ASEAN

Your law firm’s brand recognition: How much does it really matter?

Earlier today Dr George Beaton (@grbeaton_law), Partner in Beaton Capital and an associate professor at the University of Melbourne, posted the following question to Twitter:

“Which firm is the ‘world’s strongest’? Skadden or Baker & McKenzie or Jones Day. Confusing”

With a twitter pic link to an article on the Global Legal Post website that contains links to the following “Related stories”:

Leaving aside the issue of financial strength, as George’s tweet clearly infers brand strength, the question I always ask when I see news items and survey responses of this nature is this:

Does it really matter?

And the answer to that really depends on what my firm’s overall strategy is.

Taking a step back, whenever I’m asked in my role as a business development consultant by law firm partners of the importance of such survey findings I will often respond by asking them the following question in return:

Imagine we are on a long distance flight on an important business route – say Sydney to London or Tokyo to New York. Now, say I give out a questionnaire to all 300 plus passengers on that plane asking them the simple question of whether or not they have heard of your firm. Would you prefer:

A. a greater percentage of passengers in first class to have heard of you?

B. a greater percentage of passengers in business class to have heard of you? 0r

C. a greater percentage of passengers in economy class to have heard of you?

Now if your firm’s business plan is to be doing “premium work for premium clients”, then my guess is you’d want a greater percentage of first class passengers to have heard of you. Similarly, if your business plan is to be working with the top ASX 200 companies, then I would hazard a guess you would want to be known by both first class and business class passengers, with the edge being on the greater brand recognition among the business class passengers. Finally, if your firm’s business plan is to be a leading B2C law firm, that I’m guessing you wouldn’t mind if your brand is widely recognised by the economy class passengers.

A very simplistic way of looking at this issue? Very much so.

But, at the end of the day, despite headlines that read ‘Top legal brands grow 45pc faster than others over last four years‘, I’m very much of the view that surveys of this nature fail to ask a more critical question, namely:

Do you regularly, or have you ever, instructed one or more of these firms you have heard of in the last three years?

Because, does it really matter if you have heard of me but never given me any work (ie, fed me)?

And all of this is before we get into the even more interesting discussion of whether or not you instruct individual lawyers (lawyer name [brand] recognition) – either at my firm or elsewhere – regardless of which firm they work for (lateral hire movements)?

After all, we have a long flight ahead of us…

Pinsent Masons joins the #Auslaw party!

Some 15 months (December 2013) after Pinsent Masons initially appointed Maddocks ex-chief executive David Rennick to lead the firm’s review of growth opportunities in Australia, and three months after the vote to appoint John Cleland as new global managing partner that appears to have confirmed the firm’s stated international growth strategy , Pinsent Masons has, today, announced that it will launch a 5 partner led local Australian practice in May of this year with offices in Sydney and Melbourne that will initially focus on infrastructure related work.

Given the firm’s overall strength in infrastructure related work in Asia – partner-in-charge of Asia Ian Laing has significant PPP and PFI experience – a strategic focus in this area would appear to be sensible.

That said, Pinsent Masons decision to open here (with an as yet undeclared number of lawyers and support staff) does nothing to deter from the fact that the legal market in Australia is a very competitive and crowded one, a trend that is likely only going to increase with the growing interest of international brands – so the very best of luck to this firm going forward and welcome to the Auslaw party!

Q2 2014/15 CommBank Legal Market Pulse report

The CommBank Legal Market Pulse report for Quarter 2 2014/15, conducted by Beaton Research + Consulting, has been published. Providing useful insights into the latest trends and developments impacting on the Australian legal industry, this report has rapidly cemented itself as a staple among serious legal business developers in Australia.

Interesting outtakes from the latest report include:

