Category: Industry Insights

Forget size, age, awards, geography, even subject matter.

Professors at Harvard Business School have deduced that there are really only four specific types of professional services practices … and that practitioners who commit to the tactics prescribed for their type will be better positioned to succeed.

For law firms, it’s important to understand the four types – and to have the self-awareness to accurately identify their own. From there, niche law firms and discrete practice teams can apply smarter strategies for hiring, marketing and more.

Writing for Harvard Business Review, Ashish Nanda and Das Narayandas shared the four types of practices that comprise the professional services spectrum:

• Commodity
• Procedure
• Gray Hair
• Rocket Science

The Four Types

Let’s look at Harvard’s four types – along with our take on legal industry examples and marketing tactics.

Commodity.

Commodity practices help clients with simple and routine problems by providing “economical, expedient and error-free service,” the authors state. (This type of practice is most vulnerable to threats from legal tech.)

Example: LegalZoom, which offers basic business and family law offerings online at fixed prices

Strategic focus: Efficiency

Profit margin: Single to low double digits

Hiring strategy: A commodity practice will prioritize dependability over creativity or credentials: “They recruit steady individuals who will produce regular output at a reliable pace and quality,” the Harvard professors note. Once on board, new hires will need to deliver standard output efficiently.

How we would market them: Work to demonstrate that you are a safe and easy choice: As a prospective client, I need to know you will solve my problem quickly, with little hassle. LegalZoom’s home page does a great job of touting statistics: 4 million clients served, 550,000 consultations completed, coverage in all 50 states. All with a money-back guarantee.

Procedure.

Procedure practices offer systematic solutions to complicated problems; they may not be novel or sophisticated, but they require careful consideration. (This type of practice is most vulnerable to threats from the Big 4 accounting firms.)

Example: Card Compliant, which applies artificial intelligence solutions for the regulatory, legal and accounting aspects of gift cards

Strategic focus: Established methodology

Profit margin: 20 to 35%

Hiring strategy: Self-aware procedure practices will focus on hiring lawyers with a predisposition to embrace hard work and fight for quantifiable metrics, like billable hours. The Harvard authors relay this sentiment from a procedure practice: “We worry about recruiting professionals who, if asked to work an hour longer on an assignment, convert the conversation into a philosophical debate.” Indeed, once a part of the practice, new lawyers will need to understand and apply the firm’s particular protocols.

How we would market them: Fall back on the adage that it’s easier to sell aspirin than vitamins: Procedure practices frequently exist to handle tedious, complex problems – the proverbial business headache. Card Compliant warns gift card issuers of the myriad landmines they can encounter, from multiple jurisdictions to multiple regulators; it shows the high stakes at play in a large volume of small-dollar transactions.

Gray Hair.

Gray-hair practices are distinguished by their experience in notable cases and transactions – client problems made easier by the application of previous lessons learned (or the swagger of previous battles won).

Example: The litigation boutique Quinn Emanuel

Strategic focus: Platform of victorious professionals

Profit margin: 35 to 50%

Hiring strategy: Individuals with “wisdom gleaned from experience,” the authors describe. In the legal sector, this could include high-profile laterals or junior lawyers with prestigious academic credentials. Because experience is the hallmark of the gray-hair practice, the firm will look for new additions to apply their experiential learnings to future matters.

How we would market them: Be ruthless about collecting, cataloging and sharing examples of experience; use the track record to assure your prospects you have handled a problem like theirs (to sensational results). Upon landing at the Quinn Emanuel website, users see a ticker of recent victories (along with the announcement of a recent award declaring it the “No. 1 Most Feared Law Firm in the World”). Another page is dedicated to notable victories with the casual note that Quinn Emanuel has obtained five nine-figure jury verdicts.

Rocket Science.

As defined by the Harvard team, “a rocket-science practice addresses idiosyncratic, bet-the-company problems that require deep expertise and creative problem-solving.”

