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Why Culture is Key to Driving Innovation with Lynne Doughtie, KPMG

Beth Kowitt, Senior Editor, Fortune and Lynne Doughtie, Chairman & CEO, KPMG LLP

Professional services organizations have a bird’s eye view into how the broader marketplace is addressing the persistent need for innovation. Lynne Doughtie will discuss the challenges that large organizations face and how focusing on building a culture that fosters innovation can create a strategic advantage.

Elected to the position of Chairman and CEO of KPMG LLP in 2015, Doughtie leads more than 31,000 partners and professionals in the United States who provide tax, audit and advisory services to many of the world’s most iconic companies. She personally drives KPMG’s inclusive and purpose-driven culture, and has made innovation one of the firm’s key business priorities.

Key takeaways:
  • Learn why the right culture is critical to innovation
  • Understand how to inspire and integrate innovation into your business priorities, and measure it appropriately.
  • Hear what business leaders say are critical challenges to innovation and how they can be met
Show Transcript

Beth:                   Thank you so much for joining me-

Lynne:                 Thank you.

Beth:                   ... up here. So you took on your current role in 2015, but you've been at the company for more than three decades at the time?

Lynne:                 Why are you telling them that?

Beth:                   Well, this is important context. This is important context. So let me start by asking you, when you took on this role, how did you decide what your priorities were going to be, especially having this, sorry, three decade background?

Lynne:                 You said it again. Yes, I'm old. Yeah.

Beth:                   Seasoned.

Lynne:                 No. Seasoned, mature. I'm very mature. It really, having spent your entire career ... so I did start right out of college at KPMG, and that was 33 years ago. It really was a time when you think about what an honor to be able to lead this organization that you have been a part of, that has actually helped to shape who you became as a leader.

Lynne:                 One of the thing that I did, actually, kind of going through that process of the chairman and CEO selection process, I actually wrote a letter to the firm, to KPMG. That letter was really all based on gratitude, because as I reflected on these three decades and how much that this organization that I had spent so much of my life not only shaping all these different skillsets that I had learned over this period of time, but also shaping my value system and what my ... a continuation of my parents, in a way. So I really felt like the firm's really helped me grow up to the leader I am today.

Lynne:                 So to be able to then kind of take that sense of gratitude into this time period that is changing so dramatically and all the disruption and to be able to kind of give back to ensuring that we are future ready for what's coming next. Which, as I think about those last 30 years and the changes that are happening now over the next five, it's just changing so dramatically, that we all need to be prepared for that.

Beth:                   So were you right, when you said what was coming next?

Lynne:                 Yeah.

Beth:                   If you look at that sort of five to 10 year timeline you laid out, what was it? And has that accelerated even faster than you thought it would?

Lynne:                 It has dramatically. I think about, even in 2015 when we were talking about things like robotic process automation, artificial intelligence, and where that has moved in such a short period of time, it's mind blowing in some respects.

Lynne:                 So one of the aspects of what I thought was a critical priority for our firm, and we actually called it having innovation at our core, that innovation could not just be, you know, you have a group over here, the think tank that's kind of looking around the corners, but that it had to be embedded, and everybody had to sort of feel this sense of responsibility for innovation, because it requires so many different perspectives.

Lynne:                 What we talked about with, just in the U.S. over 30,000 people, you think about all those different jobs that are happening every day, and one person may be the key to thinking about how could we be doing this differently that brings more value, more efficient, more value add?

Lynne:                 So we created a dynamic that, look, it's everybody's responsibility, embedding it in goals, etc. So innovation at the core was a key part of the strategy.

Beth:                   So how are you able to do that? How can you reach inside the organization and find those people who are so critical?

Lynne:                 Well, one of the things we did, Beth, that really helped to kind of bring it to life, was that we did this Shark Tank-like competition, where basically we opened it up to everybody to say, "You come up with the ideas on what you think we could be doing better, whether it's delivering to clients or whether it is an internal process. Any idea is fair game." And we opened it up to everybody.

