Received wisdom can be gloriously soothing. There is a lot of it surrounding the Big Four accountancy giants’ accelerating attempts to crack the global legal market. Increasingly, this ‘wisdom’ is out of date.
High up the list is that, as one London-based legal recruitment consultant puts it, “they’re stuffed full of mid-level recruits from mid-level firms”.
Really? In July, Deloitte Legal brought in former Travers Smith managing partner Andrew Lilley as head of employment, joining former Allen & Overy banking partner Michael Castle, now the firm’s UK managing partner. Not too shabby, not too mid-level.
Globally, the prominence of lawyers originally from firms in the upper echelons of the market is also gathering pace, a trend highlighted by the appointment this year of group leaders at both PwC and KPMG, respectively Tony O’Malley and Stuart Fuller.
Both were formerly partners at legacy Mallesons (which became King & Wood Mallesons (KWM) following its merger with the China-headquartered firm), once one of the top firms in the Asia-Pacific region and a brand that still resonates locally. Fuller was also global managing partner of KWM while O’Malley had been Australia managing partner at the same firm.
The flow of lawyers into the Big Four is highlighting a related trend that is potentially worrying to traditional law firms, that of the rise of new, often technology-driven entrants to the market.
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The world of the alternative legal services providers (ALSPs) is one to which the accountants absolutely believe they belong. The recent recruitment of several notable tech-focused specialists in London have amplified this impression and underlined the extent to which the ground beneath traditional law firms appears to be shifting.
“The ALSPs are growing rapidly and we’re part of that,” confirms the global co-head of EY’s legal team Cornelius Grossmann.
Grossmann’s view is endorsed by the CEO of one rapidly rising ALSP, David Holme of Exigent, who highlights probably the biggest threat to the established order.
“The traditional law firms are deluded,” insists Holme, a former corporate finance manager at KPMG between 1989 and 1995. “The Big Four have combined revenues of around $150bn (£124bn), which means the scale of their possible investment in technology and people is not even vaguely comparable to that of any law firm.
From nowhere they now employ 10,000 lawyers and that is without meaningful access to the US legal market. Which of the traditional providers can demonstrate these kind of stats in a low growth market? None.”
Ramping up
Over the past 12 months or so, the quartet have begun to flex their financial muscles. Most notably, in June this year, EY completed the takeover of Thomson Reuters’ legal managed services (LMS) business, Pangea3.
The deal followed EY’s acquisition of Riverview Law last year, confirming the impression that it has been the most aggressive of the group in recent months in terms of targeting legal services, despite PwC having been the largest in the UK in revenue terms for several years.
“The momentum has shifted,” agrees Carlyle Kingswood director Milo O’Connor. “EY has really put a bomb under it to get it moving.”
EY’s efforts have coincided with a ramping up of strategic investments by the three other members of the quartet since the start of 2018. In the UK, PwC has been setting the pace for the past few years and is still thought to be the largest in terms of revenue. Its name has also been mentioned as a possible buyer of the managed legal services division of soon-to-float ALSP, Axiom.
PwC posted a UK legal services revenue of £70m last year (its most recent financial results for year ending 30 June 2019 are not yet available) but the division is now financially integrated into the broader business, making direct comparisons difficult (The Lawyer has estimated its 2018/19 revenue at £80m).
Deloitte’s recent UK launch and a sense of renewed vigour at KPMG, which confirmed last year that investment in legal services is now a global priority, removes any doubt that the Big Four are on the march. Growth in the legal services market is now in the upper reaches of their priorities, both in the UK and globally.
Those at law firms with long memories like to hark back to the 1990s and early Noughties when the then Big Five (including the now-defunct Arthur Andersen) had their first serious crack at breaking into the legal market.
That didn’t go so well. The door was effectively slammed shut for regulatory reasons in the wake of the accounting scandal that led to Enron’s collapse.
But anyone still clinging to what happened two decades ago as evidence that this second attempt is doomed to fail is kidding themselves. One reason for this is that the legal services market, and buyers of legal services, have changed significantly in recent years.
