Consulting the Next Step for Law Firms?
With cautious steps being made by law firms into a range of different areas, how long is it until the traditional “law firm” structure looks to change? And with the Big 4 professional service firms moving into legal services, how long until we see one of the big law firms reversing the trend and transforming into one of these professional services behemoths?
Fresh from a career as a psychologist, I was first thrust into the world of professional services firms on the back of the first wave of diversification of accounting firms into a relatively new field called “management consulting”.
Riding the wave of the popularity of the “corporatisation” of professional services firms, I was able to build a practice amongst an old guard of auditors and tax accountants, as a partner of Coopers & Lybrand. While many partners at the time supported and embraced the change, there were a number of hold-outs who were hesitant to accept this upstart non-accountant spoiling their sacred ranks. As the work continued to roll in however, these doubters reduced in number and volume.
Similarly, the consulting market continues to grow across the world, and in Australia amounts to a $6 billion dollar industry. Bouncing back from a brief exile in the 2000s in the wake of the Anderson Consulting collapse, the “Big 4” continue to hold a large market share of this work, with Deloitte, PwC, KPMG and Accenture (formerly Andersen Consulting) holding 40% of this market.
Despite their best efforts, law firms have tended to follow the example set by accounting firms, whether this is through structure (the ever popular Swiss verein) or through internationalisation and consolidation. Diversification could very well be the next example of this trend.
Apart from a few disruptors, including a Tony Harrington-run Minter Ellison in Australia and Hogan Lovells internationally, few law firms have dared to step into this brave but not-so-new world. In doing so law firms continue to forego a goldmine of management talent, with many of their senior staff having held wide ranging positions in a range of different industry based roles. Furthermore, many associates leaving the law have followed a well-worn path into a number of popular consulting firms. While a large amount of law firm unused capacity stays idle, the consulting industry continues to drain talent progressive law firms could turn easily into revenue.
While conflicts are a live issue, as accounting firms have learnt, law firms are much better equipped to deal with these eventualities. Furthermore, the advent of Multi-Disciplinary Practices (MDPs) in the UK and Australia and the expansion of accounting firms into legal practices organically would seem to militate against the status quo. If law firms are going to prosper against their well-resourced competitors, the use of their talent for the best result for the client is essential. If law firms lack the right talent, or are unable to build the necessary processes through existing staff, acquisitions and consolidation can fill that gap. To ignore the potential of their staff and the potential for revenue, as in any industry, is to court disaster.
Dr Stephen Moss is the Chairman and Matthew Hodgkinson is a senior consultant at Eaton Capital Partners. Eaton Capital Partners is a corporate advisory and M&A firm specialising in the professional services sector including legal, management consulting and engineering.