KPMG Cut The Partners Who Cost The Most

KPMG Australia has a very simple cost problem. The expensive people are at the top, the consulting market is soft, and the audit scandal is still burning through leadership trust.

The Top Partner Band Got Smaller

Chief executive John Sams has reportedly cut the annual cost of KPMG's senior partner ranks to $13 million. The firm's internal partner-band list showed that partners in band 11 or higher fell from 17 last year to about 10.

That is where the money gets loud. Profit distributions reportedly start at $1.3 million a year for band 11 and $1.6 million for band 12. Sams has also cut the bands of some senior partners.

Partners were told average income could fall by 20% this financial year. Based on last year's average annual distribution of $717,000, that would be about $144,000 less per partner.

The Cuts Are Not Only About Payroll

The money move also changes the politics inside the firm. KPMG's partner headcount has dropped from 700 to 650, but the cost savings are expected to help fund band increases for around 150 junior partners.

That is the awkward part of partnership math. The firm needs to reward the next layer while cutting the cost of the old one. Nobody calls that a morale strategy, but it is often what happens when growth slows.

Sams also changed executive roles under an interim structure. The chief operating officer role was combined, the chief strategy officer role was removed, and Silvana Mammoliti is acting as COO and CFO while the firm searches for a permanent replacement.

Consulting Is The Drag

KPMG Australia reported total revenue of $2.3 billion for the year ended June 30, down 1% from the prior year. The consulting business fell 16.9%, which the firm blamed on soft market conditions and reduced government use of consultants.

Audit and assurance moved in the other direction. Revenue there rose 11%, even while the firm was dealing with scandal headlines and client trust problems.

That split matters. Consulting weakness is forcing cost cuts, while audit growth is happening under a microscope. The old Big Four balance is not as clean as it looked when consulting was doing the heavy lifting.

The Scandal Still Has A Bill

The compensation changes are part of an internal review called Project Vector. The review follows whistleblower allegations tied to audit misconduct, sharing confidential documents with unauthorized people, and alleged mistreatment of the whistleblower.

The fallout has already taken out several executives, including former CEO Andrew Yates and former chairman Martin Sheppard. Former COO Eileen Hoggett was expelled from the partnership and has started legal proceedings against KPMG in the Supreme Court of NSW.

There is also a client-side cost. KPMG was bidding for a $75 million Macquarie Bank audit contract, but Macquarie said it would not recommend KPMG as its future auditor after a public hearing. PwC keeps the work instead.

The Partner Model Is Getting Stress-Tested

This is the part firm leaders should watch. A scandal does not only create legal and reputational cleanup. It also changes who gets paid, who gets promoted, and which partners carry the cost of rebuilding trust.

KPMG's problem is unusually public, but the pressure is familiar. When consulting slows and audit reputation gets fragile, partnership economics stop looking like a reward system. They start looking like a survival spreadsheet.