Seventy percent of top global law firm leaders say they’re not making strategic changes in response to the competitive threat from the Big Four accounting companies, according to a new Harvard Law School study.
Fifteen percent of the 20 law firm leaders polled said they aimed for more “complementary” relationships with the Big Four—which include PwC, Deloitte, EY, and KPMG—while the remaining 15% said they were already busy transforming their firms by expanding to be able to provide “multi-professional, integrated solutions,” according to the study.
Momentum has been building for states to loosen law firm ownership rules, changes that could grant the Big Four the ability to compete with—or perhaps eventually to combine with—existing law firms.
The study was conducted by Robert Couture, a senior fellow at Harvard’s Center on the Legal Profession. The former McGuireWoods executive director interviewed leaders, including firm chairs, chief operating officers, and managing partners at 20 of the top 100 global firms as based on gross revenues.
Couture said he’s concerned that “too many law firms will say, ‘Well, seventy percent of the people are doing nothing. We’re comfortable now. Let’s not do anything.’”
“And that’s a real threat,” Couture said during a webinar Tuesday.
Joe Andrew, global chairman of Dentons—the world’s largest law firm with 204 offices around the globe and more than 12,000 lawyers—said firms like his are already intertwined with the Big Four in many ways. The accounting companies are all among Dentons’ top 50 clients, he said—and they make up the top four client referral sources for the firm.
“When you talk about whether you choose or don’t choose to recognize the impact of what they do, they’re our clients, they’re our collaborators, they’re our referral sources,” said Andrew. “They have a tremendous impact on what we do.”
Deloitte’s recent alliance with the workplace law firm Epstein Becker Green is one example of how firms and accounting giants have joined forces. That initiative has allowed the firm and the company to refer clients to each other and jointly bid for new work.
Law firms and the Big Four often compete for contracts to automate contract review and to provide other AI-enabled and tech-driven services for corporate clients. As the role of the corporation general counsel evolves, those competitors should find more ways to work together, including through partnerships, said Meghann Kelley, White & Case’s global director of strategy.
“The shift in expectations and the pressures that are being put on the GC are really opening the door to many different types of providers to come in and work side-by-side with the GCs,” said Kelley, who worked for Deloitte for more than a decade before joining White & Case in 2019.
Some of the law firm leaders emphasized that states and the American Bar Association need to work faster to get rid of Rule 5.4—the regulation that allows only lawyers to own legal service operations. Several states have loosened or repealed their versions of Rule 5.4, including Utah and Arizona—and California and other states may be heading down the same path.
“In the U.S., the ABA is not doing law firms any favors with Rule 5.4, because they’re not learning how to compete with integrated solutions being offered by the Big Four and other consultancies,” Couture said he heard from one law firm leaders during the study. “It’s good for short-term profits but bad for long-term competitiveness.”