Accelerating Business | Episode 3: The Evolution of Business and Wealth with Mario Paron, KPMG Enterprise

Louis: Tell us a little bit about KPMG's footprint globally.

Mario: I wish I could tell you how many countries we're in. I don't think I actually know but we are just over 200,000 people as a global organization. I think it's fair to say pretty much any country that has any sort of developed economy we would have representation.

Louis: The structure of KPMG, in terms of it's sort of … of the market now, as I'm understanding it you divide your business in Canada along three verticals. You have tax, audit and advisory services. In addition to that, and we're going to explore this a little bit, you also offer what you call your enterprise solution to business. So, can you help us understand the structure of the business as it relates to those particular verticals and how they interact with one another?

Mario: Sure. We refer to them as the functions. Our functional expertise, if you will, in terms of that service offering that we're bringing to market. I think historically we would have started, and I'm talking 100 years ago, pretty much as an accounting firm. Back then accounting meant you did audits and you probably helped with tax. As the business evolved the audit practice became much more significant, much more regulated and much more of a formal business. Tax is now also become a very formalized, regulated type of business and has subdivided into multiple specialties. It's funny, 30 years ago when I started you were a tax professional. Now, you're an international tax professional, transfer pricing, tax controversies, the subdivision of specialties all under that tax umbrella is quite amazing to see how specialized it's become. Then we have our advisory business and advisory is basically three big buckets. We call our corporate finance "deals practice", risk consulting and then management consulting. That's how we operate our business. Those three functions run those verticals within our business. There would be sort of P&L accountability, quality assurance is covered through those functions, all under the umbrella of KPMG Canada and then within a matrix organization, which we are, there's a local either office or regional structure that knits those functions together to form one team going to market together.

Louis: On the advisory side, if you were to compare the growth potential or trajectory of the advisory parts of your business relative to the more historic tax or audit, do you view organizationally that there's much more greater offside, if you will, in the advisory space? How do you look at those different sectors, or service lines, in your business and plan around things like growth and market opportunity?

Mario: The audit business is a very mature business. If you look at the two elements of our audit business, being publicly listed entities and then our private company practice, that's pretty sort of low to stable growth in those sectors. In fact the business is quite mature. Tax has grown, I would say at a higher rate, but that's because of that specialization that I talked about. As the world has gotten more complex, and specialties have developed, those have provided for greater growth. But for sure the fastest growing part of our business is the consulting side of it as new services are developed, new offerings, new responses to our client's needs. You'll see the consulting practice probably growing at twice the rate of even the tax practice and the tax practice generally growing again at twice to 50% faster than the audit business.

Louis: Another aspect of your business, something that you have leadership or vocation over is KPMG Enterprise. Can you tell us a little about what that is and what you do in that role?

Mario: My Enterprise role is a national role. It's a market facing role. At KPMG we have a long of history of servicing families, private companies in Canada for probably a 150 years. But what has happened over the last, I'd say 15 to 20 years, KPMG has put a real focus on the private company part of our business. That's a reflection of Canada, is effectively a middle market type economy. Relatively limited growth opportunities in publicly listed entities. Just the sheer number of publicly listed entities is not increasing all that dramatically. And then, I think most importantly, is the recognition that the needs of clients, how they interact with their service providers, the regulatory environment around those components of the business, are diverging and they're diverging dramatically in the sense of what a publicly listed entity will buy from its advisors, from its auditors. Who is doing the buying, ie: the audit the committee versus the owner. All of those things are diverging and continue to diverge over the last 10 to 15 years, such that our Enterprise business is saying, "If you're going to be dealing with the owner/entrepreneur, the skill set required to service that individual and their needs is different than what a chair of an audit committee might need in a very regulated environment in the audit world.", for example.

Louis: It would seem though that the degree of knowledge of a client or a client's industry that is required to effectively provide that value, that insight, and to drive solutions necessarily requires a significant investment of time that doesn't usually, or maybe immediately, translate to something that you can bill for. How does the organization invest the capital, and people that are required to develop that knowledge, so that you can efficiently bring that to bear to a client in a way that permits you to recover on that investment? How do you do that?