Lynne:                 So teams started flooding their ideas in. We had a competition. We had our leaders who ... we actually kind of did the video of like the TV show. We picked finalists, and they came and they presented their ideas. Then, more importantly, we funded the top ideas to say, "Okay, here's some money. Go bring it to life." So I think that demonstrated to all of our people, and we actually broadcast the show to everybody across KPMG, but it demonstrated that we're serious about, we want to listen to the ideas and actually do something with those really good ideas.

Beth:                   So you're in a unique position here, because you're also talking to a lot of clients who are struggling with the same thing. What do you hear from them? What are some of their biggest challenges?

Lynne:                 Yeah, I think every single organization is really trying to see around corners, what are those disrupters that could either propel them forward or put them out of business? So we spend a lot of time with clients around the concept of how do you really harness the most that you can out of not only seeing those signals of change, but then how you make decisions around them.

Lynne:                 I think one of the areas that is really big ... and this kind of gets back to what's the culture of your organization? Is your culture one that is going to nurture this sense of innovation? I think collaboration is really big in this space, because I think really gone are the days that you can just do it within your own four walls of your organization and being open to building that ecosystem where you have a number of external partners who are helping you sort of co-create. You can't do it all by myself anymore. You can't be the best at, whether it's leveraging disruptive technologies or the like, but building those ecosystems is really been very critical that we've seen.

Lynne:                 And also, just having kind of the space to create and think differently outside of your typical conference room and your office is really important as well.

Beth:                   Let's talk about that, because you've made a huge investment here. How did you get the idea? And tell us a little bit about what this space looks like.

Lynne:                 Yes, so what Beth is referring to is, we have under construction at KPMG a Learning, Development, and Innovation Center. It's right outside of Orlando. We're building this space to be able to foster a continuous learning. You may say, "Well, isn't that kind of going against the trend of this should be realtime and micro-learning?" But I really believe that we have found that ... You know, we do a lot of training at KPMG. You're constantly retooling and building new skills. We have been at the mercy of, you know, can you find the best hotel setting that you can equip with the latest technology? And we were spending a lot of money on that, but not having the right environment to learn.

Lynne:                 And so, building this, this is a 800 square foot, 55 acres. We can house over 1,000 people in this space. But equipped with experiential learning, where we can have the latest technology that will allow for new ways of learning. We can also bring clients into this setting as well. But you know, it's more than just skills building, it's also about reinforcing culture and values and what you stand for. You kind of have this place that's ours, that you can kind of bring your whole self. There's also a big component of this, too, that's around wellness and hiking and team building.

Lynne:                 So I can kind of think about, you start as an intern. You're kind of going back to this same place that enables you to celebrate the heritage of KPMG, which is a long one, and allows us to really reinforce our culture.

Beth:                   I want to go back to what you were saying, though, about how this is a little bit against certain trends. I mean, you live in this digital world. We were about, backstage, about how much traveling you do. I'm sure you're calling in a lot, remote. Why was it so important to have a physical space for this? Like a place where people go?

Lynne:                 Well, I think one reason is, we control it. It's our space. We own it. We can put the kinds of technology that we need. We can have sort of the space that we think is the most conducive for what training is going to need to look like for the future. So us having that control in that space was really ... that was one of the key drivers for us.

Lynne:                 Then all the intangibles that come with that. I mean, we're 120-year organization. We also have all of these really cool artifacts. So one of the things about this space is, you can ... We're planning to have our own museum. You can kind of celebrate the history of KPMG and see that and feel it.

Lynne:                 I think this space is something that for generations to come, will create kind of that connection point and those bonds. And the places where, you know, I mentioned collaboration, the importance of that for innovation. That's where collaboration happens. When you're face to face with people from all parts of the country getting together to solve problems, different perspectives, I think it's a really great opportunity for us to really celebrate the inclusive firm that we are.

