Transcript | PULSE Episode 02
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Adam Smith:
I'm pleased to host this second episode of the PULSE podcast series by Wisdom Board, a series of personal conversations with experts throughout the leadership, governance and board communities. I am Adam Smith, the founder of Wisdom Board, a pioneering community-centric platform providing thoughtful digital insights enablement to board directors and also their member CEO and stakeholders.
Adam Smith:
We founded Wisdom Board in the summer of 2020, with a mission to empower private company directors, leaders, and owners to optimize and fortify their governance to perform best practices, mitigating conflict, empowering leadership, and ultimately growing shareholder value. I'm here with Tim A. Stiles, a partner at KPMG and a friend and sponsor and supporter of Wisdom Board in New York. Tim, how are you today?
Tim A. Stiles:
I'm very well. Thank you for taking this time to talk. I appreciate it.
Adam Smith:
That's great to have you. I'm going to tell our audience a bit and give accolades about you briefly. Then put in conversation to follow. Tim, is the global chair of the firm's international development assistance services practice, and also is responsible for delivery of those services to hundreds of organizations around the development sector. Originally started at the firm in 1990. Is that right, Tim?
Tim A. Stiles:
Yes, 19... A long time ago.
Adam Smith:
Long time just the other day. Then you went on to form the Global Grants Practice, and today you've had about 30 years of services to many taxes and organizations, including higher education and hospitals, museums, foundations, of course, NGOs and other multinational operations.
Adam Smith:
You also are the chair of the several other areas at least recently, or currently, including the Global Public Sector Tax Steering Committee. You work with the UN representing the firm. Then you're also working in the public sector tax area, which has had about 4,000 grants over the year. How do you keep it all straight? How did you join the firm? And what's your journey been like since you came on?
Tim A. Stiles:
Yeah. Thank you, Adam. It's always embarrassing to hear your CV read back to you, but I... As you said, I joined the firm in 1990, actually, 30 years ago in November, and so the journey has been really a lot of fun.
Tim A. Stiles:
I came in as a manager in Seattle at the time. What has been interesting to me was the opportunity to start and or launch new programs within KPMG. In 1995, we launched a program aimed at exempt organizations, so I did that. And, as you've indicated there, a number of things that happened along the way where I had ideas, and I took those ideas to KPMG, and KPMG's been very good about listening to its people, to bring ideas for doing business differently. So the global grants program that you referenced, the global aid and development program were ideas that I took to leadership, and they said, "If you think this will work, let's give it a shot." And fortunately, they've worked and so that's where I am today.
Tim A. Stiles:
It's interesting, just on my current role, which is responsible for the operations of KPMG Spark. KPMG Spark, as you know Adam, but for the listeners is a software-enabled, cloud-based, outsourced, managed accounting service, and the firm about 15 months ago asked me to go over it and help support that part of KPMG.
Tim A. Stiles:
The reason for that was as I was working with Spark, which automates financial transactions, bookkeeping, and reporting. And I was working with them, to help improve that platform for non-profits because non-profits are, frankly, there aren't a lot of services and organizations out there that provide really good strong tools for them that are affordable. So that's what I was doing.
Adam Smith:
Okay. So you started really with the non-profit world that you cover, knowing that they have a lot of organizational administrative needs, but now the firm integrated and expanding Spark to be available to any form of SME or small business. How many clients are you serving and where is the organization going to scale over time?
Tim A. Stiles:
Yeah, it's interesting. The organization is scaling right now. We are seeing client acquisition at about... It's close to 5% per month, which is really, really great. And, as you said, it's a huge mixture of different types of clients. It's mom-and-pop startups, if you will, people working out of their own house or garage. It's nonprofits, it's family offices, it is every type of sector, agriculture, we have farms and so on, all the way up to very large organizations. Spark's largest client actually is out of Chicago, and they'd be more than 80 million a year in revenue.
