"One Firm" - Leading Organizational Transformation BDO Canada LLP

Bio: Keith Farlinger became BDO Canada’s Chief Executive Officer in September 2008 after serving as Regional Managing Partner for the Firm‘s Toronto Region.  Keith has over 35 years of business experience and has held many leadership positions in the accounting industry as well as in business associations.  He was Chair of the BDO Policy Board from 1997-1998 and served on the board from 1995 to 2001.  In addition, he has served on the Firm’s Senior Management Team since 2000.  Keith has been on the BDO International Policy Board, the 5th largest international accounting network in the world, since 2008.  He was Chair of the Institute of Chartered Accountants of Ontario (ICAO) from 2006 to 2008 and was a member of the governing council from 2001 until 2009.  Keith is actively involved in his alma mater, the University of Waterloo, where he received a Bachelor of Mathematics degree in 1977.  Keith received his CA designation in 1978 and his FCA in 1997.

Organization: With over 90 years of experience providing assurance, accounting, taxation, and advisory services to a broad range of clients across the country, BDO is one of the largest audit and consulting firms in Canada.  The Firm has over 400 partners in 100 offices throughout the country and, under a Partnership structure, employs more than 3000 people.  BDO Canada is a member firm of the international BDO network through which it connects to global advisors in over 1,000 offices and more than 100 countries.

Beliefs at the Starting State: Upon assuming the role of BDO Canada’s Chief Executive Officer in 2008, and drawing upon his years of experience as a partner, Keith sought to assess the Firm’s overall strengths and weaknesses.  He identified several sources of strength which he believed to be integral to the Firm’s history that could provide a strong foundation for continuing to grow and strengthen the Firm.  In particular, Keith believed that partner relationships with clients were more personal and stronger than in most other large firms.  He also believed that the partnership model as opposed to the corporate model, which had been adopted by many accounting firms, was the right model for BDO.  As true owners of the business, BDO partners legitimately and productively contributed to and had a say in the future of the Firm, as well as the right to directly take part in and enjoy the successes of the Firm.  In addition to the partnership model, the Firm’s 100 offices throughout Canada established strong relationships within local communities.  This entrepreneurial history was a unique strength that made BDO a recognized brand throughout the Canadian market.

At the same time, and based on his own experience as well as on conversations with partners across the Firm, Keith identified a number of beliefs that he felt were not conducive to the long-term business interests of the Firm.  Most generally, he noted that many partners believed that there was no need for change.  Some seemed to believe that macro-level and international events played only a small role in their lives as partners within the communities across Canada, and that the Firm was fine as it was with highly independent offices.  Keith also sensed that many partners believed that, once you became a partner, you were a partner for life.  As well, there was a belief that the Firm’s clients were personal clients as opposed to clients of the Firm and that each partner must directly and exclusively deal with their clients.

Associated with this was a prevalent belief that clients come first above all else, including before those employees who actually participate in the provision of services.
Keith also identified a number of opportunities to make the Firm stronger.  At the highest level, he observed that the prevailing strategic plan described the structure of the Firm more than it set out a vision for BDO and a strategy for achieving that vision.  Hence, Keith’s first order of business became bringing a team together that could create a clear vision for the future and a plan to make BDO Canada a stronger, more dynamic and leading-edge firm.  The challenge was to develop a team that could create an organization capable of securing and sustaining the growth needed to successfully compete in a highly competitive Canadian marketplace.

Keith further believed that the Firm needed to become more tuned to national and international competitive market forces and that it must focus, not only what was working well at that time, but also on what would work best in the future.  Above all, Keith believed that the Firm would be more efficient and effective if it were to act in a more integrated fashion, moving from a firm of individual partners to a team approach.  In other words, Keith believed that the Firm would be more competitive and powerful in the marketplace if it no longer operated as a collection of different organizations, but as “one firm”.

Beliefs about the Target State:  Keith’s vision of “One Firm” included shared practices, systems, and procedures where tasks would only need to be completed once and in one way as opposed to each office developing a unique approach.  In Keith’s words, “It seemed clear that it would be more efficient and better to solve a problem once rather than 400 times”.  Keith also believed that clients should be seen as clients of the Firm with all of the Firm’s resources available to them.  As well, Keith believed that, in order to best serve clients, employees must come first.  He believed that employees needed to be engaged and enthusiastic if they were to provide the best and most proactive services to clients.