unsurprisingly, given the continuing political uncertainty and falling commodity prices, many law firm leader believe there may well be a downturn in the broader economy over the next 12 months.
one in three firms are looking to expand geographically by opening new offices, with an emphasis on Perth, Brisbane and Canberra being the locations of choice. This is an interesting development as it had been the stated strategy of many firms in Australia for a long time not to expand outside of their geographic stronghold base. For example, for a long time HDY were only ever going to be a Sydney firm serving national clients. Now they have an office in Brisbane. Likewise for G&T (new offices in Melbourne and Perth). What I would be interested to find out though is how much of this expansion is self-driven and how much of it is been driven by major clients looking to rationalise the number of law firms they use? If that question was asked, I suspect we may find that this trend is more client-driven than firm-driven.
Asia at 89%, UK/EU at 67% and Brisbane at 52% are seen as being the geographic areas with the highest revenue growth expectations. Sorry but I find this nothing short of astonishing. Have any of these respondent law firms looked at how crowded the Brisbane and Asian legal markets are? And wasn’t it only a few months ago that PwC were reporting that return on equity for Asian law practices was the lowest globally (at somewhere in the 20% range). [that said, Clifford Chance did recently announce a desire to increase revenue in Asia by 25%]
expected changes in realised rates is a 1% (+) increase. Pathetic! Might I suggest the firms concerned consider not increasing their rates by 5-10% this year and instead concentrate on trying to get more than 80c in the $ in realised billing rates.
negotiating price with clients, at 81%, is seen as the biggest business challenge facing law firms. Here, I would hazard a guess that negotiating the price we want from our clients is probably the real business challenge as it would seem that price negotiations in law firms is a one way conversation at the moment.
the practice area with the highest revenue growth expectations is Government (at 55%). With the announced forthcoming closure of the Australian Government Solicitor potentially putting up for grabs around $111.3 million in revenue for private practice law firms, perceived growth in this sector shouldn’t be too surprising. What does remain to be seen is how much of this pie firms other than Clayton Utz (at 11% for 2013-14) can get their hands on.
54% of law firms surveyed believe revenue from “non-legal services” will increase over the next 2 years. While I was unable to find a definition of “non-legal services”, the relatively low (at 54%) number of law firm leaders who saw growth in revenue in this area does surprise me. This is especially so if services such as the recently launched Orbit by Corrs Chambers Westgarth is seeing as constituting “non legal services” (in that it is not core legal advisory work).
and finally, 70% of law firms see “recruiting partners and staff from competitors in the new location” as being the most likely method of geographic expansion, while only 30% saw this geographic expansion occurring as a result of a “merger with an existing firm” – so be on the lookout for 2015 being a very business year for lateral hires!

If you haven’t already done so, can I suggest you download a copy of the report. It really is an interest read.

Network ASEAN: Are you plugged in?

I read with interest a commentary post yesterday (although the post itself was made on 7 February) by Reid Kirchenbauer (on the www.investasian.com website) that outlines some of the economic developments that had occurred in the forty years since The Association of Southeast Nations (ASEAN) and Australia had developed diplomatic relations – ‘Understanding Australia-ASEAN Trade’.

Some of the more notable aspects of Reid’s post include:

Southeast Asia (SEA) is currently Australia’s second largest trading partner after China
Bilateral trade between SEA and Australia was valued at US$67.9 billion in 2013

And yet, somewhat troubling, notwithstanding the multi-billion dollar level of trade between ASEAN and Australia, and even though a free trade agreement (FTA) exists between ASEAN-Australia-New Zealand (the AANZFTA signed in 2010), a 2013 survey by the Australian Trade Commission (ATC) found that the majority of companies in Australia were not aware of the ASEAN Economic Community.

I say “somewhat troubling”, but the reality is that the ATC 2013 survey mirrors a recent Acitas survey, whose major findings were that:

45 per cent of multinationals require legal advice in South East Asia;
34 per cent of Australian multinationals’ legal spend now goes outside their home jurisdiction; and
60 per cent of Australian in-house counsel surveyed said they needed legal advice in South East Asia

but that these needs were largely going unmet – “Law firms are failing to support clients in South East Asia” an article by Felicity Nelson posted to the Lawyers Weekly website on the 19 December 2014.

If we leave aside for the moment the comprehensive recent report by The Lawyer Magazine on Southeast Asia Legal Elite (the Executive Summary of which can be read here), it seems indisputable to me that ASEAN represents a massive opportunity for Australian law firms in 2015 and that, sadly, a large part of this opportunity is going to be unmet.

Turning back to Reid’s post though, what realistic opportunities exist for Australian law firms in all this?

Well,

no doubt assisted by the Thailand-Australia FTA (TAFTA), coming into effect in 2010, Thai foreign direct investment (FDI) into Australia has increased by over 20 times since 2007;
with the Australia-Malaysia FTA (MAFTA) coming into effect in 2013, Australia is ranked the third biggest investment destination for Malaysian investors and two-way investment between the nations has doubled since 2010 and now accounts for more than $20 billion; and
in addition to being the oldest FTA between an ASEAN nation and Australia (signed in 2003), according to the most recently published data Singapore is currently the largest foreign investor in Australian real estate, making up 28% of all foreign property investments in Australia.

and that’s just inbound work from ASEAN into Australia, let alone any of outbound work the 60 per cent of surveyed Australian in-house counsel said they needed help with in SEA.

