issues that affect colleagues both locally and globally. We regularly update Audit colleagues on the progress we are making against the focus areas in a newsletter called ‘You Said, We Did’.
• Our Audit Listening Programme which gathers views from the entities we audit.
• CultureScope, a culture measurement tool to assess our current culture.
• Reports to our Speak Up hotline.
• Coaching surveys.
• Audit leaver feedback.
• Root Cause Analysis outcomes (read more about this here).

Working with the Root Cause Analysis team we also continue to measure our culture through focus groups where we deep dive into the behaviours we need to focus on, to test the vision of what ‘high challenge, high support’ looks like and how we get there. We held over 130 focus groups in 2022 which were attended by approximately 750 Audit colleagues. These inputs are helping us target our actions where they will have the greatest impact.