New entrants, new technology and new ways of delivering legal services along with an apparently growing willingness from clients to try alternative providers is creating the perfect environment for well-funded competitors to take on the establishment.
“Generally, the appetite for what we’re doing is just really strong,” admits KPMG UK head of legal Nick Roome. “The way we approach the market coupled with pent-up desire from clients to see some change in the sector is making it perfect time to execute on plans.”
Investment priority
The ability of the Big Four to really go full throttle for legal is borne out of the most significant shift that has taken place in recent years: investment in legal services has now become a strategic priority.
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Jane McCormick, KPMG International’s head of global tax and legal, insists that investment in legal services worldwide has been “a consistent priority”, evidenced by its network of more than 2,400 lawyers in 77 jurisdictions.
“However, demand from our clients for an integrated legal offering, and market growth, has seen us steadily increase our focus over the past two years, with global legal services now being elevated to be a collective priority across KPMG’s global network,” adds McCormick. “We expect the growth to continue.”
Similarly, at EY the focus on legal services investment has shifted from being known internally as one of its “big bets” to “a priority” following a strategy refresh in January 2018. That said, five years of what Grossmann calls “dynamic growth” has already seen it expand coverage from 20 to 85 jurisdictions.
As an indication of how high up the pecking order law now is at EY, the decision to make global investment in law a strategic priority was taken last year at a global level by the leaders of the firm’s tax group (notably global tax vice chair, Kate Barton), the business line in which law sits.
The June 2018 appointment of Jeff Banta, a tax specialist and former deputy vice chair of the Americas tax group, as EY’s second global law co-leader to work alongside Grossmann, emphasises the sense of forward momentum relating to legal.
Notably, Banta is based in the US, the world’s largest legal market. His appointment is another indication of EY’s ambition of driving the business forward, particularly in the managed services space.
“The market opportunity is huge,” confirms Grossmann. “Legal was in its infant stage compared to other offerings in EY such as tax when the decision was taken to make it a priority, but the plan was to scale that business up significantly. You need to be credible and we’ve now seen five years of dynamic growth.”
There are several reasons for the renewed focus on legal. Partly, it is a result of the ongoing questions about the future of audit, which is facing challenges from regulators including the Competition and Markets Authority (CMA), which recently called for an “operational split” between the Big Four’s audit and non-audit arms.
The risk of the quartet’s traditional bread and butter audit income stream drying up is already being exacerbated by the fact that much of it is handled on a commoditised, fixed-price basis.
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“Audit is now a bit of a dirty word and is very price-competitive while aggressive tax planning is frowned upon these days, so where will their growth come from?” asks Giles Murphy, a partner at rival accountant Smith & Williamson. “This is forcing them to squeeze every last bit of efficiency out of their processes and search for new income streams.”
One lawyer familiar with the Big Four sums it up even more succinctly: “Bluntly, they realised that there’s money to be made in legal, they see law as just another route to revenue.”
Doing things differently – the integrated concept
PwC: the billion-dollar business?
Headcount growth is a common thread between all four accountancy giants and another, tangible, indication of their renewed commitment to the legal services sector. However, the extent to which this investment in people is translating into higher revenues is unclear.
PwC is the Big Four member that is most shackled to a bold, growth-related statement of intent.
Back in 2014 its then global legal services group head Leon Flavell insisted it would be a $1bn, top 20 global legal services provider by 2019.
Flavell told The Lawyer that the firm was targeting revenues of $1bn which would represent a doubling from 2013’s almost-$500m across PwC’s legal offering – with particular growth earmarked for Asia and Africa.
“There’s a strong appetite among PricewaterhouseCoopers’ global network for significant investment in legal services,” said Flavell five years ago. “Our ambition is to become a leading global legal services business in terms of quality and quantity and both in each of the local markets and globally.”
For the 12 months ending 30 June 2018, the most recent period for which financial results are currently available, PwC’s global revenues stood at $41.3bn, a rise of 7 per cent on the previous year.
PwC’s tax and legal revenues grew by 8 per cent to $10.4bn and while the firm confirmed that revenues from its global legal services business had continued to grow “as our reach and capabilities in this area expand”, it did not confirm whether or not it had reached its $1bn target.
