This article was first published in the June 2014 UK edition of Accounting and Business magazine.
To say that Jean Stephens lives in interesting times is an understatement. As chief executive of RSM International, the seventh largest global accountancy network, she has just managed to plug the UK hole in the network. And, having just returned from a flying visit to China to check on the progress of the newly merged member firm there, she will now be turning her attention towards Canada in a bid to fill the vacancy created when RSM parted company with its Canadian member firm last year. In Stephens’ world, problems can quickly become opportunities.
Last year, the loss of RSM’s UK member firm RSM Tenon, which was merged into rival Baker Tilly following a pre-pack administration, posed a significant problem. But now that particular problem has been solved – Baker Tilly UK will leave its own international network and join RSM, in effect bringing the old Tenon firm back into the fold, along with a similar amount of new blood.
Stephens says: ‘The UK is a critical market. RSM has a lot of history here – our headquarters are here, one of our founding members was based here. It is a top priority.’ Ahead of signing the deal with Laurence Longe, Baker Tilly UK’s managing partner, Stephens said she had looked at what the options were and had had ‘a number of discussions’ but ultimately was able to persuade Longe that his firm’s future lay with RSM’s network.
It is a network that stretches across 106 countries, is made up of 32,000 professionals and has a combined fee income of US$3.7bn. Last year, some 14 new member and correspondent firms joined, and like-for-like fees rose 5% in local currency terms for the year to 31 December 2013.
Snapping at the heels of mid-tier rival Grant Thornton International in terms of fee income, RSM achieves its success, says Stephens, by getting its individual member firms all pulling in the same direction. ‘One of our key areas of focus has been on having our firms work together on an ever increasing basis to grow the amount of international work they do together. The amount of international referral work has grown 18% in the last year, and I’m very satisfied with that because that is the area where the network can contribute, helping the individual firms grow their business through international clients. This year it will probably come in at over 20% growth, and that is music to my ears.’
Such contributions include putting in place an infrastructure so there is a common approach to the firms’ markets and pricing methods, as well as best practices for tendering. ‘While the firms are still all independent practices, they are aligned ever more closely,’ she says.
This alignment is embodied in the four cornerstones that Stephens promotes among the member firms: quality, brand, business development and people. She sees the four as crucial in creating a strong alignment of individual firms. It is not a unique proposition, but it is one that works well. ‘Every network is on the same journey,’ she says.
But is it really possible to create a single path for firms born out of different cultures, different regulations and different economies? ‘This is the most interesting part of the job, trying to get everyone closer together in a way that makes sense to members,’ Stephens explains. ‘Is there an RSM way of doing things? Absolutely there is.’
The process begins with recruitment into the network, carries on with common technology and training, and through to building strong intra-network relationships. ‘If people don’t know each other they are not going to refer their biggest clients,’ she argues. ‘This builds trust, and anything we can do to keep building that trust is going to help.’
She points to the RSM Academy for future leaders, which brings together professionals from around its network, as one way in which the central RSM team can add value to the individual firms. ‘This is a leadership development programme where senior managers and partners come together and learn about working in different cultures and the RSM way of doing things. They get to know RSM and their colleagues.’ She stresses that the success of the network should be put down to a central team working alongside regional leaders rather than a single individual.
Part of getting to know colleagues around the world inevitably involves a good deal of travel, and Stephens is no stranger to international departure lounges. She reckons she spent 80% of her time abroad last year, a figure she is determined to bring down this year. She recalls how she travelled to Beijing for a single meeting, only to step back onto the plane to head home again. She makes such commitments because of the importance of face-to-face meetings as a way to build trust among network members and in countries such as China – RSM’s Chinese member firm last year merged with Crowe Horwath China to create Ruihua China, currently ranked third largest firm in the country.
‘Work continues on the merger and we are down the road towards having integrated processes, offices and teams,’ she explains, adding that the firm will be a member of both RSM and Crowe Horwath International, another top 10 accountancy network, ‘for a few more years’.
Stephens flew out to Beijing and Shanghai shortly before announcing the Baker Tilly deal, and saw first-hand how the Chinese economy is faring – it has been growing at a phenomenal rate in recent years, so any slowdown has to be seen in the context of sluggish growth in regions such as Europe and the US.
She pauses here to comment on two accountancy-specific issues relating to China. The first is the ongoing difficulty with the US over access to audit papers, which has seen the large international networks fall foul of the US Securities and Exchange Commission. ‘This will have to be dealt with,’ she says. The other big question is whether a challenger to the dominant accountancy networks, notably those of the Big Four, will emerge from within China. ‘Yes, it is a possibility,’ believes Stephens, ‘but it is some years away, and will take time to develop.’
China is not the only focus of the network’s attention. Africa is also seeing significant activity, though it is still very much a work in progress. ‘We do a lot of mentoring with the firms,’ Stephens says. Capacity building is a challenge for the profession as a whole, as firms seek to keep up with the continent’s rapid economic growth.
She also touches on a couple of other profession-specific issues such as vicarious liability – where an accounting scandal spreads from a member firm in one country to affect the whole network. ‘It is still an issue, but we have our risk policies, checks and balances in place,’ she says.
At the same time, there is the vexed issue of International Financial Reporting Standards (IFRS) convergence. The networks need to ensure that member firms are applying IFRS in a consistent manner against the backdrop of continuing divergence in a number of areas between the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). ‘It is an ongoing situation,’ Stephens says.
The network has understandably been following the debate on auditor competition and choice that is being fought, notably at a UK and European level. ‘The debate has been healthy, and it is now on everyone’s radar,’ she says, but adds: ‘The changes are not as widespread as initially envisioned, and the debate will continue.’
There are, however, other wider business issues on which Stephens has been particularly vocal – diversity and equality in the boardroom, for example. In March this year, to mark International Women’s Day, she recalled that her appointment as CEO of RSM in 2006 was heralded as one that ‘broke the glass ceiling’ of international accountancy networks. But nine years on, she has come to realise that ‘real change cannot come from another person nor be enforced top-down’. Instead, she says, ‘it must be something that every individual seeks for themselves, man or woman’.
She acknowledges that progress has been made, but the fact that it is an issue that is reported on ‘every day’ shows that more needs to be done. ‘Quotas of women on company boards could be helpful, but we need to change behaviour and culture,’ she argues. She believes that the accountancy profession itself should have made more progress than it has, noting that women make up 50% of those entering the profession but at the highest level ‘they are just not there’, although she adds: ‘But if it was easy, we would have solved it by now.’
Stephens has been based in London since 1996, having trained as a professional accountant in the US before joining RSM founding member firm McGladrey in 1994 as a senior manager.
A joint US/UK citizen, when she is not running the international network she is running in her spare time. ‘I’m currently building up to a half marathon,’ she says.
The lifestyle of the travelling executive undoubtedly comes with positives – ‘and things that are not so positive’, she says. ‘It might not be perfect for most people, but it’s perfect for me. I tell people that I’m leading the life I was meant to lead.’
It is a life that Stephens clearly relishes – travelling around the globe, solving problems and providing leadership. As the network celebrates its 50th anniversary this year, she will be pleased that the UK piece of the jigsaw has been fixed. Now she will turn her attention to Canada, as well as ensuring the smooth integration of Baker Tilly in the UK and developing the network’s China presence. As she says: ‘It’s a short to-do list of very big things.’
Philip Smith, journalist