Managing Partner Simon Michaels reviews a year in which BDO took decisive action to reshape itself in line with clients' needs.
A ONCE IN A LIFETIME OPPORTUNITY
The business landscape is changing rapidly. The downturn has given us a rare window of opportunity to survey that landscape and reshape our business around the way we see the world changing. It has also accelerated the pace at which the firm is evolving, giving us an opportunity to organise ourselves to serve clients better and grow our market share.
Like every other sector, our own profession needs to adapt rapidly to a new and fast changing world. The businesses that prosper - and we intend to be among them - will be those that are light on their feet, understand the challenges their clients face, and tailor their offering appropriately.
The downturn has sharply altered clients' priorities. Economic recovery will change them again. At present, clients are necessarily tending to focus on costs rather than growth, on financing rather than infrastructure, and above all on their own clients' needs rather than eye-catching transactions.
We understand this, and are supporting our clients to succeed.
What matters is how well we and our clients adapt. The global economic shift from West to East, increased competition and technological developments have created unique opportunities. The excitement for everyone in business lies in determining how to exploit these opportunities. Our clients need to know we'll put them first, so for us flexibility and versatility are key.
The UK retains a global competitiveness. A favourable time zone, language and above all an entrepreneurial mindset give it a particular opportunity in delivering services to both domestic and international markets. It is a globally established centre for business, with a depth of skills base that positions it strongly to prosper - particularly in the professional services market.
A NEW WORLD AT BDO
We have been very clear that nothing is more important to us than our clients. That is the basis of our strategy for growth and our ambition to be increasingly recognised for providing exceptional client service. It is not enough to understand clients' needs, bring them relevant experience and be available, accessible, commercial and pragmatic. More than all this, we must show them we actually care, and spend time building long-term relationships with them.
Systems and processes alone won't do this. We can only deliver through people who are talented, skilled, able and encouraged to think on their feet. Attitudes are fundamentally important. From the firm's Leadership Team down, we want everyone to embrace their client responsibilities, whether their clients are internal or external. That is the BDO difference: delivering for our clients requires free-thinking, independent people who are empowered and genuinely want to make a difference. At BDO they do.
During the year we streamlined the Leadership Team as the business and the market evolved, and continued to have the support of two very experienced non-executive directors. This highlighted our desire to be a hands-on business: we want as many of our people as possible to be focusing on the market and clients.
To help clients recognise and address both challenges and opportunities, we have invested heavily in thought leadership. We initiate original research and publish reports and informed opinion on industry trends, and on broader issues such as tax developments. We work closely with key organisations in individual sectors, such as manufacturers' organisation EEF, to ensure we can anticipate developments and give clients proactive, authoritative advice. We have increased our investment in events such as workshops, seminars and sector conferences for finance directors, as well as technical updates for tax and audit clients.
Larger and more complex clients need joined-up thinking across a wide range of disciplines. So we have put in place a process that regularly brings together experts from across the firm to devise fresh ideas for our largest 500 clients, both mid and larger corporates, and to ensure that all our clients benefit from this thinking.
Investment in IT is important to support our clients and our people. We have created an online forum for sharing knowledge and commercial insights within the firm, giving everyone access to the wealth of knowledge that exists in our business streams, sector teams and strategic business units. We have also continued to invest in global IT and audit methodologies to support consistent service standards.
Already, clients are noticing the difference. The proportion saying they have recommended us, or intend to, has risen sharply. We want to push the figure even higher. Meanwhile, we are encouraged that our progress was recognised in November 2008 by Accountancy Age's top awards for Audit Team, Tax Team and Corporate Finance Deal of the Year.
RESHAPING THE ORGANISATION
To stay competitive we needed to reorganise the business during the year. This was inevitable, given the scale of change in the business environment - with M&A activity coming to a near-standstill while our Business Restructuring business grew by almost 50 per cent.
We are no more immune to market conditions than our clients, and had to take tough decisions, including a partner and staff redundancy programme. We sought to manage this as openly and transparently as possible, while continuing to invest in people where we saw opportunities for growth: in the public sector, in outsourcing both internationally and domestically, and in international capability. We continued to develop market-leading Corporate Finance and Tax businesses to serve existing and future clients as their markets recover. Overseas, we made a modest investment in the BDO Member Firm in India and opened an advisory office in Dubai to serve the wider Middle East. We also developed more flexible working policies and continue our efforts to work as 'one firm': more staff than ever are operating across our national and international business and undertaking client secondments to help us understand how best to service them. Increasingly, we are enabling the firm to operate without silos, providing the best senior-led teams to our clients through a supportive and progressive culture.
Despite the challenging market conditions, we saw only a modest contraction in national turnover (5 per cent) which was almost entirely attributable to the lower levels of transactions and other one-off assignments. Operating margins and underlying profitability were maintained albeit we saw a modest reduction in overall profits, primarily as a result of the costs of re-organisation. We are fortunate in being able to balance sustainability with short-term profits, making judgements for the long-term while remaining competitive.
Globally, the BDO International network has continued to grow. Over the past five years, BDO's annual global revenue has grown by an average of almost 11 per cent each year. You may have noticed that we have changed our name and we are now known simply as BDO. The UK firm was among the first to make the change to this single global trading name, which recognises that our clients are looking for consistent, seamless service at an international level and reinforces that we are a credible, capable and integrated international accountancy network. 'Stoy Hayward' is no longer part of our business name, however our 'Stoys' heritage is absolutely in-built in our culture and will always be a part of who we are as a firm and why our clients enjoy working with us.
Few observers expect the market to recover quickly. Despite some green shoots, the global economy remains fragile. But we do see significant opportunities for us to grow market share, both in our core mid to larger corporate market and in the areas where we have been building capacity: the public sector, outsourcing and other international work.
We continue working with clients to create and implement strategies for growth as their markets recover. In a climate of uncertainty, agility and responsiveness are crucial. Our business model, with its high ratio of partners to staff, gives clients more contact with senior, experienced people able to deliver the full resources of 'one firm'. In turn, the assurance of a more tailored and immediate response helps to build long-term relationships.
That is the platform on which we will grow market share. While our sector is forecast to see relatively subdued growth over the next few years, we remain confident and believe we are well placed to grow ahead of the market.