Similarly, the UK end of PwC’s legal services division would not confirm its most recent financial performance in the year ending 30 June, stating that the figures were not yet available and were also now integrated into tax.
PwC’s UK head of legal Ed Stacey insisted that fee income had grown though would not put a figure on it, confirming that “we don’t report separately any more”.
Based on conversations with sources close to PwC, The Lawyer estimates that its UK legal services group is still significantly below £100m at around £80m.
This acknowledgment of the shifting legal service landscape is noted by PwC’s UK head of legal Ed Stacey. He insists that his firm’s approach, with law now integrated into other service lines rather than standing alone since last year, makes it a significantly different offering from last time around.
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“We’re not looking to replicate a traditional law firm model, we’re responding to what clients are looking for,” adds Stacey. “It’s actually helpful that we’ve seen the other Big Four [being active in the sector in an integrated way], it normalises the approach both in terms of the provision of aligned services with other parts of PwC and in combination with the push into New Law and tech-enabled work.”
Certainly, the Big Four’s legal services headcount has ballooned as a result of their recent investments. At EY, Grossmann claims there has also been “double digit” growth in revenue, although he declined to reveal precise financial data.
In the UK back in 2016, the earliest year for which figures are available, EY had a total of 26 fee-earners. It is now five times as large at 129. The Lawyer estimates its UK legal services revenue now stands at just under £30m.
Globally, the change is even more dramatic. EY’s legal services headcount has mushroomed from 1,400 in 2015 to 3,500. Of these, some 2,400 are lawyers while the total also includes 1,100 law graduates (who are not lawyers).
But scale is only one card in what the accountants see as being their strong hand in legal. International reach is a key component but the real money is being placed on delivering a one-stop-shop, integrated services strategy.
“Yes, absolutely, legal is now seriously on their strategic radar, but this time around they’re not trying to build a law firm to compete head-to-head in that way,” says Pinsent Masons’ senior partner Richard Foley. “Now it’s about building legal capability that lets them target a strata of work leveraging off their broader corporate contacts and offering their process power and brand – ie ‘you can trust us, it will be good’.”
As Foley describes, the current plan revolves around advising clients on business-as-usual, entry level work and building out from there. Sometimes the work involves modernising large organisations’ legal departments, which until recently had tended to be insulated from external forces such as procurement or supply chain efficiencies, leading to the autonomous running of panels and external advisers by heads of legal.
“Legal had always been seen as a dark art, which meant that legal departments’ external spend hadn’t seen as much scrutiny as other departments,” confirms Roome. “That is at last changing. GCs are realising that they’re starting to look out of kilter with the market if they’re not considering alternatives. The question now for in-house lawyers is: as a smart buyer, why wouldn’t you consider the alternatives? These options are becoming mainstream now in a way that it wasn’t five years ago.”
Clearly, if the Big Four get through the door to advise clients on efficiency projects then they are also well positioned to look at external legal spend, in the same way as they would IT or HR spend.
“As they build relationships at that conversational level, one would have thought it’s only natural that they’d also be saying, ‘oh and we’ve got a legal team that can do XYZ as well as this other stuff’,” adds the earlier source.
The Big Four’s forte is large-scale, multi-jurisdictional projects, generally at the more ‘commoditised’ end of the business and including managed legal services and legal process management.
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As Reed Smith EME managing partner Tamara Box points out, all four have rapidly managed to scale up, hoovering up work most law firms profess to believe that they can afford to lose. Box, however, issues a clear warning against any complacency.
“We’re really behind in understanding process and that much of our business is about being good and efficient at process,” she says.
“The accountants are well ahead in building process maps and process management tools and so are able to be time and cost efficient in those circumstances where our clients say ‘hey, this shouldn’t be rocket science or cost a bomb’.”
Box has inside experience of the accountants’ way of doing things, having previously been head of the finance practice at EY-affiliated firm Tite & Lewis during the last wave. She is adamant that they are clearly a threat as well as a competitor.