Example: Forgive the literal rocket tie-in, but a prime example is Hogan Lovells’ Space and Satellite group

Strategic focus: State-of-the-art expertise

Profit margin: 50% or more

Hiring strategy: “Brilliant, creative professionals.” A rocket-science practice does not solely rely on the charm of its rainmakers; social savoir-faire can be a distant second to a beautiful mind. To maintain the firm’s competitive edge, rocket-science lawyers must stay visible, credible and cutting-edge.

How we would market them: Develop a position as the thought leader in the field, and protect it with constant visibility; speak and write constantly, and make it hard, if not impossible, for any other firms to catch up. Hogan Lovells’ space lawyers speak at industry events, like the MilSat Symposium; the firm also seeks industry-specific awards in addition to the legal stalwarts. Its attorneys have been recognized by Space & Satellite Professionals International and Women in Space, among others.

How Do I Know My Type?

It’s important to note that none of these is “better” than the others: Managed correctly, all four can be very successful.

However, in a profession that often attracts individuals with high ego drive, there can be a tendency to overreach: The Harvard professors share that most practice leaders place themselves in “gray hair” or “rocket science,” despite evidence to the contrary.

You cannot self-select your type: It is determined by what clients need (as defined, perceived and felt by the clients) and what they are willing to pay. Margins are the best indicator.

Why Does This Matter?

When firm management does not accurately assess or understand their position, problems can arise. Consider this hypothetical from Nanda and Narayandas: A leader erroneously inflates a practice into a rocket-science practice. He recruits expensive talent with the lure of exciting, creative work. The clients view their problems as straightforward; they want efficiency and low rates. Both will end up frustrated.

What Do I Do Now?

First, commit. Although it may be tempting to think about your practice like a mutual fund, with a little of each of the types, don’t. As Nanda and Narayandas write: “The best-performing practices have a sharp focus. Clients know what services each practices offer, practice leaders know which performance levers to pull, and recruits know what type of work they’ll do.

“A diffuse profile dilutes a practice’s identity and renders it a jack of all trades and a master of none.”

(I may print this last sentence on t-shirts.)

Second, prepare to play the long game. Over a long enough period of time, the most rocket-science practice can go to gray-hair to procedure to commodity. Cruise through the LegalZoom offerings for examples, from patents to corporate dissolutions. To safeguard a higher-end practice, study the marketplace relentlessly. Invest. Experiment.

Third, get selective. If you are a commodity or procedure practice, stay laser-focused on the solutions you provide profitably – and make them even better. If you are or aspire to be a gray-hair or rocket-science practice, stop offering services seen as commoditized. Get disciplined about which proposals you chase (an RFP checklist can help).

This final point is especially important in the wake of COVID-19 and the uncertainty of 2020, which tempted many law firms to take on incompatible work just for work’s sake. Gray-hair and rocket-science practices must heed the warning of the Harvard professors: “Once a practice has become commoditized in the market’s view, it’s extremely difficult for it to move back toward the premium end of the spectrum, and the long-term damage to the practice can be devastating.”

Your firm’s “brand” is not your logo, letterhead or tagline. It is your fundamental identity, the essential truth of your organization, and the characteristics, values and attributes that support this identity.

It’s important for law firms to get it right – and there are compelling business reasons to do so. Altman Weil reports that well-positioned firms can:

• Improve cross-selling and organic growth among current clients;
• Attract more targeted, desirable new clients;
• Weaken the competition;
• Recruit better laterals and associates; and
• Become a more attractive candidate for mergers.

Need a more tangible motivation? Altman Weil also cites research that brand recognition in professional services firms can garner a 10 to 20 percent premium in fees.

If you are assessing your law firm’s brand (or lack thereof), it’s helpful to start by learning the basics. Then, by reviewing the common mistakes law firms make with their identities, you can lessen your risk of a brand blunder.

Brand 101

As defined by the definitive Kellogg on Marketing, “a brand is a name or some symbol or mark that is associated with a product or service and to which buyers attach psychological meanings.” The psychological meaning can come in three ways, sparking three types of brands: functional, image and experiential.

