Facing the partnership
21 May 1996
7 April 2014
23 June 2014
3 March 2014
23 June 2014
28 August 2014
Multi-disciplinary partnerships have been the subject of debate for a number of years. And they are now beginning to appear in the UK, the largest market for professional services in Europe.
There has been a gradual blurring between the professions over the last few years and the major accountancy firms, which employ lawyers, property surveyors, engineers and management consultants as well as accountants, have been at the forefront of this evolution.
The move into the legal market by Arthur Andersen a few years ago, and recently by Price Waterhouse, reveals the strategy of the major accountants - to build international professional services practices and major legal practices within that capable of competing with top law firms for medium-to-high value corporate and commercial work. But they will need to build up teams of lawyers relatively quickly and this will present serious organisation and management challenges.
Critics point to the cultural differences between the professions as reasons why accountants are unlikely to realise their aspirations.
These criticisms are fair but only to a point. After all, the large accountancy firms have long been multi-disciplined practices and have successfully built up strong competitive positions in most professional sectors in which they operate.
But there are cultural differences between lawyers and accountants and integrating a legal practice into a large accountancy firm will be difficult.
The internal environment of the larger accountancy firms is more highly managed, the people more closely supervised and the work more tightly controlled than tends to be the case in law firms, which still allow a higher level of independence and autonomy.
Legal work, particularly high value and complex litigation, often requires creativity, and independence and personal autonomy are appropriate for this. Accountants' work is more procedural and systems-driven and this has tended to create more ordered, compliance cultures.
It is easy, therefore, to imagine a bureaucratic, compliance culture swamping the more individualistic and ideas-driven culture of a law firm, thereby losing one of the positive aspects of legal practice.
What is more cause for concern is the very real competitive threat posed by the legal practices of major accountants. The cultural differences and management challenges are not insurmountable. But the key to the successful entry into the legal market, and the effective integration of professionals, is the markets that firms target and those they avoid.
It is likely that the legal aims of accountancy firms will be to target the small-to-medium sized company market as well as the operational and routine commercial work of larger companies. And in both these segments the accountants have some potential advantages.
The corporate finance league tables already show accountants are active in the smaller deals market and as principal advisers they are in a strong position to cross-sell the services of their own or associated legal firms. In addition, smaller companies are likely to see advantages in a one-stop shop.
Accountants are also likely to be strong competitors for routine work across the board. The core competencies acquired through the repetitive and standard work in the audit, along with accountants' use of IT, will enable them to drive down the cost of doing the routine legal work. This will inevitably eat into much of the bread and butter work of law firms.
The established international networks of large accountants will also provide them with a competitive advantage over mid-sized law firms by offering access to legal advice throughout Europe; most of the Big Six have sizeable legal practices in mainland Europe.
Accountants are therefore likely to establish strong positions in the middle of the market and the cultural differences are unlikely to be such an impediment here. But the top of the market - high value corporate and finance work of large international companies - is not likely to be easily penetrated by the accountancy firms. It is here that the cultural and management differences are most stark, and the strengths of accountants in managing routine work are unlikely to be of benefit.
Moves by accountants into both management consultancy and corporate finance point to likely successes and failures. In both sectors accountants have tried and failed to penetrate the upper end of the market and to win the high value work of large companies. For example, strategic consulting, the highest value consulting work, is an area the Big Six firms have failed to get into, concentrating instead on the more routine and operational work, such as IT.
There are cultural differences between the two professions, and accountants are likely to build strong positions in the market over the next five years. But it is not a foregone conclusion and there remain challenges in managing diverse professional service practices of lawyers and accountants.