Mario: Yeah. It's not easy. I'd be lying to you if you said, "We know we've got the secret formula figured out." A couple of things that we do have going in our advantage is there is a cadence to the type of work we do for many of our clients. What I mean by that is there's an annual cycle for an audit. That necessitates being out at the client's premises at least twice a year and certainly regular touch points throughout the year. Tax compliance necessitates a regular cadence to be out with the client. What we've done is try to be efficient by taking those natural touch points that occur, and I'll say in a money making activity, and leverage that to then broaden our knowledge of the client's business, their needs, their issues, their problems and then share that with the team, broadly, so that what we're really doing is taking one person's investment of time and multiplying that out through the balance of the team. We try to be very formal and rigid around how we do that. One example in Enterprise, we have a Know Your Client document; that to be on that team you must understand the Know Your Client document. There are ten aspects that we consider really important to know that client. That'll go through things like what's going on in the industry; what are the family dynamics that are at play with that particular client; what is their long term strategy; what's their competitive landscape; all those dimensions and it's hard for a lot of our teams to come out of their functional silos and see the broad aspect. So, as best we can, we try to create that knowledge and share and disseminate amongst that client service team so that we all benefit from the various bits of knowledge that we've gathered from that client.

Louis: The family office offering something that's geared towards the challenges and issues that family offices have.

Mario: Right. Yup. That's really a response to the global trend and phenomena around the transition of wealth. The transition of businesses and the related wealth. There's been umpteen studies around over the next 25 years trillions of dollars of wealth will be transferred from, effectively, the baby boomers to the next generation. Or not the next generation. It will be sold and turned into capital that needs to be redeployed in other ways. That family office, family business is really just a response formalizing our response. I've think we've always kind of done bits and pieces of it, always as a firm, but we're really formalizing our response to the market need that we've seen develop around that wealth and that capital, either being transitioned or monetized and then being redeployed.

Louis: But in that space, which is going back to the comments that you were making earlier about your approach to business, you would seem to be positioned then in acting for that family office to also provide services selling that business. Finding a purchaser for the business in circumstances in which it's simply not being inherited by the next generation. So you capture from a life cycle perspective the entire business needs across the business and overtime within a certain business segment. I take it that's the approach.

Mario: I actually use a slide to talk to my partners about exactly that. If you look at historically where we've played, we've helped businesses start up, the proverbial entrepreneur in his garage starting a business. We help businesses raise the capital to grow. We help businesses strengthen and really produce more efficient businesses to maximize ibadah. Really, along that life cycle all we've done now is formalized that last piece which, historically, what we've found is we would help a client sell their business. They'd walk away with a hundred million dollars and, not that we kind of forgot about them, but we didn't take a very strategic approach to say, "Wait a second. The wealth of that family has simply converted from an operating business to liquid capital." We owe it to our clients to now help them deploy that capital in what is the best way, the most efficient way, that is right for their family and business. So it's really that last step of the life cycle and that's exactly the slide I use with our partners. This is a natural extension of what we've always done. We just need to formalize the offering and enhance it. One of the things that we are doing now and investing in is people who can have family business consulting skills. People who can help families have those difficult conversations between parent and children or between siblings around what do we do with this wealth and do we stay together as a family or not. That's something, again, we've had pockets of expertise and trusted advisors in the organization that did that historically. But we've never been sort of strategic and methodical about building out a service line around it which is what we're doing now.

Louis: When you talk about this aspiration, the historic importance of these larger institutional relationships, you're talking about servicing them globally in a variety of different jurisdictions. And then, just out of curiosity, in terms of how it is that you're able successfully then to develop a relationship, say in one jurisdiction, and then grow the relationship out globally to other jurisdictions. If you can just, before going on to the balance of that, just remark if you can a little bit about how that's done effectively.

Mario: I'd say it's done a couple of ways. One is, I'll say the informal cultural aspect, which is you're part of the KPMG family. If I pick up the phone and call a partner in Peru, I may not know that partner, never spoken to them, but because we're in the KPMG family he's going to take that call, he's going to try to service that client as best he or she can, notwithstanding they might actually represent a tiny fraction of revenue to the Peru practice. That's just a cultural thing that's always been there. This is just what you do. Being part of a global organization it's incumbent on you to help your global colleagues. Now for some of those massive institutional accounts we actually have a global lead partner. There's much more rigor and formality around how do you service that account. They would have global calls with all the countries dialing in, understanding what's going on, what's the client doing, expecting, time lines, objectives, all that kind of stuff and making sure that globally we are very consistent and we're servicing them with the right needs, in that we don't have a hiccup in one country damage the relationship globally. And that frankly, as a global lead partner, you're actually supporting those other countries and making sure they get what they need to help service the client.