Functional brands help buyers solve a current problem or prevent a potential problem. They strive to differentiate on the basis of superior performance or superior savings; they compete on product, price and place (convenience and/or ubiquity). For a consumer brand, think about Bounty, the “quicker thicker picker-upper”; in the legal context, look to many legal tech solutions, such as Hello Divorce (“Get lawyer results without lawyer costs”).

Image brands help buyers achieve higher self-worth or feel part of a desirable group (good parents, cool guys, powerful business executives). They strive to differentiate based on their ability to deliver and reinforce the desired image; they compete through aggressive marketing communications, such as advertising and social media. On the consumer side, consider Dos Equis, which associates its drinkers with The Most Interesting Man in the World, or Jif’s targeting of choosy moms. In the legal industry, image brands are most powerfully harnessed by the white-shoe stalwarts; the colloquialism “Nobody ever got fired for hiring Skadden” may be the most enduring example of an effective law firm brand.

Experiential brands help buyers escape the everyday; they meet our needs for self-actualization by providing experiences, memories and bragging points. They differentiate based on the uniqueness of their offering; they compete through inimitable service delivery. The experience can be grand, like a trip to Walt Disney World, or more commonplace, like a cup of coffee at a Starbucks; either way, the experience is delivered with precise consistency. Pure experiential brands are rare in the business-to-business category, perhaps nonexistent in legal.

Though these types of brands differ on tactics and differentiation, all three are focused on helping the buyer: They make our lives safer, easier, better.

It’s this emotional tie that leads to brand loyalty – and long-term, profitable growth. It’s also where most law firm brands miss the mark.

Where Law Firm Brands Fall Short

While not a comprehensive list, these are the issues we most often see with dysfunctional law firm branding:

• Focusing on “Permission-to-Play Values.” As Harvard Business Review defines them, permission-to-play values “simply reflect the minimum behavioral and social standards.” Examples are integrity, competence, experience, decent customer service. These are table stakes. It is a reasonable expectation that when you give money to a lawyer, in return you get someone who is smart, educated and informed, and who will not treat you like garbage. Statements like, “Our purpose is to assist clients in achieving their goals” is permission-to-play branding: If I’m paying you, I should hope you would not hinder me in achieving my goals.
• Trying to Please Everyone. It can be far more fun and effective to market a niche law firm: It’s extremely hard to find a unifying brand identity for hundreds of lawyers practicing in dozens of practice areas in multiple time zones. Far too often large full-service firms make milquetoast brands in an effort to find some sort of identity that fits everyone (or worse, doesn’t offend anyone). This leads to identities that are the equivalent of a one-size-fits-all t-shirt: too big, far from special, and nobody’s favorite.
• Telling vs. Showing. The snazziest brand concept will collapse if there isn’t a structure to back it up. (Or far worse, if it’s not a genuine reflection of the firm.) If you claim you have superior service, process or abilities, prove it with evidence. What’s your process? What are examples of your work? What do your clients say?
• Relying on Features vs. Benefits. Your firm’s age, size, footprint: These are features of your organization – but hiring decisions are made on benefits. (No one spends $150 on AirPods because they are small, white and funny-looking. You buy AirPods because they bring you your favorite podcast, they drown out office noise, and maybe they make you look hip.) When features appear in your marketing, switch them to benefits by asking why they help the client: If you’re touting your geography, for instance, does your significant presence mean more access, better connections, faster results?
• Delivering Inconsistently. A brand is a promise; can you keep it? Can every partner, associate, professional staff member? A brand of “exceptional client service” will quickly fizzle if clients are ignored in a cold and sterile reception area (yes, your reception area is marketing, too). Law firms are not Starbucks, so this is a challenge, but it’s an important one: In interviews with more than 300 chief legal officers and general counsel, more than half said their primary law firm’s biggest weakness was inconsistency.

Above all, law firm brands fail by focusing on the law firms themselves – not the clients. Instead of thinking about who we are, we should focus on who we serve. We should go back to the basics, dust off the Kellogg and consider the essentials.

