It is often suggested that the Big Four accounting firms are coming to eat large law’s lunch. Conversely, we also hear that to both combat this incursion and achieve greater success with clients, law firms should emulate what accounting firms are doing.
Not surprisingly, both of these bon mots are likely wrong, and they don’t give enough weight to the far more nuanced relationship and differences in approach between the two professions.
Professor Laura Empson, Director of the Centre for Professional Service Firms at Cass Business School in London, and a Senior Research Fellow at Harvard Law School’s Center on the Legal Profession, understands this relationship dynamic well. She is the author of Leading Professionals: Power, Politics, and Prima Donnas (Oxford University Press, 2017) and served on the board of KPMG LLP as its senior independent non-executive director.
Empson explains that law firms need not look to accounting firms for a winning model, but must recognise there are several areas where they could glean some lessons in their approach to self-management (both professionally and financially), global growth, project management, and building a corporate brand. In addition, both industries should realise how important collective leadership and individual responsibility are to each profession.
“In the past, law firms would never have considered they could learn anything from stodgy old accounting firms,” Empson says. “So, I find your starting premise a really interesting indication of how much things have moved in a very short space of time. I’m assuming the reason why is because more law firms have woken up to the potential threat that accounting firms are posing”.
The need for professional management
Empson says one of the strongest areas where law firms can get some insight from accounting firms is around the professionalisation of management, which the accounting firms have pioneered among professional firms. “Law firms in general are quite a long way behind, although one always has to remember there is a great diversity of management in the legal sector as well as in the accounting sector,” Empson notes.
But how do law firms and accounting firms—especially large ones—differ in their approach to professional management?
Empson offers this example: when she asked the managing partner of a US law firm why he was made managing partner, he explained it was because he was the highest billing lawyer in the firm. Empson then asked him that, if he was still a high-billing partner, when did he get his management work done? He said he read and sent his management-related emails after midnight when his client work was completed.
That showed her how little value is placed on management in this firm, and possibly in many law firms, Empson says. “It is essential to recognise that management is a professional expertise in its own right, and it has a particular set of skills,” she adds. “A firm cannot simply promote amateur managers from within the ranks without preparing them to develop some of that responsibility”.
Law firms need to be willing to introduce management professionals from the outside, accept them, and let them get on with their work. In one chapter of her book, Empson discusses how law firms in the UK have brought in people from the outside as professional managers and how difficult that’s been. Many of those managers have been not able to do their work, have been expelled, or left because they were frustrated.
Collective vs. individual leadership
However, Empson says there’s a flip side to the professionalisation of management. And that’s the idea of collective leadership, which means recognising that all partners should be involved in the leadership of the firm and have a collective sense of responsibility for the success of the firm as a whole, not simply for their own success or their own practice.
This combination of professional management and collective leadership is key—any firm that can bring those two capabilities together in equal strength, is likely to find success, she explains.
“One of the things that’s been a problem among the Big Four is that they’ve become so effective at professionalising management that somewhere along the way the partners as individuals have felt disenfranchised and disempowered to such an extent they haven’t necessarily retained a sense of responsibility for the leadership of the firm”.
While these ideas of collective leadership and individual responsibility are deeply ingrained in both professions, it’s possibly that mixing in a bit of both would go a long way to smooth out the rough patches each face and enable lawyers and accountants to manage their businesses better.
Growth, globalisation and project management
In terms of growth and globalisation, there has been rapid development in the accounting industry, Empson says. Many accounting firms have grown extremely fast and built very, very expensive global networks. So, there may be lessons to learn there for the big law firms. “Large accounting firms are not necessarily more globally integrated than large law firms,” she says, adding however, that the Big Four remain a network of firms rather than truly globalised organisations, but are nevertheless very good at growing quickly.
“If you think about this in terms of project management, in terms of how to put together teams very quickly, define deliverables, hold people to account, and then break down complex procedures into extremely detailed, meticulous, and quite tedious project plans—again, go ask an auditor how they do that,” she says. “There’s plenty you can learn from them.”
Indeed, managing growth is a major concern not only for law firms, but for all professional services firms. Too many global-wannabes have wrecked on the rocks of poorly planned integration and growth strategies.
Like project management—which of course is built around the idea of assembling the right people, process, data, and technology to complete the task more efficiency and at less cost—managing growth is a balancing act that needs constant attention and commitment from a firm’s leadership to succeed, she notes. So, law firms should look to accounting firms in the area for ideas on team-building, process management, and technology adoption.
The challenge of financial management
Another area in which large law can learn from the Big Four is financial management.. “Clearly, both professions know how to manage the finances as a partnership,” she says. “But it wasn’t until I spent time on the board at KPMG that I got to really understand partnership accounting. Just seeing a whole bunch of accountants sitting around in an audit committee meeting debating how their accounts were put together was exciting. I thought, ‘wow! This is a master class.’ This goes to the core of their professional expertise”.
For too many law firms, she adds, the prevailing attitude seems to be that as long as the revenue and profit numbers are getting bigger, and most partners feel their end-contribution is being adequately recorded and recognised, they will be willing to trust someone who puts themselves forward as an expert in this area to take care of the broader management demands. “The challenge then is, when the numbers start going down, does that person or the partnership have the ability to really interrogate and understand the numbers?”
Building the ‘corporate’ brand
When it comes to building a ‘corporate’ brand for a partnership—and this is at the heart of the individual versus collective tension that exists inside any professional services firm—individual lawyers may be brilliant at building their individual brand, but the Big Four have been more effective at building their collective brand, Empson explains.
Changing this would require a change of focus in many law firms—from individual lawyer branding to instead promoting a singularly identifiable brand for the firm as a whole that each lawyer can take pride in being a part of. “It depends very much on what particular issues any law firm is grappling with,” she says. “But I would encourage law firms to be open to the idea that the answers to their problems may have already been solved in the accounting sector, and there may be lessons for them there”.
In the end, lawyers always look to precedent. They just need to recognise that precedents are already being set in other sectors, and they might look to them—including in the accounting sector—for some lessons in effectiveness.