Monday, 12 December 2011

Big 4 a reason

In 2011, the Big 4 "accountancy" firms reported revenues of $29.2 billion (PWC), $28.8 billion (Deloitte), $22.9 billion (E&Y), $22.7 billion (KPMG). The world's largest law firm reported revenues of $2.1 billion (Baker & McKenzie).

OK, you got me. That law firm number dates from 2010. Perhaps 2011 was a barnstorming year and they added a zero after 12 Stakhanovite months of wild billing. But probably not. In fact, based on published numbers, you'd need to add the revenues of the world's top 15 law firms before you get one Big 4 firm.

The largest law firms are very respectable sized businesses, but the Big 4 are so massive they make the law firms look like boutiques. I'm not suggesting revenue is everything, but it's a perfectly reasonable measure of how much the rest of the world wants you around. 

The Big 4 don't just sell audit or accountancy advice, they sell all kinds of professional services. That statement also describes one of their weaknesses. They have a tendency to appear at the elbow of the people on the opposite side of the table. Law firms are still focused enough to have narrower loyalties. But, apart from that, what's the Big 4's secret? Here are a few brief thoughts on their approach to client care, entirely based on unscientific personal experience.

First, the Big 4 are thoughtful about what's really important to their clients. Take for example advice on areas like tax or remuneration. In most law firms, these areas of practice are mostly regarded by the mainstream corporate lawyers as esoteric areas staffed by technical propeller-heads. But at the Big 4, they understand that both are key areas of discussion in any boardroom. They lead with strong practices in these areas and they're prepared to push the partners who understand them into the boardroom as the face of their businesses. In terms of building relationships, it works.

Second, there's little oppositional debate between "in-house" and "out-house" accountants. I don't see CFOs and the partners at the Big 4 firms involved in sterile debates about whether "business" is polluting the purity of accountancy or whether they should have direct access to the staff outside Finance. Lawyers take note. The race isn't with another part of your own profession. If we all combine to work out how to serve our clients, our profession will thrive. In-housers are just as culpable. Recently, I was challenged on whether I really involved my external legal advisers in the development of my department's strategy. I confess I'm nothing like systematic enough and that's going to change.

Third, the Big 4 think very carefully about how to engage with and develop their current and future clients. Everyone publishes briefing papers and many of them are very good. I have a Big Law corporate briefing and a Big 4 quarterly briefing on the table in front of me. Both are excellent. Law firms do very good training for their clients. But the Big 4 take this quite a lot further. One of them runs a "CFO Programme", designed for those in senior positions in Finance, who are either recently promoted into the CFO role or may soon be. The aim of the programme is to help budding CFOs prepare for and cope with the sheer complexity of their roles. That's a pretty clever way of building loyalty amongst a grateful client base. If there's a law firm with a systematic development programme for prospective General Counsel, I'm yet to hear of it.

Fourth, there's something important about the psychology of how they interact with you. In the past month, two partners from different Big 4 firms have come to see me. They opened the discussions by saying "Help me to understand you" and then they were nice enough to sit, patiently, listening. The General Counsel isn't their most important client inside a company. So, the fact they showed up at all is revealing. How many lawyers go to see the CFO to find out what's important to him/her? 

Those words "help me" are the key. They change the nature of the transaction. It's no longer you telling me what I ought to know. I've come to the meeting expecting to listen to someone trumpet their expertise and tell me why I ought to give them more work. Instead, they've made themselves vulnerable and asked for my help. Any human being will respond to that in a different way. 
Along similar lines, I saw a Big 4 pitch which laid out what the firm could do for us, but only on the condition that we achieved certain things for ourselves. That's also very human. The message is that we need each other. Neither of us can do this alone.

I recently saw a statement from a Big 4 partner which said simply "I'm really proud of my association with [your company]". That's a very simple and a very powerful thing to say. If you're a lawyer, ask yourself honestly whether you feel the same way about your own clients. If you do, would you tell them?

Maybe that's the real key to the success of the Big 4. They seem to believe their client isn't just another "dull company" (a comment made on this blog) that they wouldn't deign to work in. That makes them an awful lot easier to work with.