Form Follows Function

For most firms, that will mean thinking like a functional brand. What problems do you solve? What problems do you prevent? For whom? Why are you a truly superior solution for people with these problems? How do you know? How can you prove it?

Having defined functional brands with paper towels above, I understand that they are not the most exciting or glamorous – but the world truly needs more functional law firm brands. It’s highly unlikely your firm is the next Skadden. But if you focus on the functional value you provide, you are by default focusing on the reasons people hire lawyers in the first place: to solve their problems. You are making their lives safer and easier, not just offering platitudes.

The function should be your foundation. Commit to solving a specific set of problems for a specific set of clients, and back up your ability to do so.

From there, you can try on some image possibilities. From there, you can even meditate on the experiential. (We know a firm that underscores its commitment to personal service with homemade chocolate chip cookies, and we salute this wholeheartedly.) From there, you can start to build a marketing strategy that will be consistent, authoritative and client-focused.

(And cookies never hurt.)

Having weathered the COVID-19 epidemic, many law firms now see a sharp uptick in work – and feel a need to hire.

Specifically, associates are in high demand. Decipher, an investigative intelligence firm, reports that associate moves in the top 10 legal markets were up 20 percent or more in the first two months of the year. Press coverage of the associate rush is centered around a frenzy of aggressive tactics, from big hiring bonuses to same-day offers. (Caveat emptor there.)

Thankfully, for most firms recruiting is a more measured process. Still, in the potential boom of 2021, it’s a buyer’s market, and qualified associates will have many options. In a December 2020 survey, 57 percent of lawyers with hiring responsibilities said they were actively looking; 93 percent said it was somewhat or very challenging.

To be sure, the country’s most wired generation will be checking out their prospective employers online. In this race for associate talent, your law firm’s website can be a helpful tool for making the right impression and conveying your culture and differentiators.

How can you best position your firm to be a first-choice employer?

Know Your Market

Major, Lindsey & Africa’s Millennial Attorney Survey provides valuable insight into the wants, needs and attitudes of lawyers between 25 and 40 years old. This report surveyed more than 1,200 respondents, 78.6 percent of whom are current law firm associates.

When asked their priorities in scouting potential employers, on a scale of 1 to 10, they ranked:

• Commitment to fostering work-life balance: 8.2
• Firm’s compensation package: 8.1
• Commitment to training and professional development: 8.0
• Commitment to progressive family-friendly policies: 7.5
• Strength of firm in a particular practice area: 6.7
• Commitment to diverse and inclusive workforce: 6.2
• Prestige of firm: 5.9
• Commitment to corporate social responsibility: 5.8

Key takeaway: Compare the high priority of work-life balance with the relatively low priority of firm prestige. If your firm’s recruiting page focuses on the rich tradition established by long-dead named partners, you’re missing the mark with Millennial recruits.

Work-life balance is so important to your potential associates that nearly 75 percent of respondents said they would take lower compensation in exchange for more time off, a flexible work schedule or fewer billable hours.

When asked what they would like to spend more time doing in their current positions, they said:

• Business development: 33.2 percent
• Training: 23.1 percent
• Mentorship: 14.1 percent
• Pro bono: 11.6 percent
• Work outside the primary practice group: 11.6 percent
• Firm social events: 6.5 percent

Key takeaway: More than five times as many associates want to work on business development as those who want more firm social events.

Baseball games and progressive dinner parties are important recreation for your law student recruiting. But seasoned associates want activities with more substance: business development and skills training chief among them.

Speak to Your Market

As your law firm’s communications hub, your website should complement your recruiting endeavors. If your organization is among the many clamoring for trained associates, mind these guidelines:

1. Don’t skip them. Many law firm Careers pages skip straight from law students to lateral partners. Lateral associates are a different demographic with different desires. Many are parents to young children; all have earned professional respect. Develop a specific page for lateral associates that discusses benefits, schedule options, business development training, the track to partnership and other specific concerns.

