#Auslaw issues

Are we seeing the start of shared services within in-house legal teams?

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Last Friday, 12 February 2016, the Australasian Lawyer published an interesting article detailing how the in-house legal teams at Telstra and Westpac had ‘swapped’ lawyers as part of a three-month pilot secondment program.

That this is a fairly novel and innovative approach shouldn’t come as a particular surprise: both Telstra – with its fixed fee arrangement with the law firm Gilbert + Tobin back in 2009 – and Westpac – most recently with its hackathon with legal teams from (again) Gilbert + Tobin and its legal start up LegalVision – are seen as being at the cutting edge of developing in-house innovation around legal services.

But… as pointed out in a tweet by leading legal market observer, Mitch Kowalski, on Friday night… what makes this recent arrangement between Telstra and Westpac particularly interesting is that it shows every sign of potentially being the start of shared legal services among Australian in-house teams.

Mitch tweet

If true, and I cannot see why it shouldn’t be, you have to wonder what the ramifications of this would be more broadly to Australian private practice firms?

Take on board the comment of Rebecca Lim, Westpac’s chief compliance officer & group general counsel that:

“Given the success of this pilot, we are certainly inspired to look for similar forms of ongoing engagement with other in-house legal teams. I believe there is much to be gained from collaborative programs such as this.”

Disruptive springs to mind!

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Report: ‘HSF bets growth on Asia’

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The Australian‘s weekly Legal Affairs section is reporting (subscription required) today that global law firm “Herbert Smith Freehills will seek to more closely integrate its Australia and Asia practices.

Sorry to be blunt, but what!?!

According to the Lawyers Weekly website, HSF officially merged on 1 October 2012 to open as the “largest fully integrated law firm in Asia Pacific based on number of lawyers“.

That was 3 years ago.

This begs the question: are all of the recent global law firm entrants to Australia going through the same issues?

My guess here is “yes”. Even though nearly all of them (arguable K&L Gates used US-Australia as its strategic reason for opening in Australia) made specific mention of using Australia as a springboard into Asia, pretty much none of them – to my knowledge – has a specific liaison Business Development Manger person (or higher) located in Australia who assists with joint business development activities.

As I understand it, there may be cost related issues involved in this (who pays for the resourcing – Australia or Asia). There may also be personnel issues involved.

Who knows; but the short answer is that for the life me I cannot understand how 3 years or more (in some cases) on from when the global firms arrived in Australia they still don’t seem to:

  • have dedicated Asia-wide practice and support teams
  • be able to tell you the number of referrals across jurisdictions (inbound and outbound)
  • be able to tell you which partners are referring work [championing] across jurisdictions
  • be able to tell you how many referrals are going to other firms within the jurisdiction where they have an office – particularly where there may have been a relationship prior to the merger (in Australia’s case, would you like to take a punt that Gilbert & Tobin gets referrals from international firms with an on the ground presence in Australia?)
  • know which of their clients are referring work to them across multiple jurisdictions.

To me, this says that both the back-end and front-end operations of the merged firm are still working in geographic and practice group silos (which they most certainly would appear to be from today’s article).

Don’t get me wrong, it’s great that HSFs is seeking to more closely integrate its Australia and Asia practices. I hope other firms follow suit. I’m just frustrated that this initiative is probably about 2 and half years late!

#BizDevTip: Spring clean now for a strong start to 2016

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Spring has officially sprung in Australia (1 September) and so now is the time to do a spring clean of your law firm if you want to give yourself the best chance of making a strong start to 2016.

As a minimum, you should consider shaking out the winter cobwebs with the following housekeeping actions:

  1. Audit your client list  – to see who the best performers have been, who the up and comers are, and who have fallen off a bit.
  2. Review your revenue streams – to see which practices are getting revenue from which clients. Remember, the more practice groups that are getting instructions/revenue from a client, the more likely that client is to be a profitable client.
  3. Review and update your ‘key’ (which should include decision makers as well as supporters) contacts database and update their preferred method of communication (phone, email, chat, Facebook, tweet?).
  4. Hold an off-site firm strategy day that includes a review of market conditions, expected client demands, and how your firm will respond to these.
  5. Segment your client contact database by industry, etc so that clients receive the most appropriate information from you – rather than blasted mailshots.
  6. Start thinking about your FY2017 client listening program – who will you go and visit? Will you be doing this internally or externally?
  7. Start thinking about your FY2017 communication plan.
  8. Review and update your referrer / firm champion list.
  9. Look up what industry events will be taking place in 2016 and see if you need to be attending these.
  10. Consider ways that you can be adding value (via your value added services) to your client relationship that might differentiate you from your competitors.

I cannot guarantee that you and your firm will be star performers in 2016 if you carry out this spring clean, but I can guarantee that 2016 will [at best] be a fairly ordinary year for you and your firm if you don’t action these and more.

Survey: One in four Australian law students are not sure about their future intentions

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We often talk about the lack of opportunities that current Australian law students face when looking for work in what counts as the ‘New Normal’ in the world of legal in  Australia.