Keith also believed that the Firm should remain a true partnership with all partners having a say, but that once a decision was made, all partners should support it.  He believed that a top-down model that dictates from head office would not be appropriate and simply would not work.  He believed that the approach must be one that all could buy into and follow so that a single BDO brand could emerge.  Keith believed that the Firm should work within Canada under a similar model to how parent companies adjust internationally for each country in which they operate.  The model would be one wherein the National office would partner with Regional offices and a flexible team approach would prevail.

Beliefs about the Change Process:  Keith believed that he needed to create his own team in order to effect the change he wanted to implement.  He believed it would be important to attract people who would bring new ideas, be prepared to speak their minds, and be ready to promote and explain the vision of “One Firm” to all because they shared it.  Keith sought people who believed in a vision for the future as opposed to a vision of the past and he believed that it was important that the vision be clearly and repeatedly communicated throughout the organization.

Keith also believed that it was important to directly involve the Policy Board which had historically operated somewhat at arm’s length from the management team.  In his words, “I refused to execute a strategic plan that did not involve and have the full support of the Policy Board”.  With that relationship strengthened, Keith recommended that the Board appoint a task force to review the Firm’s many different profit-sharing plans and develop a single plan that would support the vision of “One Firm”.

Based on a strong belief in taking advantage of natural opportunities as they emerge, Keith capitalized on the early retirement of a senior executive to combine two of the Firm’s regions under one talented leader who was an adamant supporter of the vision for “One Firm”.   Keith also took advantage of the availability of a strong leader in Quebec to engage Canada’s French-Canadian partners in the vision and this began the process of building the Firm’s strength in Quebec where it had historically been weak.

In addition to selecting a talented COO who possessed complementary strengths to his own, Keith recruited senior human resources talent, as well as specialists in the areas of mergers and acquisitions and business development.  During the recruitment and selection process, Keith refused to settle for the “candidates” that he met.  Instead, he pursued individuals who would not only be leaders of their departments but who would also look beyond their departments to the whole Firm.  In this manner, Keith was able to build a team of highly capable senior executives who were fully engaged and intensely focused on achieving the vision of “One Firm”, and on bringing the full potential of BDO to fruition.

In particular, Keith believed that that BDO’s human capital and business development functions needed to be transformed into strong, skilled, and strategic departments that would become agents of change and powerful forces for the effective execution of his vision of “One Firm”.  Keith also recruited specialists to help design and deliver processes for enhancing engagement and strengthening communication. 

With his new people in place, Keith charged the management team with accountability for operations and created an executive team that met every two weeks to focus on strategic initiatives. The executive team established a forum for the senior-most leaders of the Firm to bring forward issues and concerns that they faced in their functional areas so that the team could capitalize on each member’s unique strengths and work together to keep key initiatives moving forward in the most effective way possible.

The first project of the executive team was to craft the vision and to put into words what the Firm would strive for.  The team drafted a vision and values statement, together with behavioural expectations, and then set out across the country to gather comments, secure feedback and build consensus.  The team then launched the final vision with an upbeat and high-energy video.  Keith created and distributed a simple diagram depicting the three strategic initiatives of growth, engagement, and reputation that would underlie successful execution of the vision.  With this diagram in hand, everyone in the Firm would not only know the vision but also be able to “see” how it would be achieved.

Keith knew that for the vision of “One Firm” to be successful it would have to be embedded into “the hearts of the partners” and he sought partner commitment by having all partners sign a commitment statement.  The Policy Board created a task force to craft a draft partner commitment statement and the leadership team again headed out across the country to discuss the meaning of the commitment statement and to gain support.  At the Firm’s Annual General Meeting, each partner personally signed the commitment on a large banner containing the 5 commitment statements.  The banner now hangs in the boardroom of the National office and all new partners sign the banner when they join the Firm.

Keith also knew that, if the vision of “One Firm” were to truly take hold and have lasting impact, he must take steps to influence the leaders of the future.  Hence, the new Managing Director of Human Capital, with the input of the executive team, created a leadership development program to promote the growth of future leaders who would understand, accept, and forward the vision of “One Firm”.  Through the leadership development and succession process, the Firm was able to develop capable leaders who shared the vision and, by doing so, effectively ensure that the positive business impacts of that vision would have sufficient life to have lasting impact.