Adam Smith:
I think it's quite unique. I'm using it, and I had some friends are as well, and I think the branding and the website are really very user-friendly and a very good value. I see that there's also unique human capital, real-time people available for clients, and I found it very, very user friendly, which makes it unique, of course, when you compare it to QuickBooks or other off the shelf services. What does Spark want to be known for in the market as a builders brand?
Tim A. Stiles:
Yeah, it's a great question, and it probably boils down to probably three primary things. Number one, most of the off-the-shelf things are do-it-yourself. So when you download the software or whatever, you still have to do the work.
Tim A. Stiles:
Spark is not a software that's downloaded or we don't license it. What you get when you sign up as a client is you get a dedicated, onshore, meaning US-based account service team. So you get a customer lead, which is like a bookkeeper. You get an account lead, who oversees them and you get a CPA assigned and they're there for you. And as part of the monthly subscription, they're available to you. You can ask them questions, they'll answer and you don't get any up-charges or anything like that. So that's one is that, that available real-life team.
Tim A. Stiles:
The second thing that we want to be known for, of course, is KPMG. Most businesses think KPMG is out of their reach because they're too big or too expensive. This is a very purposeful investment that we made to be able to reach out to the small to medium-size business enterprise and provide them tools and solutions that work for that business and their pocketbook.
Tim A. Stiles:
Then the third thing is really tied back to Wisdom, and that is that we find that a lot of businesses spend a lot of time doing transactional things and handling the day-to-day, rather than taking a step back and saying, "What about the governance, the oversight, the financial analysis of my business?" So what we want to be known for is taking those day-to-day responsibilities off the plate of the business owner or the business leaders, and allowing them just like Wisdom board puts forth to focus on the entire organization. How does it run better? What are the financials telling me about what I need to do?
Tim A. Stiles:
So those three things, I think, are critical and that's really where the tie into Wisdom Board came.
Adam Smith:
That's great, and, well, we're lucky to have you one of 219,000 employees in the firm. I think we're lucky that you're you're involved. I actually started working with KPMG way back as you know, in 1997, and Counsel Harlen, we worked with a former head of your investment management practice and David Seymour, then went onto the board and is a real gentleman, and he took really good care of us, as well as your transaction services groups. Also you have a solid investment banking and capital markets practice over the years.
Adam Smith:
How do clients at Spark work with you and your team and integrate within the broader firm? Are there other areas of KPMG that can get involved with these small businesses?
Tim A. Stiles:
Yeah. Another great question, and that was part of the strategy of buying this company. We actually bought Spark. It was called Bookly. We bought it about two and a half years ago. One of the primary reasons was we know that data and technology are disrupting traditional industries and sectors. So if you think about the newspaper sector, right? They could have looked in the rear-view mirror and seeing the internet coming. Some did, some didn't.
Tim A. Stiles:
But as an accounting firm that's delivered services in a fairly consistent way for about 100 years, we're looking in the rear-view mirror. So we looked around to identify companies that were disrupting the accounting industry. So that's how we identified Spark, which was called Bookly back then we rebranded it.
Tim A. Stiles:
But to your point, it's an opportunity, as I said, to provide information and support to small to medium-sized business enterprises are our key market, is one to 20 million in revenue and five to 50 employees.
Tim A. Stiles:
But the really great thing about KPMG and Spark, first of all, we're part of KPMG. We're not a separate legal entity. But when issues come up, as you've just asked, we can reach over the fence as I like to say, to KPMG property, get support, so this happens a lot. Businesses, they want to get a research and experimentation credit support, or state and local tax analysis support, or financial advisory, or a SOC 2 readiness. We can reach over the fence, get that expertise, and then it can be provided to these organizations. So it's an easy path of access to KPMG without having to negotiate that path, if you know what I mean, because you're already part of KPMG.
Adam Smith:
That's great. How about the small cap companies, the private companies that we focus on, the 6 million private companies in total that I think that we probably are paying attention to the several 100,000 private family-owned businesses that are within that 10 to $100 million, $10 million range. What happens when a client is a bit larger, or has greater sophistication, or needs a go beyond the Spark SaaS template and maybe is a couple of 100 million of sales and has a couple 1,000 employees? How do you navigate them and introduce them into the organization, which is so large?