Louis: And beyond then, those large institutional clients that you were talking about, the evolution of the business in other areas.

Mario: Yeah. Getting back to why Enterprise is now getting priority for us globally, I think it's a couple of things. One is we're recognizing as an organization that it is a huge part of our business. I say it's natural that it historically never got the attention because Enterprise tends to be smaller clients. Smaller dollars associated with the assignments. You add it up in total it's quite large but individually it's small. It's just the natural headlines versus of the multi-million dollar global account versus a whole bunch of smaller accounts adding up. But I think there's been a recognition that this is a big part of our business. It's actually a very fast growing part of our business and therefore needs some attention globally. That's why I've been asked to spend some time doing that. I would say part of it is a bit of a coordination role. Trying to create networks within the regions, ASPAC, IMA and the Americas of practitioners who service Enterprise clients. Best practice sharing. There's a lot of low hanging fruit around. We have some amazing things that we do for private clients around the world and they're the best kept secrets even within KPMG. There's an element of the role which is just about elevating some of these best practices, sharing, creating a community that is willing to engage with each other and learn from each other. Which will have huge dividends. But then there's going to be an evolution to that to say where are we going to invest. Because investing globally makes a lot more sense. It's more economical than any one country or practice doing it. So what are the unique services solutions that our clients have a need for that we can build once and replicate as opposed to every country building it 50 times over. That's a bit of part of my mandate.

Louis: In doing that it is absolutely necessary for you to develop personal relationships with your colleagues around the world and I'd like you to talk a little bit about that. Obviously in providing effective cohesive service across different geographies to a client it's important for the team members, wherever they might be, to know each other to a certain point, trust each other, be able to communicate effectively, and how do you foster that as a leader within the team and by the team to you?

Mario: Everyone's got sort of different theories on that. I, maybe it's old school or maybe it's just the way I operate, but I just believe nothing replaces face to face contact. Every KPMG meeting that I've gone to, and within the last month I was in Paris, I was in Hong Kong, I was in Madrid, six weeks ago. Every one of those meetings, where the real relationship building happens, is at the dinner before and the dinner after the meeting. Where you're talking with people as human beings, understanding what their challenges are, what are they trying to achieve, how can you help them, how can they help you and coming to an understanding that this is, in fact, the greater good for the organization, which ultimately lets us service our clients better. I'm a big believer in you've got to break bread. You've got to sit across from somebody. Take a low self-interest approach. Figure out how to make that other professional a success in their country. And if you can do that then people are more likely to reciprocate and buy into the broader strategy around, in my case Enterprise, being done globally.

Louis: We'll get into this in more detail later but it would occur to me to ask you, you used the expression a low self-interest approach in developing relationships with your colleagues. I take it, organizationally, there would be a premium in also taking that approach in developing relationships with your clients. That you would purport to try to take a low self-interest approach with them with a view of having them trust and believe that you have their best interest at heart and worthy of expanding the work that you do for them. Is that fair?

Mario: Yeah. I think that's really very much imbedded into our culture, as strategically we talk a lot about that in terms of putting the client at the center of everything we do. Adopting a low self-interest approach. It's better to give before you get. All of those concepts, I just think they're true in life and in business in general, but I think in particular, in professional services where you are selling the invisible. You're selling advice and trust. I was reflecting coming into this discussion, Lou, that the world when I first started some 30 years ago, the trusted advisor was also the functional expert. If I think about it I'm a tax partner by trade. Some of my mentors they were incredible technical people but they were also trusted advisors. I think it's much more difficult to do that today. To be that deep technical expert in so many of those verticals now. I gave the example of tax before. I was a transfer pricing expert, international tax expert and all these things 30 years ago, but I wouldn't purport to be an expert in any of those areas today. I know enough to be dangerous. Clients want that deep technical expertise but I can tell you they have no interest in navigating the complexity of KPMG, or any other global professional services organization, as to where to find that expertise. What they do want is one trusted advisor who understands their business holistically and then will bring the right technical resources to bear. It's funny, the market is actually pushing us in two different directions. An expectation that you'll have deep technical expertise but at the same time that you'll have an overview and a global perspective of their business. Those are really hard to find in one individual. I think our organization, both by design and somehow we're falling into it is, we are developing relationship partners for accounts that will have the relationship with the client, really build, have the time and, frankly, the skill set to build that trusted relationship with the client. But then knowing full well that they need to draw on a whole bunch of deep technical experts to bring to bear, to solve that client's problem. It's an interesting evolution of the professional services business where power by the hour, you're the expert and I call you and you solve my problem, is morphing into who understands the business at a macro level and has the trusted relationship versus is a functional expert in 20, 30 different disciplines that the client may actually pull upon.