It was interesting to read, then, in a recently published survey of the 1,403 law students undertaken on behalf the Women Lawyers’ Association of NSW that:

“One in four law students were not sure about their future intentions, and one in ten intended not to practise as a lawyer.”

Of those students who did intend to practise as a lawyer (61%), only half (both female and male) anticipated working as a solicitor in private practice; while close to one third intend to work as a government lawyer, in-house corporate lawyer or as a barrister.

Those law students who do not intend practising law after graduation said they anticipated working in banking and financial services, government/politics or in corporate strategy.

Interestingly, given the cut backs in this area, one in five law students were proposing to work as a community-based legal service lawyer, with female law students the more likely to be studying law for altruistic reasons; including “having an interest in social justice“.

Less surprisingly, male law students were more likely to cite “a good income that a career in the law offers” and “the prestige and status that a career in the law would bring” as being their main drivers for studying the subject. Which probably proves beyond any reasonable doubt that females are smarter than males!

All in all, I’m not sure the outcome of this survey would have varied dramatically in my days studying law at university 20 years ago. That said, I know that my aspirations – in studying the subject – were to be a lot more like Geoffrey Robertson QC than the partner of a Magic Circle law firm.

As it turns out, I ended up being neither. Which is why survey’s like this are important in reminding us that we probably need to hold off telling law students that it’s all doom and gloom in the world of the “New Normal” and start with actually asking them what they want to do with their lives.

3 more surveys on the state of the legal market were published this week

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Hot on the heels of a post I posted two weeks ago summarising three reports on the state of the legal market, the last week of August has seen the publication of a further three survey reports.

  1.  The US Survey Report 

The first survey report (Surveys Find Mixed Demand, Moderate Pay for Corporate Counsel) is out of the USA and summarises the findings from a questionnaire sent to 1,300 chief legal officers (CLOs) of the Association of Corporate Counsel (ACC) – who now have a Chapter in Australia.

This ACC survey covered wide ground, including pay rises (3%) and areas of in-house recruiting growth (compliance, contracts and corporate generalists), but probably my favourite take-out was the following two paragraphs:

“Organizations are looking for corporate counsel who can facilitate the business process, according to Peters. Counsel should become familiar with what the company does, take an interest and act as a support, instead of simply focusing on the legalities of whatever is presented to them, she said.

For example, corporate counsel might tour the company’s plant and observe the manufacturing process to better understand how the company works, according to Peters. This might allow the lawyer to help get the product to market quicker. “It behooves the lawyer to be involved and become an integral part of the company. Partnering with the business, you add and keep value,” she said.”

Private practice lawyers could move a lot further along the trusted advisor paradigm just by following that piece of advice.

2.  The UK Survey Report

The second survey report (Mind the Gap: GCs, Firms Wide Apart in Perception)  is actually a one-page infographic [downloadable here] done by the team at Briefing Magazine in the UK and provides further evidence, if ever we needed it, that there is a growing ‘value gap’ in the perception of the relationship between in-house counsel and their outside law firms & law firm managers.

This survey polled 125 GCs, 67% from companies with more than £1.1 Billion in revenue a year and more than 1000 employees, along with 86 managers (NB: Briefing Magazine‘s target readership is law firm leaders and managers) from the top 120 law firms in the UK.

Two take-outs from this survey of note are:

  • on whether the process of buying legal services had moved to the in-house legal team’s procurement department, 80% of in-house GCs said they – and not the procurement department – had the say on who to send legal work to, whereas almost three quarters (74%) of law firms said exactly the opposite (ie, procurement had the say here).
  • on the issue of AFAs (alternative fee arrangements), 76% of law firms believe that in-house GCs want to move away from the billable hour, whereas only 58% of GCs said they do.

Interesting as they are, both of these responses really highlight to me that most law firms out there are not having proper conversations with their clients around how legal services are being procured and, importantly, paid for.

3.  The Australian Survey Report

The third survey report of the week was the most comprehensive.

Authored by Joel Barolsky and published by The Melbourne Law School and Thomson Reuters Peer Monitor, the 2015 Australia: State of the Legal Market report sets out the dominant trends impacting the Australian legal market in 2015 and the key issues likely to influence the market in 2016 and beyond [a copy of which is downloadable here].

As you would imagine, a survey report of this nature (15 pages) packs a punch and there are way too many take-outs to summarises them all here so if you are interested in the finding of this report, but don’t have the time to read the whole thing, I would like to suggest you take a look at Joel’s post on LinkedIn – Key takeouts from major new legal market report – summarising the findings.

For me, it was interesting to see the survey confirm a trend I identified last year in the market, namely that the biggest competition private practising lawyers have these days is actually in-house counsel. I think this is further evidence that private practice lawyers are not doing enough to explain to their in-house counsel the benefits of using outside counsel.

In short, to my mind the conversation should not simply be: “I’m spending $150,000 on external legal each year, I can hire a lawyer and bring this work in-house“. Although I very much fear that is exactly the conversation that is taking place. And when you keep in mind that the two principal areas of concern for in-house counsel are compliance and risk, you’d think this provides external legal with exactly the right platform to have the conversation around why taking work in-house should not be a growing trend.