Tim A. Stiles:
Yeah. There are two pieces to that. The first one is that if a company comes in and starts with Spark, we consider it a success if they graduate out of KPMG Spark, and we've had a number of these. They started small, they grew, and they got too big and too sophisticated for the Spark platform. Usually, we're providing some support to them through KPMG property, but we can hand them off to other parts of KPMG. So that's one piece of it.
Tim A. Stiles:
The other piece, particularly to your comment about family offices, we do a lot of family office work at Spark. What Spark is for them is more of an enabler. So oftentimes within a family office structure, the investment side is very sophisticated. They have different people, they work with money managers, but it's the personal side. It's the residences, the boats, the day-to-day kind of expenditures. Spark is a great tool for helping sort through all of that.
Tim A. Stiles:
So you actually have two teams. You've got the primary investment team that's doing their thing. Then we come in and support on the true family kind of personal side to square the corners and all of that, and make sure that the investment side and the family side [inaudible 00:11:48] well to each other transactional.
Adam Smith:
That's great. We're seeing, having covered fandom, family offices, small to mid-size family offices for years as limited partners, general partners, collaborators, and increasingly in the governance side where they have more and more private holdings that are below the radar screen of the larger vendor board or needs. And they're acquiring operating companies in this area we're talking about. Camden and UBS had mentioned that the average rate of operating company acquisitions by family offices is somewhere in the two to three year and average. They hold eight or 10 companies and that's only for a half a billion dollar family office. So tell us about that practice in terms of the super entrepreneurs and the family office practice that at KPMG, let's say a client graduates from Spark, what type of services could the single family office receives from KPMG, the operating companies?
Tim A. Stiles:
Yeah, that a great thing. And I will say right now, I don't run the family office practice at KPMG. We have other folks that do that. So I won't call myself the key specialist here, but they offer a huge range of services, right? It's everything from compliance through to advisory and analysis. So for example, if the family office is using money managers, we don't advise them which money managers to use. We can assess how they're performing.
Tim A. Stiles:
Are they performing well or not? Transactionally, as you just alluded to, there are a lot of transactions that happen in these family offices. They can get quite complicated. So coming with different ways to structure those transactions and things like that is another area where KPMG is quite good. And of course, really tricky tax questions, as we know happen in family office.
Adam Smith:
You got that one covered that's for sure. Let's say back to the cultural side of KPMG, it's always been a firm I think that cares about its culture and its people, and it states directly on your website that it's really seeking to contribute positively to your client success, but also society at large and being involved in making the lives better of your clients. You're also involved in one or more governance, diversity committees as well? What should our audience know of KPMG and its approach to the client relationship and what type of culture is within the firm and its priorities in that area?
Tim A. Stiles:
Yeah, again, a great question. I mean, the culture of the firm too, of course, is around values, excellence, integrity, courage, working together. Those things are really important transparency. So that's what we try and live. We actually have a chief culture officer, believe it or not, that looks at all of these things because we want to make sure that our employees are modeling these behaviors and living them and believing them. And we want our clients to see that too, because we think our clients care about that and they do based on what we see.
Tim A. Stiles:
As you've said, we have all sorts of other tools or avenues to try and demonstrate to clients and the community and the capital markets that we are living those values. So for example, as you know from your Wisdom Board experience, we have some [inaudible 00:15:23] board leadership council, which is available to people so that they can enhance and participate in board building and board information on exercises and knowledge sharing. And of course, diversity inclusion is huge at a company like KPMG. We try very, very hard to make sure that our teams model and reflect the cities and the places where we work and operate. And it's a very important part of what we do.
Adam Smith:
That's impressive. I was reading recently that your current CEO, which has been on the board of the company for 11 years, who just unanimously voted again to remain as CEO and chairman, Bill Thomas, what are in this complicated era of COVID and civil and ethical and governance and diversity and gender and climate and ESG, tell us what your thoughts are on the firm's priorities and how that relates to some of you are non-profit and your Spark clients?
