Blog - Management speak

Can Darwin help law firms?

The good times are over and only the adaptable will survive, says George Beaton.

Adapt or die

Charles Darwin might have been thinking about law firms when he wrote: “It is not the strongest of the species that survives, nor the most intelligent. It is the one that is the most adaptable to change”.
Analyses show growth of the Big 4 accounting firms outstripping their legal counterparts in most parts of the world. Additionally, the ‘accountants’ enjoy the fruits of steadily diversifying their range of services, client industries and geographic footprints in being less exposed to the vicissitudes of the economic cycle. Details are available in the Beaton450 here.




This divergence in business strategies is surprising, more especially as the needs of clients are multi-faceted, often complex and extend well beyond law firms’ traditional services. Indeed law firms serve the same corporate and government clients as the accountants and have just as much access to c-suites and boards, yet they are allowing others to eat their lunch, so to speak. What’s even more surprising is that examples of successful law firm diversification–judged in terms of growth, profitability and how complementary the services are–have existed for a decade or more, albeit in relatively small numbers and scale. Examples in Australia, the USA and the UK include non-lawyer services in governance, risk, compliance, policy, regulatory affairs, procurement and commercialisation.


Conflicts of interest


So why aren’t law firms diversifying at the speed and to the extent their accounting cousins have pursued so successfully? What is it that causes them seemingly to shy away from adding new services delivered by professionals other than solicitors?
Here are four answers we hear when law firms’ leaders are pressed. “We are poor managers of lawyers, let alone other professionals; it’s too risky”, “Consulting is not as profitable as law; why bother?”, “There are too many conflicts of interest” and “We’d be competing with the accountants and others who refer us work”.
We would add a fifth - “It’s been too easy for too long for law firms to make big profits”. Times have changed; the good old days are not coming back. And most law firms have yet to realise this.


New normal


The big end of town accountants are beginning to view and describe themselves as broad-based professional services firms, not as mono-discipline practices. It’s not just the large firms; smaller firms are also starting to follow suit.
Where do these trends in clients’  buying patterns and competitive moves by other professions leave the legal profession? Struggling to hold share of mind and market is one answer. The question remains -  will law firms evolve by diversification to survive in the new normal? As Charles Darwin observed, it is the most adaptable that survive.

George Beaton is Executive Chairman of Beaton Research + Consulting and a Partner in Beaton Capital, firms dedicated to professional services.

Posted by:

Dr George

25 February 2013

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