“I joined an EY-affiliated firm almost 20 years ago because I believed law was heading towards being a multidisciplinary business,” adds Box. “Admittedly later than I anticipated, it is happening. Law firms are starting consulting businesses, hiring data analysts, running around trying to figure out what they need to do to protect their businesses and serve their clients. The accountants started down that path years ago. It’s only natural that law should be an advanced part of their strategy.”
True, they might not yet be winning the most lucrative kind of work. None are currently bothering many of their clients for truly big-ticket, multi-billion-dollar deals or bet-the-company litigation.
There is also a notable lack of visibility of the Big Four on major client panels, despite the fact that insiders at these organisations insist they are being appointed (when asked, no client names were offered as evidence).
Of the four, only PwC is known to have secured a panel appointment during 2019, winning a place on the Government’s Crown Commercial Service panel.
Hogan Lovells’ innovation lead and global head of legal operations Stephen Allen says: “I think the Big Four will be operating in two places. One, doing the ‘process bits’ of larger transactions or two, in the mid-market. However, they have a big overhead, which therefore adds to cost, and they don’t see the most complex work.”
Nevertheless, big transformation projects can themselves translate into a significant book of business and, of course, this is not the extent of their ambition, as Eversheds Sutherland co-CEO Lee Ranson points out.
“They want to secure a firm foothold and then build out from there and move up the value chain,” he says. “In my view, this is a concerted attempt to build a very credible offering in the legal services space. It is not a ‘dip a toe in the water and see if it works’ thing. But I’d add that unlike the last time around, they’re also now much more challenged in the audit space from a regulatory and profit perspective. The ability to provide legal services is likely to be part of their business plan for the future, a specific response to challenges in audit and an area where they feel they can find new profitable growth.”
Strategic steps in the UK and beyond
EY
• Takeover of Thomson Reuters’ legal managed services (LMS) business Pangea3, June 2019
• Acquisition of Riverview Law, August 2018
PwC
• Estimated UK legal services revenue circa £85m
• Formed a strategic alliance with US firm Fragomen Del Rey Bernsen & Loewy to pitch jointly for immigration-related work, September 2018
• Launched Washington, DC law firm ILC Legal, 2017
Deloitte
• Launch of legal services division in the UK
• Acquisition of the international offices of immigration specialist US law firm Berry Appleman & Leiden, June 2018
• Formation of a non-exclusive employment law alliance with US law firm Epstein Becker Green
KPMG
• Hired 145 lawyers, including 26 partners, from Fidal in Paris, February 2019
• Launch of SF Lawyers in Hong Kong
• Leads a $4.65m Series A funding round, the largest venture capital raise in Australian legal history, into Melbourne lawtech startup Plexus
• Appointment of former King & Wood Mallesons’ global managing partner Stuart Fuller as head of KPMG Law
Weaknesses and issues
Before lawyers working in traditional law firms become too despondent, it’s time for a reality check. Even many of the lawyers working in the Big Four’s legal teams admit that the current market position is still several years away from matching up to the undoubted scale of their ambition.
Notably, there are a number of challenges all four of the accountancy giants will need to address if their assault on the legal services sector is to be seen as an outright success five or 10 years from now.
High up in the debit column, critics claim there can be a lack of clarity about the precise focus of their approach, which makes pinning down their target market (and potential biggest competitors) tricky.
“They may have a strategy regarding legal services but it’s not that obvious to me what it is, with different strategies and product mixes,” admits Gowling WLG CEO David Fennell. “So, what exactly is it that they are offering? It patently isn’t full service.”
Herbert Smith Freehills’ global head of its alternative legal services practice Libby Jackson agrees that the similarities between the apparent strategies of the Big Four can lead to some confusion in the market.
“The Big Four all appear to be aiming at a strategy which simultaneously tackles the three parts of the legal market – private practice law firms, alternative legal providers and legal technology companies – and tries to bring them together in a cohesive way,” says Jackson.