Tim A. Stiles:
It's hard. And you're right, Bill Thomas is our global chair. In the U.S. we have a chair also and that's Paul Knopp. And the firm is very, very aligned across geographies. As you said that with 200 and 200,000 plus employees worldwide, keeping all of those things aligned and all of those initiatives aligned is difficult at times. But I know Bill personally, I have been an attendee at the World Economic Forum in Davos, Switzerland, a number of times and worked with him. Maybe anecdotally, the thing is that he cares. And so going back to the COVID-19 thing, the primary messages that come out with him, and I don't think he's wildly different from a lot of, if you will chairs of companies, but the messages have been in first around our people. And that says a lot about a company when their primary cares about their personnel, that's important, and then trying to help clients actually, and customers and the public navigate this area.
Tim A. Stiles:
We have a huge commitment around climate change. KPMG U.S. announced, I think last week, and maybe it was even KPMG global I don't remember but, we will be carbon neutral by 2030. Okay? I'd like to see it sooner personally, but it's taking those steps and moving in the right direction. We have significant programs where we look at our teams of employees to make sure that they're diverse and that those people that are in diverse groups and perhaps underrepresented diverse groups or marginalized diverse groups are getting the opportunities to advance in the firm.
Adam Smith:
That's great. He seems like a very inspiring leader and has a big way to carry in this consolidating industry of accounting now, down to the big four. Just briefly, what do you think is the most interesting part of the accounting industry and it's evolving and what is your favorite part of working at KPNG? Actually, I think as we're talking, the firm has grown from 219,000 to 220,000. So that's where you are now.
Tim A. Stiles:
Yeah, wouldn't surprise me. I was a lot smaller when I joined years ago. I think what's a very interesting thing is where is technology going? How is that impacting us? And how are we going to respond to that? And how do you manage huge volumes of data for the benefit of clients and for the public? And there's a balance between what you can put out there publicly, right? Because we obviously have safe responsibility for safeguarding financial information, et cetera, but there are lessons we can learn.
Tim A. Stiles:
So how can we use data and innovation to continue to disrupt what we do and provide better services to clients? Personally, I'm enjoying leading Spark. It's a technology, basically it's a FinTech startup, and that's how we operated. It's ring fenced within KPMG. And we are using it to learn lessons about how we can better deliver our services and better serve our clients.
Adam Smith:
That's great. Well, legacy continues from the original kernel of a small company. I think somewhere in Europe, perhaps in Bristol in 1818. I always find it interesting that the KPMG acronym is so well known, but it actually is otherwise known as client developed peat, Marwick, Gardella, which is quite a mouthful. Perhaps you should start using that in your more intimate conversations.
Tim A. Stiles:
Yeah. That I always lose them. A lot of times we ask people that work here, what does the KPMG stand for? They don't even know because we don't focus and emphasize that anymore.
Adam Smith:
That's where the brand equity comes in. It's working. It's really a pleasure to have you as a guest on our PULSE podcast series. The first installment of such as we expand our content and offerings to the leadership community of small and mid-size probably held companies, we're dedicated to supporting the leadership and board of private companies given that they're often lacking those services to them from us or vendors. And KPMG has many, many offerings to this audience. And we look forward to working with you more ahead in the future.
Tim A. Stiles:
Thank you, Adam. And thank you for inviting me to do this. For those people that are listening, I really do want to encourage you to go to the Wisdom Board website, to go to LinkedIn and to look at what Wisdom Board is doing. We were one of the first patrons, I believe to Wisdom Board for sponsorship, and it's a great initiative and that's why we're involved. And we'll continue to support you, but also wish you great success and just want to encourage people listening to participate and get involved.
Adam Smith:
Thank you. I can say the same thing about you as well. Have a great day.
Tim A. Stiles:
You too. Thank you.