2. Do be authentic. In the process of selling your firm, you must be genuine. It’s one thing to make a favorable first impression; it’s another to delve into fiction. Do not tout flexible schedules if you know the firm is putting the kibosh on remote work post-pandemic. Be forthright and manage expectations from the beginning, and you will find your people: While not every firm is “fun,” neither is every associate.

3. Don’t be coy about compensation. In the Major Lindsey & Africa survey, compensation was the No. 1 motivation Millennial attorneys cited for considering a job change. Meanwhile, nearly 70 percent of associates “strongly agreed” that law firms should strive for maximum transparency with regard to compensation. In addition to salaries, be straightforward about billable minimums and what counts toward them.

4. Do offer evidence. Smooth marketing prose will only get you so far. Take a “show, don’t tell” approach, and provide proof points for your firm’s culture. Post testimonials from current associates. Share favorable statistics. Profile successful alumni. Don’t assume that a potential hire will read every page of your website: Reiterate core values, major awards and significant client work.

5. Don’t just talk about diversity. Show action. In the Major, Lindsey & Africa survey, 77.5 percent of Millennial attorneys said a diverse and inclusive workforce should be a priority for law firms. This demographic is looking for more than a well-crafted statement; show your action, and show your investment.

6. Do embrace multimedia. Younger consumers strongly prefer video; 56 percent of those 25 to 34 years old said it was their first-choice medium. Consider the power of a recruiting video geared to lateral associates that shared their peers’ stories; you could write with static text that you support work-life balance, or you can create a video that shows an associate playing with his kids. Keep it short, and keep it authentic, and video can be a compelling recruiting tool.

Above all, the “experienced associate” portion of your Careers page should further the brand promise of your firm. The best brand experiences are authentic, relevant and ownable: Carry this into your recruiting story.

• Authentic: Who are we really, and what is it like to work here?
• Relevant: Why does this matter to this specific audience?
• Ownable: Why us instead of the law firms down the street?

(And if all else fails, maybe put a cat meme on there.)

For most lawyers, referrals are the No. 1 driver of business development. Research on the client side supports this; according to Clio’s 2019 Legal Trends Report, 59 percent of clients who needed an attorney sought a recommendation from someone they knew.

After receiving a referral, the next logical step for many prospects: a little cyberstalking. How effective is your website at converting a warm lead into a client?

To capture the full ROI of your referral base, it’s imperative to strategically craft your website to be a closer for your business. Far too many websites are the online equivalent of the receptionist who answers the phone “Hello, law office” – they are generic, and they fail to persuade prospective clients that you are the absolute best solution for their problem.

A strong law firm website should take a position; it should make the case for business. Take a “show, don’t tell” approach, and incorporate these four types of evidence to prove your capability.

One: Experience

The most compelling marketing material you have is your body of work: the cases, transactions or projects that show a potential client you have handled a problem like theirs. Indeed, in the Clio survey, 77 percent of clients said they wanted to know a lawyer’s experience and credentials; 72 percent said they wanted to know what types of cases they handle.

Client confidentiality is paramount, to be sure. But an up-to-date and user-friendly Results section is a must when marketing a niche law firm or practice.

These can vary in presentation:

• Bartimus Frickleton Robertson Rader, a plaintiffs’ firm, allows users to quickly filter results by type of matter, from coverage disputes to class actions.
• Wyatt, Tarrant & Combs, a large corporate firm, writes case studies that detail the challenge, approach and result – along with a link to the relevant lawyer bio.
• Brown & Curry, which helps veterans with benefit claims, uses a ticker to show the basics for recent wins: dollar amount, branch of service and location.

It’s important to include wins in your practice area pages and lawyer biographies too – but do not underestimate the importance of a standalone Results section (or Experience or Our Work or what have you). According to Google Benchmarking, the average user will spend 38 seconds on your website: Make it as easy as possible for them to find examples of your success.

Two: Happy Clients

The exact techniques will vary depending on your field and your state’s Rules of Professional Conduct, but how can you show website visitors that your clients like and appreciate you? Some possibilities could include testimonial videos, testimonial quotes or references to strong online reviews, such as Avvo’s “10 out of 10” rating badges.