Louis: Now I know that you personally have taken a real interest in developing better skills and training around the provision of trust advisory services and in that regard I know that you've spent some time developing, training and coaching around being the trusted advisor. Can you talk a little bit about your interest and your efforts in that space?

Mario: Yeah. I think it gets back to what your earlier question around how have we invested in trying to differentiate Enterprise. Recognizing that entrepreneurs, I think all human beings want to trusted relationship, but entrepreneurs in particular value that. We've developed trusted advisor training that we do and last year we put every single Enterprise practitioner in the firm through a one day session on trusted advisor training. We're following up this year with one hour lunch and learn modules to reinforce that training. But really talking about how do you get to understand what is really important to the client. What are the family dynamics, the business dynamics that get to the heart of what's keeping that entrepreneur up at night, that we can help solve for. Unless you're asking a lot of really good questions, which a lot of accountants actually are not comfortable asking, you will never get to that level of trust and depth of relationship. The training is really focused on getting people comfortable asking the questions. I've said this to people, over and over in the firm, "For the vast majority of your career you're rewarded by being the smartest person in the room when it comes to this particular piece of functional expertise." But really, to go to the next level, it's not about being the smartest person in the room on that expertise. It's actually about being the person who is willing to listen and ask the best questions to draw out of that client what is the real problem. What are all those interconnected elements that are going to be required to bring to bear to build a solution for that client that's going to stick and actually solve their problem for them. We're not used to that. I have to believe, as lawyers, it's the same thing. That you're called upon for some expertise and to answer a specific question. Your bread and butter has been made being able to answer that question. But the real evolution is now to say, "No, no. I'm going to actually ask that client a whole bunch of questions that they hadn't even contemplated and get them thinking in a very different way." That takes a lot of confidence. That takes a lot of practice, experience, so anyway the training is trying to help people to be comfortable, starting to ask some of those questions.

Louis: Often the provision of the answer or the solution isn't necessarily what it is that the lawyer thinks immediately, or what the client things is the solution, but what you collectively come to in an exploration of the issues and the concerns and the context. That's a conversation. It's not usually a speech.

Mario: Right.

Louis: Aspirationally at least.

Mario: Yeah.

Louis: Mario, I'd like to talk a little bit about the competitive environment for KPMG. Now you're obviously one of, what is colloquially referred to as, the Big Four. Those are the competitors, dare I say their name in this building, but they're PricewaterhouseCoopers, Ernst & Young and Deloitte. I'd like to know, I'm curious, whether, and to what extent, you spend a lot of time as leaders within the organization looking at your relative strength or competitiveness as between the Big Four.

Mario: I think everything is in balance. You always need to keep an eye on the competitive landscape. But I think as KPMG, and certainly our leadership, we don't try to let ourselves be led by what our competitors are doing. We definitely look at, and it's sometimes challenging to get information, but we look at it in our markets, both in Canada and globally, how are we growing relative to our competitors. If the playing field is the same, are you growing faster than your competition, then that should you tell you that you're executing the right strategies, appropriately, because we're all kind of dealt the same hand in terms of the economic conditions that any given country might be facing at one time. We look at that from a KPI relative measure. Are we growing faster than our competition? Then we're always keeping an eye out, whether it's new service offerings, what are they bringing to market, making sure that that might make the sense across, but we really want to try focus on being first to market with new and innovative services.

Louis: Given your size and the multitude of different industry and service verticals that you deploy into, clearly your competitors are not limited globally or even nationally, to the other Big Three accounting firms what would include a number of diverse and different type of both advisors and other product institutions. On the advisory side can you tell me a little about the competitive thread or your perception of the competition with advisory firms like McKinsey or Bain.

