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Published 07 December 2012 05:55, Updated 30 January 2013 22:00
For firms weighing the pros and cons of remaining independent in a globalising world, it may well be that talent considerations outweigh those regarding clients. Photo: Aurora Daniels
For an increasing number of Australian firms in accounting, law, consulting engineering and other professions a big and – in some cases – urgent question is: ‘Do we remain independent or do we align with a global firm?’.
Reflection on the announcement a few days ago of Middletons’ merger with K&L Gates and our recent work in several professions with leading domestic firms provide the grist for today’s post: What’s required to prosper as an independent domestic firm when others are globalising?
While tie-ups between Australian and overseas firms are no longer as newsworthy as they were a year or two ago, Middletons’ decision will ignite further debate in similar firms in Australia, Canada, Latin America and elsewhere. The prospect of more mergers like this puts pressure on all firms to make decisions: ‘Do we maintain a watching brief?’ (in effect, do nothing) or ‘Do we decide to remain resolutely independent?’ or ‘Do we seek to become part of global firm?’.
Being clear about the answer is important for all firms in respect of attracting and motivating talent. And for some firms it’s relevant to winning, retaining and growing clients.
Most, but not all, top graduates elect to join the Big 4 in accountancy, the Big 6 in law and their equivalents in other professions. Given that these are also the biggest firms; this leaves only a few top graduates for which the large number of mid-size and small firms compete. Note also that almost all of the big firms are increasingly global in their footprints plus their brands have an allure with which domestic firms find it hard, often impossible, to compete. Yes, some of these top graduates leave the big name firms and join others after a few years with training under their belt and a big name on their resume. And yes, not all top graduates make top practitioners. But, unless domestic firms successfully take creative and sustained steps to secure their fair share of top talent, the net effect over time is a dilution of their DNA to the advantage of the global and/or large firms. For most domestic firms this ‘But…’ is a bridge too far – the result of which is a decline in their competitiveness over time.
As to clients, Middletons’ media release captures the rationale for globalising espoused by all firms. The words speak about benefits to clients of their merger: “With the largest integrated network of offices and partners of any global firm, our clients will be able seamlessly and efficiently to access top-notch legal resources around the corner and around the world”.
For firms weighing the pros and cons of remaining independent in a globalising world, it may well be that talent considerations outweigh those regarding clients. After all, by number most clients have no need for services outside Australia.
But there’s more to being sustainably successful and profitable as an independent domestic firm. To truly prosper such firms must have absolute clarity about their positioning (ie. what type of clients should prefer their services and why); a deep focus on a few core client sectors; the highest quality advice and service levels; access to best practice know-how; and strong governance and leadership.
Every firm eventually has to make a decision about its status. Is independence preferred over being part of something larger, whether it’s through being acquired by a larger domestic firm or joining a global firm? Cultural and emotional arguments are important and often prevail. But the logic of forces in the talent and client markets and each firm’s capacity to manage these are more important in the long run.
George Beaton is Executive Chairman of Beaton Research + Consulting and a Partner in Beaton Capital, firms dedicated to professional services.