Get creative. If you do not have direct client testimonials, comb your verbatim reviews from Chambers & Partners. If your firm conducts client feedback, look for trends in the quantitative data; in a given year, one firm I worked with earned a perfect score from clients when asked to rate its ability to “give an honest assessment of my situation.” We used that as evidence that the firm gave clients straight talk and clear advice.

Remember that your prospects want to see that you’ve handled a problem like theirs; they also want to see that you serve people like them. Consider this in your selection of stock images, whether of people or places. A banking practice should have a fundamentally different look and feel than a construction boutique.

Three: Subject-Matter Prowess

Lawyers who dominate their niches are true subject-matter experts. They speak at the relevant conferences. They write articles for the trade publications. They publish their own content – client alerts, newsletters, podcasts – on their websites.

Do you?

According to the Clio survey, nearly 60 percent of potential clients will shop around. For clients with niche needs, showing a sustained pattern of thought leadership will prove your expertise.

(Think about this from a defensive standpoint, too:  According to BTI Consulting, nearly 60 percent of law firm clients said they use online resources to compare their lawyers to the other side. How do you fare in this matchup? Will your website make your client feel confident in their choice?)

Four: Third-Party Endorsements

While awards and rankings may not make the sale on their own, they can provide further reassurance that you are a safe and established choice, akin to a “USDA Prime” badge on a steak.

These badges also are also nice fast visual cues for readers who are doing a quick skim; they may not read all of your practice group materials, but it takes just seconds to see that you are among the Best Lawyers in America.

Pay heed: Not all badges are created equal. Do not waste money or valuable website real estate on fly-by-night rankings. Reputable accolades include those issued by media outlets (local, national or trade) or the “big three”: Best Lawyers in America, Chambers & Partners and SuperLawyers.

For law firms that serve consumers or small businesses, I recommend the “Best Law Firms” badges from Best Lawyers in America/U.S. News & World Report. While “Chambers & Partners” doesn’t mean much outside the industry, U.S. News is a credible household name.

While niche-ifying your law firm website is important now, it will become even more so in the decades to come.

The Clio survey asked respondents how much they cared about their lawyer’s website. While only 21 percent of Boomers said websites mattered, that jumped to 48 percent of Millennials and 49 percent of Generation Z.

At the same time, the younger clients valued referrals less: 60 percent of Boomers cared about a recommendation from a peer or friend, but that dropped to 46 percent of Millennials and 47 percent of Generation Z.

Take a look at these statistics together. Websites already have edged out referrals as a driving influence for younger clients: 48 percent to 46 percent for Millennials, and 49 percent to 47 percent for Generation Z.

Crafting a purposeful website with clear and convincing evidence will position you to close more referrals now and attract more clients in the future.

Location, location, location: It’s everything in real estate, but can it be a sustainable niche in law?

In other words, is it a lucrative long-term move to stake your brand identity on being “Tennessee’s premier corporate practice” or “Tallahassee’s go-to trial boutique”?

Legal brands that are successful in location-based marketing do so not by being friendly neighborhood lawyers, but by staking a claim that they are the absolute best solution in dangerous terrain. They have the talent and resources to own the jurisdiction like no one else, and they have clear and convincing evidence of their success.

In short, they are a variety of the Category Killers described in Adam Smith, Esq. “Can you fight them on their own turf? Why would you want to try?”

When marketing a niche law firm or practice group, three branding fundamentals apply: The claim must be relevant, authentic and ownable.

Relevant. Your geography niche must be relevant to the client – that is, the client must feel a compelling reason to choose lawyers based on geography alone. “We are smart lawyers based in Cincinnati” does not suffice here – instead, you need to lean into the pain.

What about the legal framework of your city, state or region is uniquely arduous? Do your courts have local rules that tend to trap newcomers? Do your state agencies have peculiar processes or administrative red tape? Are you in a Judicial Hellhole?

