While the Big Four have a massive 96% of FTSE350 audit work (not including investment trusts), doubts are starting to surface about the lack of choice available when it comes to selecting an audit firm. There is a growing sense that if the mid-tier can get their branding right, they have an opportunity to capture business from current Big Four turf.
It is just over two years since Andersen admitted that staff in Houston shredded Enron audit documents, but the Big Four are still living in the shadow of the collapse of what was at that point the most distinct and ‘different’ of the then Big Five brands.
Quite simply, Big Four brands are running for cover, and according to branding expert Lucian Camp, chairman of marketing and branding agency CCHM, they have decided it is best ‘to keep their heads down’.
According to Camp, Big Four brands have retreated into what he calls a ‘2-D era’, which means asking themselves just one question: ‘How do we avoid Andersen happening to us?’
Camp says that the demise of Andersen was a devastating blow to the top firms, which has caused these giants to keep a low profile. But, he says, in the professional services world, brands are important not just to the outside world but internally. ‘They show employees how to behave within their organisations.’
In the case of the Big Four, which between them have tens of thousands of employees, it is all about exercising control over how staff and partners interact with the outside world.
The demise of Andersen illustrates only too clearly what can happen when some employees fail to embrace core values such as trust, honesty and integrity.
The failure of a few of its audit partners to keep to the firm’s original values ultimately destroyed Andersen’s reputation. This has had a negative spin-off for the other Big Four, which, according to brand experts, appear less secure about whether their employees are embracing behaviours that their brands are meant to represent. In other words, claims Camp: ‘None of them know what skeletons are in their closets in their offices around the world.’
Nigel Mengham, UK head of marketing and consumer affairs at KPMG, says Andersen and other scandals have had what he refers to as a ‘grand prix crash effect, where one car crashes and causes the others to crash too’.
And while the Big Four seem to be keeping their brands by and large below the parapet, this has opened the door for the mid-tier firms to adopt and build bolder brand images. It is not surprising then, that mid-tier firms are happy to speak about their brands.
Chris White, national director of communications at Grant Thornton, says his firm recognises that branding is ‘an extremely important way to differentiate yourself’.
The firm is currently reassuring clients that the problems facing Grant Thornton Italy have no bearing on the UK firm. White, speaking before the Parmalat scandal broke, says that the firm has had to evolve its branding.
‘Many years ago Grant Thornton identified its market segment as owner-managed businesses and built up that relationship.’
Now, says White, the firm has become an international business, serving other organisations, multinationals and plcs. ‘Our brand strategy has had to evolve based on how we are doing business.’
According to Andrew Pincott, director of marketing at PKF (rebranded from Pannell Kerr Forster), adopting a personal approach is key to success.
‘PKF partners develop and nurture strong relationships with clients. Client relationships are key and very personal and our client reviews underpin this,’ he says.
White is more blunt. ‘We adopt a practical real world approach to generate ideas for clients, whereas the Big Four have a more theoretical approach.’
This view is shared by David Haig, chief executive of consultants Brand Finance. He describes the Big Four brands as standing for ‘one-stop shops’ where making money is the ‘be all and end all’, and more importantly where they ‘don’t want to give up what they already have’, referring of course to auditor independence concerns and conflicts of interest issues which have dogged them.
According to Haig: ‘They are in retreat – the mid-tier firms are on the rampage and doing very well. The mid-tier are happy to talk. Their brands offer good value for money and they have been neglected in the past.’
But it’s not all doom and gloom for the Big Four. Their brands are still the strongest and most powerful, for now. And, of course, a strong brand name influences price.
As Mark Allatt, director of brand and image at Deloitte, explains: ‘The Big Four represent a brand category in their own right and this category also includes the four most well known firms.’ Deloitte, which along with KPMG was the only Big Four firm to comment, has arguably been more proactive in its brand identity then its rivals. Allat is, of course, responsible for the rebranding of Deloitte & Touche to the more succinct Deloitte.
He claims that the change was driven by the need to refresh the brand and move on. ‘The new identity is more distinctive, which is a good thing in a busy market,’ he says.
Haig says rebranding is generally driven by the market. ‘In the case of Deloitte & Touche, clients were already calling them ‘Deloitte’ so the rebrand was a natural progression.’
It will be interesting to see how the mid-tier firms position their brands and how the Big Four respond. Already, BDO Stoy Hayward is adopting a markedly different image – that accountancy firms are fun places to work.
Commentators will watch to see if any of the Big Four, or indeed any other mid-tier firm, go out on a limb this year.
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