Beth:                   So we've been talking a lot today about innovation, creating culture. How do you measure these things? I mean, this is something that is a little bit more intangible than other business metrics. How do you make sure you're doing it right?

Lynne:                 I was at a session this week with all CEOs, and one of the CEOs was talking about culture. This question came up. It was like, "So, how are you going to measure that?" There wasn't a really good answer for that, because it can be very intangible. This is an area that we have done quite a bit of work over the last year, where you actually really can't measure what you don't know.

Lynne:                 So one of the things that we did this year was to go through a very ... and this was using a third party, because we wanted it to be very objective and really get from our people, what is it like to experience KPMG? What are the behaviors that you're seeing? So we gathered that information. This was about a five month study to get us to the starting point of, what is the culture? What are people experiencing? There was a lot of great feedback. KPMG has a great culture. That's why we're on this list.

Lynne:                 But it's really important to identify, where do you have some vulnerabilities? Where are there opportunities to improve? Then you can get very specific about the measurements that you want to have around, whether it's do you have the kind of teaming, do you have the incentives that reward the teaming that you're looking for? And then finding where you can have sort of those pulse surveys throughout the year to measure those very specific things that you're trying to drive change in.

Beth:                   So let's take a second and talk about some of the challenges that you faced as CEO. I mean, you've had to deal recently with some ethical lapses of some individual employees. How are you talking about that internally, and how do you make sure that employees are living up to these values and the culture that you're trying to create?

Lynne:                 Well, I think, Beth has a good point, because any time you have an organization with thousands of people, I mean, we're a microcosm of society. And look, we're humans. There are going to be situations where people make mistakes and they fall short of the values.

Lynne:                 We had a situation two years ago related to that. It's really difficult when you go through that. I think the important thing for all of us to think about is, how you as a leader, how you as an organization respond in those moments. For us, responding quickly, decisively, self-reporting and investigating, doing all of those things sends a very powerful message to your people that there are certain values, and especially your core values, that they're non-negotiable and there's zero tolerance for. So you can use those moments to communicate a really strong message about what the firm stands for. It doesn't matter what level you are, that there's consequences for that.

Lynne:                 But at the same time, I think you can also use those moments in time where you're faced with a difficult situation to really learn from it, to use those as teachable moments for the entire organization, to say, "This happened, and this is not okay." This is continuing to sort of reinforce the things that are what you stand for and what's important.

Beth:                   So we are running out of time,-

Lynne:                 Fast.

Beth:                   ... but I want to circle back to where we started.

Lynne:                 Okay.

Beth:                   Not to put too fine a point on this, but you've been at the firm for a long time-

Lynne:                 [crosstalk 00:15:53]

Beth:                   I'm sorry, I'm sorry. I'm curious, what do you do individually to keep making sure that you're still innovating, that you stay fresh?

Lynne:                 Oh, yeah.

Beth:                   Yeah, go ahead.

Lynne:                 I think that's a great point, because I do think sometimes people can get the impression that you've reached some milestone and you've sort of arrived, then you can kind of kick back. I have not found any job like that yet. I'll keep looking for that.

Lynne:                 But I think that in this environment that we're all in, this continuous learning mindset, I mean, you will not be successful if you don't have it. I think that I am constantly learning. As I think about what is the future of work, I mean at KPMG, we're all people. We're not manufacturing anything other than the most extraordinary people. How we continue to foster that? I mean, there's so much new thinking around that and new ways of thinking.

Lynne:                 Also, ensuring that you have the best minds at the table, different minds from different backgrounds to influence that is so important. So I do think individual skill building, continuous learning, but also knowing that I'm not going to know it all, and I better have the right team around me that can make sure that we're staying on top.

Beth:                   Lynne, thank you so much.

Lynne:                 Thank you, Beth.

Beth:                   Really appreciate it. Thanks. Okay.