But as Jackson adds, the differences between the four are not so much strategic as much as a question of emphasis, energy and investment-appetite for particular areas or types of work, ranging from immigration and corporate reorganisation projects to M&A and employment. “Their strategy on legal services suggests they see this as a long-term play to build relationships, gain understanding of client needs and ‘infiltrate’ client organisations,” adds Jackson. “Over time, this is a compelling way to build their competitive profile versus firms like us.”
Ironically, the strength of the Big Four’s brands is also currently seen as one of the group’s biggest weaknesses, at least for now.
“Are clients fully bought into buying legal services from them yet?” asks Fennell. “The biggest issue with their brands is they’re often still thought of as accountants. And at the moment GCs tend to be less comfortable turning to them for advice than CFOs, most of whom are ex Big Four. At the moment law firms have much deeper access to GCs.
“But that’s for now. GCs’ trusted advisers tend to be lawyers, not accountants, but that’s changing as GCs themselves becomes more strategic and business-focused, less focused purely on legal. They’ll become broader in terms of their adviser base. Then turning to the Big Four will be less of a problem – but of course we’ll see law firms stepping up on the strategic and consulting side too.”
Legal players’ positioning in the UK market
Indeed, as TLT managing partner David Pester points out, even if that’s currently true don’t bet on it staying that way.
“I’m certainly hearing noises in the market that some clients are interested in reviewing what options are now available, including the Big Four,” confirms Pester. “It’s not a cacophony, we’re not at 11 yet, not quite the frog in the boiling water, but there’s a very gradual and considered turning up of the noise.”
Their sheer number of corporate clients means that the risk of conflicts is likely to be an issue while despite the scale of their global headcount and geographical reach, the connections between teams – and the quality of some of the team members – is said to be patchy.
As a London recruitment consultant adds: “They’re very disconnected, it’s very difficult to find out who the decision makers are, and they have Byzantine and overly-complicated structures.”
EY’s Grossmann vehemently disagrees with this assessment, describing it as “absolutely not true”.
“We’re very well connected, we’re following one strategy and we’re aligned,” Grossmann insists. “Yes, legally we’re different firms but we’re working cross-border on multiple projects. We never wanted to build a law firm. Twenty years ago yes, but today legal practice is another service offering of EY. We don’t go to market on a standalone basis. We want to build solutions for clients. I’d say EY is the most connected one of the Big Four.”
As for the “patchy quality” allegation, Grossmann is candid in his response.
“I’d say we’re facing the same challenges that every international law firm has,” he concedes. “I’m not going to say we’re consistent in every jurisdiction but I feel very comfortable about our quality. Obviously, there are some disappointments and while I would not describe it as ‘patchy’, to get it fully harmonised is not easy, particularly when you’re on the fast track.”
Recent deals handled by the Big Four
PwC
Honeywell: PwC provided global legal advice and project management service on two spins of strategic business units in 60+ countries in readiness for IPO. PwC supported with all of the strategic legal advice, global legal implementation and project management, working with their legal, tax, treasury and controllership functions. The transactions involved funding advice, share and asset transfers and demergers.
Eli Lilly: PwC advised on a global separation project being undertaken in contemplation of an IPO of the spin business. Via the UK legal team, PwC managed its network’s legal teams in more than 70 countries and provided legal advice as part of a PwC multidisciplinary team delivering integrated legal, tax, valuation and other consulting services. The project involved our corporate, commercial, employment/HR, pensions, real estate and regulatory legal practices.
Hewlett Packard: PwC advised on a global separation into two separate publicly listed companies, each with revenues in excess of $50bn, in what was the largest technology company split ever. The project involved separating HP’s enterprise technology infrastructure, software and services businesses and its printing and personal systems businesses.
EY
UK: Acting for a Japanese pharmaceutical company on an outbound, court-approved cross-border merger from the UK to the Netherlands, involving the transfer of assets in excess of £800m.
– Acting for an automotive manufacturing company on an outbound court-approved cross border merger from the UK to Belgium, involving the transfer of assets in excess of £90m.
– Acting for a FTSE 250 company on its $80m acquisition of a Netherlands-based data business, including legal due diligence, contract negotiation and project management.