#BigLaw is far from dead

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Has the death knell of #BigLaw been rung too early?

Despite all rhetoric to the contrary, three reports published within the past week would suggest that the business model of #BigLaw is far from dead.

  1.  Citi Private Bank’s Law Firm Group report*

The first, published in the American Lawyer, was Citi Private Bank’s Law Firm Group‘s quarterly report on financial performance in the legal industry.

While this report headlined as ‘Despite Growth, Law Firm Forecast Dims for 2015‘, it is worth noting the following three paragraphs from the report:

“Looking at the results by firm size, the Am Law 100 firms saw demand and revenue momentum build. For the Am Law 1-50, part of the positive momentum is due to some moderation in 2014 results from the first quarter to the first half. The Am Law 100 firms are also better poised than smaller firms for near-term revenue growth, given that they had comparably larger inventory increases (especially in accounts receivable) at the end of the second quarter.

The Second Hundred was the only segment that saw a drop in demand. It also had the lowest increase in inventory (2.3 percent), so the third quarter will likely be particularly challenging for these firms.

Despite the momentum generated by the largest firms, it was the niche/boutique firms that had the strongest first half overall. Revenue was up 7.0 percent on the strength of a shortened collection cycle (compared with a lengthening for the Am Law 100 and Second Hundred segments), as well as modest increases in demand and rates. The niche/boutique firms also posted the smallest increase in expenses, 1.9 percent, creating a substantial widening of the profit margin. Because of the accelerated inventory turnover and only modest improvement in demand, however, inventory for these firms was up only 2.8 percent. These smaller firms may therefore find the second half of the year more challenging than the first half.”

So, while mid-tier firms appear to see revenue in decline, the top-end of town was actually seeing demand and revenue momentum build.

[* The results of this report are based on a sample of 177 firms (83 Am Law 100 firms, 45 Second Hundred firms and 49 niche/boutique firms)]

2.  BTI Consulting report**

The second report is a snippet from BTI’s Annual Survey of General Counsel and goes under the bye-line: ‘Large Law Edges Out Mid-Sized Firms for New Work, with Higher Rates‘.

Here, BTI Consulting’s research found that:

“60% of law firm hires went to larger law firms (650 lawyers or more) in the last year. Clients report hiring large law as a result of increased and more pointed attention—think industry knowledge and more specific discussion of company issues. Think less about your firm statistics and more about the people to whom you are talking.”

Possibly more damning, however, was the observation that:

“The onus is on mid-sized firms to do better. Clients expect mid-sized firms to bring more client focus and more business understanding than large law—but are not always getting what they expect. And, mid‑sized firms have to demonstrate vastly better understanding of their potential clients’ targeted objectives than large law.”

[** Research is based on 280 in-depth interviews with corporate counsel at companies larger than $750 million in revenue as part of BTI’s ongoing Annual Survey of General Counsel.]

3. CommBank Legal Market Pulse Conducted by Beaton Research + Consulting

The last report is a little closer to home, Q4 2014 results from CommBank’s Legal Market Pulse conducted by Beaton Research + Consulting.

I’ll most likely review the findings of this report more closely in a post later this week – and it may even be interesting to compare them against previous Q2  & Q3 reports – but for the purposes of this post I believe we don’t really need to go past the following infographic from the report:

CBA Q42014 Graph

which would certainly seem to indicate that “top-tier” firms are far happier with overall FY2014 results than their “mid-tier” cousins.

Bringing it all together

So, what does this mean?

To my mind what these three reports cumulatively evidence is this:- while #NewLaw may have arrived, and while it may be here to stay, what is increasingly clear is that #BigLaw is not the market segment that needs to be concerned with this development.

Nope, dig a little deeper and I think you’ll find that it is actually Managing Partners in firms with revenue in the A$20-A$70 million range who will be having a lot more restless nights sleep…

China, #Auslaw firms, and the $400 billion lost opportunity

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Last week I blogged that Australian law firms were missing out on a massive opportunity by not being better at selling Australian law, and Australia more broadly, as an alternative venue to London and New York. One of the things that I commented on in the post was how Australian law firms were falling short on their ability to sell venues such as the National Stock Exchange (NSX) and Australian Stock Exchange (ASX) as alternative venues on which Asian, and Chinese in particular, companies could look to to raise capital.

It could not have been more timely then that later in the same week Reserve Bank of Australia (RBA) Governor Glenn Stevens added a monetary value to the opportunity being missed here – $400 billion.

Yeap, Stevens is quoted in this article as saying:

“…capital markets should prepare for a world where China invests $400 billion a year offshore.”

So, the question I asked in my blog last week remains:

“What is your law firm doing to capitalize on this opportunity?”

Because there is absolutely no doubt in my mind that while we ponder this question others in the region are touting the benefits of Singapore, Hong Kong or a whole raft of other suitable offshore venues.