Mario: When we get into the consulting space for sure the competitive environment changes. It's funny, a competitor one day might be an alliance partner the next day. IBM, for example, where we might compete with them on certain jobs and then in other cases, because of complimentary skill sets, we'll actually partner with them on bids for certain pieces of work. I certainly do see it more so in the technology space where, we're not a hardware provider, we're not really a software provider, per se, although we are evolving some elements of that in our business, so a client has an issue. They need a solution and then the question is who's best suited, either individually or in partnership with others, to provide that solution. It's an interesting, for me being a simple tax guy, it's interesting to see how we in some cases are competing and then partnering with others.

Louis: If you were then to, really I'm inviting you to comment what you've told me KPMG has been doing for a considerable period of time, but if you were going to advise a major law firm, in considering this question of multi-disciplinary practices, as presenting the potential to be better integrated with clients, to grow a business centered on clients and client needs, as a business strategy that should be employed, I'm taking it you'd obviously see considerable merit in that. Can you speak to that issue, in terms of whether your experience in working with law or law firms, do you feel that it is a gap that we can overcome? Do you think there's utility merit in our doing that? What might you see as obstacles to our legacy industry doing themselves? Because law firms, traditionally, haven't gone down that path.

Mario: I'm not an expert in terms of advising law firms. Just take my comments with just the perspective that I bring. I've always been a big believer that build a relationship with a client, service that client, multi-disciplinary, as I said earlier clients are pushing us to be deep technical experts and yet understand their business at a macro level. I think a law firm has to adopt that model to say who are those partners that can build relationships, see the business holistically and yet still have disciplines that they need to bring to bear to solve that client's problem. That necessitates a working as a team approach. Where it's not my client, it's the firm's client. This year the clients doing a transaction, that means I'm drawing on this element of expertise and next year it might be something else that I'm going to draw on something else but they're still a firm client. You can't be naïve or expect that people will just simply be team players because. You've got to line up the rewards and the incentives and, at the end of the day, remuneration is a big part of what drives professionals. There has to be a line with a balance between individual performance and some element of team performance. My perception, maybe it's not accurate, is that law firms, I think, are still very much sort of what did you do as a lawyer, or as a partner, and that's going to drive your remuneration. Until you address that in some capacity I don't think you're going to get a different outcome in terms of behaviours. I don't think that would be logical to expect that.

Louis: So which beautifully segues into the next topic of conversation. If you were to look at that particular imperative as being a question of innovation, an innovation challenge for law firms, let's talk about innovation a little bit. We're all consumed with the innovation imperative. Being an innovator. Promising innovation. Delivering innovative service and yet accounting, not unlike law, is a very tradition bound industry. We are, as legal service providers, generally in an industry that is conservative in disposition and yet, of course, we're all in the middle of a time of great dynamic disruptive change. So, you face these issues having to be innovative, in a traditional market segment, how do you overcome that challenge? In ten words or less.

Mario: If I had the answer to that I'd be on the speaking circuit and then laying on the beach with my free time. There's so many elements, I think, to sort of crack the innovation riddle. One, it has to be tone at the top. I've seen with our current CEO a communication doesn't happen without innovation and him challenging us to think differently, to do differently, being consistent. I do think tone at the top is really important to make sure that people understand it's an organizational imperative. We've also approached it from a, I'll say a more formalized structure, innovation council, membership to that council from multi-disciplines within the firm trying to build solutions that are cross functional, that hopefully innovate. Tapping into younger people. Our CEO has a group of Leaders of Tomorrow that help him. Our younger people who, frankly, are way more technologically savvy or way more plugged into what's happening at a sort of a street level in terms of client interactions, informing his views on what is possible from an innovation perspective. The challenge I always find is innovation happens often at the interface between the client and the professional. Ideas are just generated and innovation happens because you're just trying to get your work done in a more efficient way or the client has a need that you've responded to and innovation is born out of that. It's not big I innovation. But at the same time, like we're a big organization with a big brand, and we can't have 6,000 people going off and doing things their own way because they want to be innovative. It's a challenge. How do you balance what the organization can do to spur that innovation and yet, between our risk policies and our legal and practice management, all those policies which are there designed to keep the organization out of trouble, making sure that that innovation comes to fruition without stifling it, burying it or just succumbing to, which again I think is another natural human element that I learned, which is people don't like change. There's lots of ways through the organization where any change can be stifled in an indirect or direct kind of way. I don't think we've got it cracked. But if you are just going to leave it to chance to happen I don't think you're going to be successful with innovation.