Global: EY’s French, UK, German and Belgium law teams played a major role in its engineering clients’ takeover offer targeting a listed industry software group. The combination created a new group with approximately 14,000 employees and combined revenues of approximately €1bn. EY advised the client on all capital markets and M&A aspects including antitrust clearance procedures.
– Support for a global telecoms operator on a carve-out; over 40 jurisdictions involved (including 30 where new entities were established).
– EY is advising one of the world’s largest telephone operators on a regulatory compliance project in 17 jurisdictions across Europe. The project covers the advice on the electronic communications regulatory framework as well as interaction with the national regulatory authorities on behalf of client.
Deloitte Legal (all global)
Banco Santander: Deloitte Legal was recently appointed to Banco Santander’s global legal panel. The appointment covers 26 jurisdictions worldwide, across Europe, Latin America and Asia. The services delivered include financial services regulatory advisory, corporate law and governance, and data protection. Banco Santander also uses a Deloitte proprietary reg tech solution, Regulatory Space.
Siemens Gamesa: Advising Siemens Gamesa Renewable Energy on an ongoing basis in over 60 countries worldwide. The services are coordinated globally and include corporate law and governance, legal entity management and data protection advisory work.
Alcedo: A recent example of a cross-border M&A transaction coordinated by Deloitte Legal was the buy-side advisory to one of the funds managed by Alcedo on the acquisition of Hydreco (a hydraulics technologies provider). The transaction was led by Deloitte Legal Italy on the legal structuring, drafting and negotiation side and also involved Deloitte financial advisory, tax and legal across seven jurisdictions.
KPMG
KPMG legal services has been heavily involved in one the firm’s largest Brexit projects. The project involved strategy, structuring and implementation of a major business reorganisation of the European financial services operations of a high-profile global business in order to alleviate regulatory permissions risks posed by a hard Brexit. It was a highly complex project run over circa two years, spanning in excess of 10 jurisdictions, concerning over £20bn of assets and involving well over 100 lawyers. The project also involved KPMG’s financial services consulting, regulatory and tax teams.
– Advised a large client in the retail sector on the structuring and implementation of an asset-backed funding arrangement to facilitate deficit reduction contributions to its defined benefit pension scheme. The project involved ring-fencing over £1bn of assets into a central asset reserve structure. The engagement was secured through KPMG’s ability to provide a fully integrated advisory offering to the client comprising pensions actuarial, pensions tax, valuations and legal services.
– Advised on the sale of Magic Rock, one of the pioneers in the UK craft beer scene, to Australian buyer, Lion Global Markets. An integrated sell-side advisory team comprising corporate finance, legal and tax supported the shareholders to a successful exit.
Tech revolution
The five-year window is a useful measure to assess the distance not only that the Big Four have come but also the extent to which the legal market itself has changed, particularly in terms of its use of technology. While it might seem longer it was in fact only as recent as 2015 that legacy Berwin Leighton Paisner (BLP, now Bryan Cave Leighton Paisner (BCLP)) became the first UK law firm to go on record as saying it was using artificial intelligence (AI) technology on a live matter.
BLP’s use of RAVN’s technology to search Land Registry documents opened up the floodgates for the use of this kind of technology in most mainstream law firms. Indeed, it is widely seen as a tipping point in the way legal services are delivered. Just four years later, machine learning technology is all but ubiquitous and indeed it is eyebrow-raising if a firm hasn’t made the necessary investments in a solution like this to increase efficiencies.
It is particularly notable, then, that the man who was behind BLP’s use of RAVN, legal operations director Bruce Braude, joined Deloitte this July as its first chief technology officer. The move closely followed Deloitte’s hire of Taylor Wessing’s innovation manager Laura Bygrave as head of innovation.
Hires such as these underline the obvious fact that the Big Four’s ability to invest sums no law firm could even dream of in technology and developing new methods of delivering legal services is likely to be one of the key drivers of their success over the next decade. But law firms really need to worry? Just possibly all is not lost quite yet.
