What Happened to Ethics, we ask “Professional” Services Providers!

Bad buying obviously covers every potentially sector and category, but I have had a long interest in professional services spend and procurement for many years, including as co-author of “Buying Professional Services”, my first published book.

A couple of recent stories highlighted that although most of the people working in that sector are highly educated and intelligent, they can still behave just as badly and even illegally as any petty criminal.

The first story was about a survey of lawyers run by the “rolllonfriday” website, anonymous of course given that 35.5% of the respondents admitted that at some point they have been guilty of adding time that hadn’t been incurred to their time sheets (which then means the invoices to clients are also inappropriately inflated). As the report said,

Thirteen percent admitted they did it regularly, 12.6% confessed to being “occasionally” culpable, while around 10% said it was something they had done, albeit “rarely”. 

Well, that probably won’t come as any surprise to most of us, but it was interesting to see our suspicions as cynical buyers confirmed. It reinforces the view that whenever possible, engaging professional service providers on some sort of fixed fee, outcome, output or success based basis is better than a simple “time and materials “ hourly or daily rate.

However, it can be difficult in the world of law, because we often don’t know just how much work will arise from a particular assignment, particularly if other parties are involved (litigation for instance). So it is hard for the parties to arrive at a sensible view of risk, which you need in order to agree a fair fixed price.

You should always look for where you can define some sort of clear work package and agree a price for that, but one thing buyers can also do is challenge their provider if bills look “padded”.  Many people feel nervous about actually digging into a statement and saying to their lawyer, “so did you really spend 30 minutes on that two-line email”?

Now they are unlikely to immediately back down and reduce that bill, but next time, they might just think “perhaps I’ll just put 20 minutes for this email” because they know you will challenge. So don’t be scared to be a nuisance and analyse billing carefully.

The second piece of news was even more shocking. Consulting and auditing firm KPMG was fined  in  the Netherlands for endemic cheating around professional examinations taken by their staff. As the Times reported, “The Public Company Accounting Oversight Board in the United States found that between 2017 and 2022 hundreds of KPMG workers in the Netherlands, including senior partners and managers, had shared questions and answers with one another. This included for exams that they had to sit to test their understanding of professional ethics”.

Cheating on an ethics test! You have to laugh really. But I don’t understand why it is the US regulator doing the fining though rather than the Dutch equivalent.  

To make it worse, KPMG lied to the investigators, saying they knew nothing at senior levels about the answer sharing – but it turned out two board members had indulged in these activities themselves! A $150,000 fine was also imposed on Marc Hogeboom, who used to run KPMG’s Dutch audit division, and he was banned for life from working for any firm that audits American public companies.

These people are auditing public companies and giving investors confidence (or otherwise) in those businesses – so having the right skills and training is critical beyond just KPMG’s own operations. The cheating means there may be incompetent people doing important work, which is not a good thought, and of course it means buyers have paid for people whose qualifications (which largely determine the level of fee paid) were bogus. Maybe some big clients should sue the firm now.

It seems that it isn’t the first time this has happened and KPMG is not the only firm that has transgressed. Last week the American regulator also fined Deloitte’s businesses in the Philippines and Indonesia $1 million each for answer-sharing on professional tests. And two years ago EY was fined $100 million by the US Securities and Exchange Commission, because a “significant number” of its American auditors cheated on the ethics component of their Certified Public Accountant exams.

The lack of ethics and morals of those involved is quite shocking for supposed “professionals”. Whilst the latest fine was substantial, it does not seem to be enough really to reflect the seriousness of the crime. I think it would have been appropriate to ban KPMG from all audit work in the Netherlands for a few years. I also think maybe a few jail sentences for the most senior people involved might have made others sit up and take notice.

So the advice to procurement people is this. As with the lawyers, don’t necessarily believe everything your consultants or auditors tell you, or everything they put on the invoice, just because you think they are ethical and trustworthy professionals. Not all seem to fit that description.