Louis: You can't have a conversation about innovation and change without hearing clichés about tolerance for failure, accepting of mistakes, being able to have the courage to take the wrong path with a view to pursuing the right one. Yet there is a significant gap between the promise, or expectation, of tolerance for risk or mistake and the reality of an individual professional or business line screwing things up in their desire to be innovative. What are the consequences of that? How do you manage that competing tension between encouraging people to take chances and then being tolerant of those situations in which it doesn't work out?

Mario: I can't speak for the organization in total. I just say my own approach is I like to go into things just being very transparent with the team. Helping define what are those desired outcomes that we want. Then getting out of the way of the team to let them go execute and innovate and try to come up with this solutions. I think it just comes down to leadership. Understanding, being involved enough in the details to know that this was, hey we tried, we did it the right way and it just didn't work out, for whatever reason. The market didn't buy what we thought they would buy. Whatever the reasons are. Then as a leader you have to be able to step back and say, "Well, that team actually execute properly you just didn't get the result you wanted." Again, as a leader, you have to be close enough to the details to know that and then be supportive of that team to try again and potentially fail again. Easy for one individual to take that perspective. As an organization that's a lot harder. As a professional services firm it's doubly hard because, at the end of the day and I assume the law firms are the same, you effectively distribute 100% of your profits every year. The business model is actually not conducive to long term investment, and taking flyers on different projects that may or may not work, you have to get the partnership, collectively, to buy into that and that is not easy. When you have a brand new 30 year old partner, yeah, their tolerance for investment for the future good of the firm might be pretty high. If you have a 60 year old partner they're probably not all that concerned what the long term innovation investment fund is for the firm because they've got a couple of years left. Those are all the challenges that come to me with managing, at least from a professional services perspective. Maybe the corporate world is a little bit easier but, boy, it's not easy in a professional services firm.

Louis: Speaking about that generational divide, let's talk a little bit about quote/unquote the Millennials. I presume KPMG, like us, we spent a lot of time thinking about our future from a personnel perspective, our future work force and were then obviously focused on recruitment and succession within our businesses, and of course an enormous amount of ink has been spilled on this subject of Millennials, their motivations, their values, their work ethic. What has then been your experience on the Millennial question, your interactions with them, how the organization approaches the management and engagement of Millennials? What can you share with us on that?

Mario: I'm not sure we have enough time to cover all of that. I always start from this perspective. I have three kids, ranging in age from 21 to 25. They would be deemed Millennials or whatever the new buzz word is. And yet they couldn't be more different as children, each and every one of them. I hesitate to label and entire generation of people with one big broad brush. I've got three kids, I've raised them all the same, and yet they are very different individuals. Having said that, are there some tendencies and commonalities that we are observing? I think for sure. Some of this is, frankly, self-perpetuating, I think Millennials are taught they need to change jobs every three to five years and then we react and say, "Well, they're not loyal." Well, it's just a vicious circle that feeds on itself. But I do see that they are much more focused on what does this organization do, what does it stand for, what are the values, what's the purpose of this organization. They seem to be a much more purpose led generation. Which I think is great actually. I think that can only be good for business in the long run. They are challenged from a loyalty perspective in the sense that they have been taught to believe success happens, and I don't know if the same is in the legal, but in the accounting profession, if they're in the same job or even with the same organization for more than three years, something's wrong. As an organization like ours where we hire people off campus, invest tremendous amounts of money in training them, if they're gone in three years that investment has not paid off. When you actually look at the dollars that have been spent. What do we do? We try to create their desire for change and new experiences within the organization. Give them the ability to transfer between functions, between teams and groups, so that they are experiencing and growing and developing in different areas. Which ultimately makes them a better professional but, I think in the short run, helps satisfy that need for different experiences. Then there's the more mundane, but I think very pragmatic real things, around working from home or using technology to its fullest extent possible to make their lives easier in terms of how they do work. You've got to react to that kind of stuff because sometimes it may seem like small things but they're quite irritant and if a Millennial says, "Why am I having to input this four times when there should be an app on my phone which can just make me input it once." then I think you better respond to that kind of stuff otherwise they will see your organization as old and spodgy and they want to be on the cutting edge. So, there's multi-prongs to that sort of approach. I am actually quite heartened by how smart Millennials are, not all, but there is an element of that group which have a tremendous work ethic and leadership and macro strategic perspective around our business that I know I certainly didn't have at that age, so I don't think the future is dim. I think they'll just rewrite how business is done and I guess it will probably end up in a better spot.