A key element of the change process was a powerful communication strategy.  Keith and his team sought to promote and facilitate a transition in people’s thinking through communications that were consistent, realistic, and straightforward.  Communication came to the forefront with national tours (“One Visit”), quarterly progress reports for partners and staff (“One Report” and “Sum of One”), meetings for rolling out changes in the Firm (“One Meeting”), and a staff blog focusing on significant accomplishments in the Firm (“One Forum”).  In addition, “One Conversation” was created as a Firm-wide WebEx that connected everyone in the country once each year to celebrate a significant event such as the Firm’s 90th year anniversary.

The final element of the change strategy was to have a new partner compensation plan approved by the partners.  Developed by a task force, the new Firm-wide plan sought to replace several different plans within the Firm.  Gaining acceptance of the plan was challenging given that a 75% partner vote was needed to approve any changes to the compensation plan.  In order to secure that acceptance the task force and executive team developed a project plan which included first getting the support of the Board and key partners and then embarking on another communication campaign to talk face-to-face about the draft plan with all partners in the Firm.  Refinements were made based on partner feedback and the final plan was approved by the partners at the 2012 Annual General Meeting.  Subsequently, the Firm implemented a stronger partner goal-setting process to ensure that partners did the right things to achieve the Firm’s vision.  That goal-setting process was tied to the new partner compensation plan in order to ensure accountability.

Beliefs Emerging during the Change Process: When working to implement his vision, Keith encountered a strong belief that every office was different and had to be managed differently.  The belief was that local partners were the only ones that had a sound understanding of their office, people, practices, and best business strategies.  In addition, Keith encountered a belief that local offices had a better handle on core professional functions such as business development and human resources than did national experts.  Further, he encountered a strong belief that the Firm was and should be “regionally led and nationally supported” as opposed to being led by an executive management team.  The belief was that the National office was, for the most part, there to support regional partners and to provide specialized technical advice.

Keith knew that changing such beliefs would be a challenge in spite of the intensive communication plans that he put in place.  Understanding that the path would not be predictable, Keith held to his belief that taking advantage of opportunities that presented themselves to execute strategic and tactical actions that would solidify the process and show partners the value of the vision would be the most fluid, powerful, and effective path to success.  Keith also put faith in his belief that he could be successful at forwarding the vision of “One Firm” with strong team members who had complete understanding of the vision and intense commitment to executing it.  He believed that, if he had people who knew what needed to be done in order to achieve success, and who were driven to succeed both personally and professionally, he would be able to successfully change beliefs and to implement the vision of “One Firm”.  Quite simply, Keith put the best people in place and believed in them.

Beliefs about the End State: Five years into the change process, Keith observed that the majority of employees had come to believe that “One Firm” was the right vision for the Firm.  Employees could be heard talking about and making decisions with the concept of “One Firm” in mind.  Keith also sensed that more and more partners were beginning to believe in the importance of employee engagement, and the Firm’s engagement scores had, indeed, increased.  The Policy Board had approved a new strategic plan to take the Firm to the next level while reaffirming the vision along with its three strategic initiatives.

Policy Board members were generally of the belief that approval of the Firm-wide profit-sharing plan was a good indication that the partners were now onside with the “One Firm” initiative.  While there were some lingering concerns about how the plan would work in practice, there were many indications that partners were stepping up to assist one another more than they had ever done.  And through a period of difficult economic times, working together as “One Firm”, BDO continued to grow.

Keith notes that there were some long-term partners who simply could not change but that their resistance did not prevent him from moving forward.  In his words, “While I could try to win over resistant partners, I knew that it would be smarter to focus on long-term people in order to create strength for the future of the firm”.  Keith believed that new people coming into the partnership were the key to the success of his vision.  Supporting this, several of the leaders who had participated in the Firm’s newly created leadership development program had now become among the most senior and influential leaders in the Firm.  The vision of “One firm” was clearly taking hold.

Keith Farlinger
Chief Executive Officer
BDO Canada LLP

Dr. Robert Alan Morton
Psychologist, Leadership Coach