The Big Four accounting firms continue to ratchet up their abilities to compete with large law firms in several areas of client service, leaving those firms contemplating a way to wrest back their top-of-mind position among clients.
Even though regulatory hurdles prevent the Big Four and other accounting firms from practicing law directly, at least in jurisdictions like the U.S., they are increasingly going toe-to-toe with law firms in some areas of work. And while regulatory risk and compliance services seems to be the accounting firms’ bread and butter in regard to competing with law firms, some larger firms are also landing client mandates for merger and acquisition due diligence, corporate transactions, contract and document drafting, and litigation and investigation support.
In a recent Thomson Reuters survey, 20% of large law firms reported they had competed against a member of the Big Four within the past year, and 23% said they had lost client business they had expect to win. It’s not totally surprising — Big Four accounting firms have been able to leverage their strong ties with corporate C-suite executives, their investment in technology, their ability to integrate legal services with other offerings, and their strong reputation for quality work into a serious threat to large law firms on many levels.
“Historically, lawyers have thought of accountants as a stodgy, conservative bunch, more on the boring side… but if that was ever true, it certainly isn’t anymore.”
Of course, this leaves law firms scrambling for a strategy to combat this incursion — but what can law firms do strategically to battle back? As we’ve suggested previously, the answer doesn’t lie in mimicking how accounting firms operate, but rather, as Dr. Larry Richard, founder & principal consultant at LawyerBrain LLC, suggests, a strategic pathway might be found by understanding the psychological differences and similarities between accountants and lawyers. Law firms should also study the way accountants think and how that might give accounting firms an advantage when trying to make in-roads into the legal industry.
“Historically, lawyers have thought of accountants as a stodgy, conservative bunch, more on the boring side,” Richard, an expert in lawyer personality, explains, adding that by implication, the thought that follows is that lawyers are more likely to innovate. “But if that was ever true, it certainly isn’t anymore,” he says.
For example, a few decades ago, it was large accounting firms that were the first to move to a multiple-office model, with law firms following about 10 years later, Richard says. And accounting firms also were the first to go beyond the borders of the U.S. and globalize, when just a couple of law firms were venturing out at that time. Accounting firms also were the first to create multiple career paths — they moved away from the traditional partner and associate model and adopted other significant roles such as manager, managing director, senior leader, etc., Richard says. “These innovations offered meaningful alternative career paths to those individuals who didn’t want to be on or who couldn’t sustain being on partner track.”
Law firms are still a step behind the large accounting firms in many strategic ways, Richard explains, and are only now seeing the value of creating non-partner roles and middle-tier positions, and even hiring non-lawyers to jump start their legal tech innovation or process management initiatives. “Still, most law firms have not really expanded in the creative ways accounting firms have, so law firms still have this hierarchal upper system that’s pretty static, and most talent doesn’t like it,” Richard says, adding that law firms that do not embrace the kind of flexible hiring that accounting firms have may find it harder to attract needed talent, especially around technology and innovation, in the future.
Richard says that accounting firms have made these advancements right under the noses of law firms at times, simply because too often lawyers don’t look at accountants as a group that could compete with them for client business.
This thinking, however, has somewhat blinded law firms from really seeing — and reacting to — the strides accounting firms have made in positioning themselves in the minds of clients as innovators, proactive collaborators, and trusted advisors. “I remember about eight or nine years ago, the American Institute of Certified Public Accountants (AICPA) began a marketing campaign around the tagline, ‘Accountants: Your Trusted Advisors’ — and you didn’t hear a peep from the law firms about it, even though that label was one they had previous owned,” Richard notes.
“This is not good, and I had hoped it would be a wake-up call for law firms,” he adds. “But thus far, it hasn’t been.”
The point to remember, Richard says, is that the two professional personalities are not all that different from each other, and although accountants may be less urgent and not as skeptical as lawyers — two of their own attributes that lawyers view with pride — these two small differences may undermine the ability of lawyers to develop innovations in branding and marketing their services, even though these traits serve them quite well in the practice of law.
“Skepticism is a very key factor and an essential mindset for the high-quality practice of law. At the same time, we have impressive evidence that a skeptical mind kills innovation,” Richard says. “It also makes it hard to be an effective leader, to collaborate, to be collegial, and to develop younger people well.” Because lawyers are so high on skepticism, they become enormously risk-averse — even if it’s a 0.01% chance of something going wrong — because they want to protect the client, he explains. “The result? Innovation suffers, unless they can learn how to dial their skepticism back a bit.”
Unfortunately for law firms, this schism between the two professions may widen in terms of success and client satisfaction. “I think accounting firms are doing a very good job at hiring highly talented lawyers, and eventually they’re going to find a way to change the rules and compete directly in the legal profession in the U.S.,” Richard says, adding then, they’re going to be impressive competitors for large law firms.
So, to the previous question of what can law firms do? Richard says they need to wake up to this new reality and start taking the competitive threat of the Big Four seriously. “Even now, I think many law firm leaders may not have this issue on their radar screens.”