Louis: The other side of that equation is our more senior practitioners in advisory firms and the imperative of fostering and promoting the succession of relationships and practices from those older practitioners to the younger ones. Which is an institutional imperative, in terms of ensuring that you have longstanding relationships and you build effective and cohesive teams. How are you meeting that challenge? How do you manage the challenge and encouraging your senior practitioners to create that next generation and pass on those practices?

Mario: Yeah, look, we're not perfect at it by any stretch. One thing that probably helps the accounting firms is that we have a mandatory retirement age. There is a date that you know that this partner will no longer be with KPMG or any of the firms. Really it becomes a question of planning and working backwards in terms of that succession. Having that date in place at least gives us a chance to put together the right plan to transition the relationships, etcetera. The other thing that we are getting better at doing, because if you look, every statistic will tell you that if you go from mom and dad to children, something like 90% of them will change advisors once mom and dad are out of the equation. My own experience, and I've seen that happen, you are seen as mom and dad's advisors, and assuming the business transitions to the next generation, they are not interested in that. I think you have to be very strategic around building the relationship with the next gen, showing them that KPMG is the families advisor, not just mom and dad, and actually being strategic around our next gen. Building relationships with the next gen at the client's level so that they're seen as people that they can relate to. They're not 30 years older. They're the same age and sharing the same life experiences at the same time which will make that transition, I think, have a greater chance of success. We're doing some things, I'll say more programmatically as well, we have a program called Family Shift which is geared to G2, G3, helping them go deal with how businesses will transition. We've partnered with an educational institution to help families explore these types of things. So there's some of the stuff that's programmatic but a lot of that is just literally who's this account, who's the relationship, who should we be matching up with, son or daughter, who's likely going to take over the business and helping them develop relationships today.

Louis: Let's switch gears to the final topic of conversation. You have been within this firm, within this city, the City of Hamilton, Ontario for a very long time. KPMG is unique in that the many other larger whole accounting firms that were here have left. Many of them left many years ago and yet you've stayed. Why?

Mario: So, I remember the day very clearly when I came back to Hamilton from a role that I was doing in Toronto, as the managing partner of the Hamilton office, and our lease was up. I still remember getting the partners in a room and saying, "All of our competition has vacated. They're either some location out on the highway, easy access and parking and all that kind of stuff, but they're out of the downtown core of Hamilton. Some have, frankly, vacated and just consolidated out of Toronto." We put it to the partners to say, "What are we going to do?" The decision was made that, call it a combination of loyalty, upbringing, whatever it was, or just belief that this city was poised for something better, we made a very conscious decision to renew, upgrade our space, stay right in the downtown core and I think it provided a rallying cry, sense of pride. Notwithstanding we service businesses right from Niagara through to Oakville, sort of out of this office, it just felt like it was the right thing to do in terms of commitment to the city. We have a whole host of institutional clients that are based in this city which we felt it was really important to kind of put our money where our mouth is, in terms of a commitment to the city and serving those types of clients as well. It's worked out fabulously. I think if you look at our competitive position we would be the largest firm by far. Those marque clients that you would have in the city, the big institutions, many of them we are proud to call our clients and I do think a lot of that had to do with us putting down and reconfirming out commitment to the city.

Louis: Well, here we are in 2019, at a time in this city's history of renaissance and rebirth. What do you see from your perch in the Hamilton region that excites you about the future as it relates to your organization?

Mario: Accounting firms, and I suspect law firms are similar, is are fortunes are tied to broad economic activity. The more businesses are investing in their businesses, starting new businesses, the more we have an ability to grow along aside our clients because we get to help them through their challenges. I'm quite bullish on Hamilton and its renaissance because it is now leading to, I think, people waking up to the fact that this is a good place to do business. There are a lot of strategic reasons why you want to do business from here. I still haven't quite figured out in my own mind when some of the larger corporates will figure it, whether it's cost of real estate, access to talent, saving their people mind-numbing commutes, there are a lot of positives that I think can bring back a lot of those corporate head offices to the downtown core in Hamilton, which I was around long enough to remember those days, where there was IBM, Stelco's and etcetera, who were centered out of the core, and I think when that happens and I have to believe it will happen, that will allow us just be a real supercharged boost to the city.

Louis: Mario, thank you very much for your time today.

Mario: Lou, it was a real pleasure and thanks for giving me an opportunity to be part of this series.