In short, why does your niche matter? State it plainly – and carry it through your website and marketing communications. Focus your content on practical tips and cautionary tales for working in your region; this will be valuable for the humans looking to hire help in your area, and this will be valuable for the search engines crawling for answers.

Authentic. Given this relevant pain, what makes you a qualified solution? What makes you the best resource in the jurisdiction?

Think about the evidence that can make your case. Think quantitatively: number of cases won or tried, deal value of real estate projects completed, number of former court clerks on staff, et cetera. (This must focus on the work you do for clients and the solutions you provide for them – while they are nice, your years in business or numbers of locations are not that convincing.)

Think qualitatively, too. Write case studies that illustrate how you navigate your regional foibles. Collect testimonials from happy clients. Round up favorable press coverage. Tout the (respectable) awards – but be cautious; if you’re ranked “Tier 2” in the jurisdiction you are claiming to dominate, it’s best to leave that one off.

That brings us to…

Ownable. The geographic niche only works if you are, indeed, Tallahassee’s go-to trial boutique. There’s only room for one.

It’s time for a ruthless inventory of the market. Who could potentially challenge your claim, and how can you counter their arguments? Can you counter their arguments?

Moreover, are you prepared to invest in this niche long-term with strategic hires, potential mergers, and infrastructure? And do you have the discipline to commit to this strategy – at the exclusion of other distractions?

Above all, remember that even location-based positioning must emphasize your acumen far more than your address. In The Altman Weil 2019 Chief Legal Officer Survey, respondents were asked “In the last 12 months, have you shifted a portfolio of work worth $50,000 or more from one law firm to another” for a variety of reasons.

“Inability to handle our geographic scope” came in second to last with 10.9 percent – trailing lower fees, conflicts, partner relocation and more.

The No. 1 answer, with 42 percent – nearly half – of respondents: Legal expertise.

The Big Four bogeyman has haunted the U.S. legal market for years.

Like any good horror movie villain, it’s shrouded in mystery. We don’t know when it’s coming, or exactly what will go down, but we know that a four-headed monster of Deloitte, EY, KPMG and PwC is coming after all of the legal work. And it might get really gory.

This is not the forum to unpack the web of ethics rules that currently prohibit accounting firms from practicing U.S. law. (Although it’s worth noting that as of January, Arizona allows nonlawyers to co-own law firms and legal service operations, theoretically paving a possibility for the Big Four to set up shop. Similar measures are reportedly under consideration in Utah, California and elsewhere.)

Instead, let’s look at the very likely scenario that within the next decade, the Big Four gets unleashed. What does that actually mean for your practice?

A Larger Trend

To be sure, the Big Four already dominate accounting. According to Audit Analytics, together they audit 497 of the S&P 500. They audit 49.2 percent of all public companies.

Their expansion into the legal market gained momentum in the 1990s, when – with the addition of the former Arthur Andersen – the Big Five fought for the ability to provide legal services in markets worldwide.

Then came the accounting scandals of 2001, which effectively ended Arthur Andersen. As a result, the U.S. enacted the Sarbanes-Oxley Act, prohibiting audit firms from providing certain non-audit services to their clients.

With the U.S. off the table, the Big Four grew legal services elsewhere. By 2011, according to Law & Social Inquiry, PwC offered legal services in 124 countries; Deloitte, 97; KPMG, 73; and EY, 29.

By 2017, PwC was the world’s sixth-largest legal services provider by headcount.

And by 2019, together they averaged more than 2,200 lawyers.

The momentum hasn’t stopped: In August 2020, KPMG said it could double legal revenues over the next five years. That same month, EY said it planned to double its legal managed services revenues over the next 12 months.

The laws and ethical rules for the U.S. market are complicated and diverse, but as Arizona shows, they’re far from permanent protection.