Sydney-based Major Lindsey & Africa recruitment consultant Tom Stretton, who has placed people into the Big Four, agrees that the fact their investment capability is much bigger than any law firm does mean they will be able to own the technology that in-house teams end up using, further consolidating those relationships. Even so, Stretton believes the picture is not entirely gloomy for traditional law firms.
“The Big Four will start off owning the commoditised part of legal services and work their way up as clients get more at ease with using them,” agrees Stretton. “They’re definitely a threat. But they tend to be less nimble than law firms and they have conflicts issues. Plus, law firms tend to be quite good at practising law.”
“They’re both an opportunity and a threat, they’re a catalyst,” argues Gowling’s Fennell. “People have definitely woken up and taken notice. It’s putting the ALSPs into the mainstream. To that extent, they’ve been catalytic in making law firms respond – and every industry needs disruption in order to evolve.”
So, are they, day-to-day, a huge threat now? No. But that’s misunderstanding the real picture.
“The right question to ask is ‘how much of a competitive threat will they be over next the next five years’?” asks Foley. “The answer is ‘potentially huge’.”
As the senior partner of one US-headquartered global firm puts it, “If you think they’re not coming for your lunch, think again”.
The Big Four and the innovation professionals
A broad recruitment trend sees innovation professionals ditching traditional law firms to enter the world of the Big Four and alternative service providers.
There are a number of examples in the past few months. Last March, KPMG hired Travers Smith’s former operations director Nicola Brooks to lead a new legal consulting unit that supports in-house teams on digital transformation. Brooks, who spent more than three years at Travers Smith focusing on legal delivery, now heads the new legal operations and transformation (LOTS) service alongside the accountancy firm’s head of legal technology and innovation James Thomas, who previously worked as a corporate lawyer and joined from Addleshaw Goddard in 2014.
Last June, Taylor Wessing lost one its innovation leads to Deloitte Legal as the Big Four accountancy firm ramped up recruitment efforts. Only a few weeks later, Deloitte also brought in Bryan Cave Leighton Paisner’s (BCLP) legal operations director Bruce Braude as its first chief technology officer.
Interviews with recruiters and innovation professionals who made the leap from firms to the Big Four shone a light on the reasons behind the growing trend.
The first point is around the Big Four’s higher capabilities relating to technology. On one hand, this level of investment attracts professionals used to dealing with much more limited resources in law firms. However, at the same time, as the Big Four aggressively penetrate the legal market, they need to hire people with expertise of working on innovation within traditional firms.
“Thousands of people do tech at the Big Four, but they want to understand specifically how firms are approaching technology, how law firms plan to go about it. These professionals spend a lot of time with clients, so they understand what law firm clients want. The Big Four have lots of people who are innovative, but they might not know law,” one recruiter says.
For these recruits, a move to the Big Four represents a win-win. They get more resources and an environment that has been developing technology for decades. “I find it exciting as I get to work in a start-up environment but with the support of a big corporate ecosystem,” says an innovation professional who recently left a firm to work at one of the accountancy firms in a senior role. The source mentions the opportunity of working with consulting teams that have been pursuing innovation for decades, while law firms are relatively new to these efforts. “There is an existing knowledge that is really powerful and valuable to the client.”
When it comes to career paths, unlike lawyers, innovation professionals were not brought up to specifically work in law firms. Most of their previous stints included industries that are far from private practice. So it is worth remembering that their career path also follow different trajectories that are unlikely to end in the office of a traditional law firm.
At the same time, they are readier to take career risks as opposed to lawyers who hold on to their hard-earned seats. “We are entrepreneurial individuals,” the innovation professional explains.
“Lawyers are trained to be risk-averse individuals. That is their job and where they add value. There has been lot of research around fixed mindset and growth mindset. As innovation professionals, we are used to designing things from scratch.”
So how can law firms retain these professionals as they look to invest thoroughly on innovation? One head of innovation at a firm suggests that these individuals will stick around as long as firms are able to provide exciting career and a clear progression path towards seniority. This entails either including them in the partnership or giving them a voice when it comes to boardroom decisions. And it goes beyond money. “Law firms can compete on packages,” one recruiter adds. “The question is: what level of recognition and influence within the firm are they ready to give?”