The Motivation

Speaking to the College of Law Practice Management Futures Conference, Ron Friedmann listed the Big Four (sorry) reasons the Big Four will can capture law firm clients:

• A multidisciplinary approach. As Friedmann notes, many “legal problems” are business problems, and accounting firms are more adept at assembling teams comprised of experts in diverse fields.
• Cost-effective but/and innovative. Decades of audit price pressure forced the Big Four to rethink their service models; they made significant investment in technology, project management, process management and knowledge management. This infrastructure garners higher quality output at a lower cost.
• Deeper relationships with the entire C-suite. Large accounting firms typically have a higher profile within an organization, cultivating relationships with the COO, CEO, CFO and CLO or general counsel….not just the Legal Department.
• Reduction or elimination of regulatory barriers. Friedmann notes that over time, the bar regulations that apply to high-end business-to-business work tend to accommodate corporate interests. The smart money is on rule changes that favor the Big Four.

Moreover, the Big Four does a significant portion of its work at a flat fee. Imagine a CFO or CEO trying to solve a problem with a legal component. Why not just have the accounting firm draw up an addendum to the scope of work it’s already handling at a fixed rate?

What’s Vulnerable

Or, more specifically, who is vulnerable?

The most prestigious corporate law firms are likely to be fine; general counsel still like the “boardroom cover” of a Skadden.

Niche law firms in premium spaces, such as litigation or intellectual property, likely to be fine; accounting firms cannot replicate a trial record.

And the national (and international) firms that already focus on value and innovation – such as the employment firms that embrace legal tech – are likely to be fine; they already offer efficiency and ubiquity, like the Big Four.

The most vulnerable firms are non-differentiated middle-of-the-pack firms. They lack the prestige to survive boardroom scrutiny. They lack the specialization that high-stakes matters demand. And they cannot compete on value proposition with more nimble, modern players.

What This Means for You

Is your work likely to be eaten by E&Y or devoured by Deloitte?

Consider these risk factors:

• Projects that are reoccurring. This work is worth an initial investment into the kind of process improvement that Big Four is adept at providing.
• Projects that are low-stakes or largely driven by a uniform process. This kind of decision-tree work lends itself to a more systematic approach than the comprehensive methods of a traditional law firm.
• Projects that generate from outside the Legal Department. CFOs and COOs already place considerable trust in the Big Four for sensitive and important projects – and well-established relationships on speed dial.

While we don’t know exactly when or how the Big Four will arrive in the U.S. legal market, you can start to play offense now.

You can fight the Big Four by fighting like the Big Four:

• Cultivate relationships outside the Legal Department. Offer value throughout the C-suite. The Big Four is masterful at providing value-added programming far beyond the confines of traditional accounting. For example, KPMG provides “CFO Real Insights,” a program that shares research, analysis and events for the finance function. On another level altogether, Deloitte offers a “Chief Executive Program” that offers, among other things, a “transition lab” to help new CEOs, COOs and business unit heads plan for success in their first year; a board effectiveness lab; and board placement assistance. How loyal to an organization would you be after they helped you thrive in a new role and fill your board?
• Break it down. Make a list of your most process-driven work. Truly break it down step by step: If A then B or C, if C, then D or E. Resist the urge to say it’s impossible; if Turbo Tax can automate the tax code for the federal government and all 50 states, you can decision-tree at least some of your legal projects. After this exercise, what could be automated? (Neota Logic’s case studies offer some ideas.) What could be streamlined or improved into a proprietary process?

Or you can avoid the fight altogether, and you need not be Cravath to do it.

As I mentioned, the arrival of the Big Four is not likely to threaten established niche firms. Successfully marketing a niche firm takes ruthless commitment to do one thing well. But the firms brave enough to focus their firepower on one discipline, industry or market – and to cultivate excellence within it – could go unscathed altogether.

Like any good horror movie monster, the best way to defeat this simmering threat is to outsmart it: The Big Four machines run on scale and repeatable processes; quality niche work is purposely specific.

If you are a generalist looking at the triple threat of insourcing, legal tech and the Big Four, perhaps it is time to be afraid, be very afraid. For the specialists and the niche firms, I’d encourage you to be the monster instead.