All of which leads me to ask:

is your law firm plugged into a formal or informal network in ASEAN?
if so, do you know what level of inbound referral work you are getting from your ASEAN network partners?
and, do you know what level of outbound referral work you are sending out to the partners in your ASEAN network?

Indonesia – the next frontier?

To those wondering what the next marketing and business development frontier in the Asia-Pacific will be for law firms now that China and India have started to go off the boil, I can say “the hunt is over” – Indonesia will be the ‘hot’ new buzzword of 2015.

An article published in Singapore’s Straits Times today [26 January 2015] – “Foreign law firms eye Indonesia market – Global players drawn in by opportunities as Jakarta pursues investment deals” by Wahyudi Soeriaatmadja in Jakarta, sets out a number of compelling reasons (as well as limitations) as to why more global law firms are looking to try an get active in this rapidly expanding and increasingly attractive market.

Of note:

Indonesia is South-East Asia’s largest economy
The country has an extremely ambitious 5-year infrastructure (roads and railways) development plan
The government of newly elected President Joko Widodo is looking to boost gross domestic product (GDP) growth by 7 per cent over the term of its government

Add to this list that Indonesia has one of the fastest growing middle classes in the world, and setting aside some of the practical limitations in place on foreigners practising in Indonesia, given the close proximity of Australia to Indonesia it is somewhat surprising that Australian firms don’t appear to be having the same tactical strategic business development approach to this market (as outlined in the article) that firms in places such as Malaysia do.

Of course, this very likely will change during the course of the year as ‘Indonesia‘ becomes the buzzword of 2015.

What is the ultimate dead-end job?

On reading the title, how many of you thought:- law?

The title of this post is actually taken from an article in today’s South China Morning Post by Peter Guy – ‘Banking – the ultimate dead-end job‘

The article is a great read and while I would ask you to read Peter’s article in full; if I can, I’d ask you to take in some of the following comments he makes:

Even as a traditional service industry, investment banking used to beckon candidates with a sense of excitement, like you were entering an elite and exclusive club.

Growing interference and lower pay are driving the smartest and most innovative people away from the once-superior banking industry

Today’s deadening layer of bureaucracy is discouraging many new hires from spending more than two or three years in a bank before leaving the industry entirely or seeking positions in hedge funds.

Older, more senior bankers whose careers straddle pre- and post-financial crisis have few career choices and must subjugate themselves to the compliance-led and rules-driven banking culture until retirement.

Alternatively,

who wants to work and lead a dumbed-down organisation?

Ambitious or just blind hopeful? – Clifford Chance look to grow Asia revenue by £50 million

On the train ride to work today I read a briefing update on the Australasian Lawyer website that the newly elected Managing Partner of Clifford Chance, Matthew Layton, had announced that the firm aims to raise revenue in Asia by 25 per cent.

Now the first thing I should say about this is that I haven’t been able to verify the source for this briefing update. The second thing I should say is that I know a number of key people – both on the management and fee earning sides – at Clifford Chance in Asia.

Putting that aside however, and on the back of the news that Fried, Frank, Harris, Shriver & Jacobson is to effectively close its Hong Kong and Shanghai offices and pull out of Asia (there remains some debate whether the firm will retain a representative office in Hong Kong and there is also a suggestion that the firm will not relinquish its Shanghai licence), and bearing in mind that Clifford Chance LLP’s announced earnings for its Asia Pacific operations in 2014 were £195 million (significantly up from 2013 announced earnings of £179 million but only marginally up from announced 2012 earnings of £181 million), I’m left wondering:

where do Clifford Chance see themselves earning an additional circa £50 million in Asia in 2015-16?

Because, while I wish Matthew Layton, Caroline Firstbrook, Bas Borris Visser and everyone else at Clifford Chance the very best of luck, I’m not sure that:

“embrac[ing] technology and flexible working and service models as key elements for [the] expansion”

will cut it. And I somehow think the management teams of a number of other firms in the region (including those at Fried, Frank, Harris, Shriver & Jacobson) would agree.

Singapore takes another step closer to being the regional centre for arbitration and mediation resolution work

Last Monday, 5 January 2015 marked the start of the legal year in Singapore and with it the opening of its latest court – the Singapore International Commercial Court (SICC).

With an initial make-up of 11 current and former judges, hailing from a combination of seven common and civil law jurisdictions (Australia, Austria, France, Hong Kong, Japan, the United Kingdom, and the United States), the SICC aims to become the World court for international commercial disputes and is the latest development in an ongoing concerted effort by the Singaporean government to make this island state the centre for arbitration and mediation in the region that first began way back in July 1991 with the establishment of the Singapore International Arbitration Centre (SIAC) and has, more recently, included the opening of the Singapore International Arbitration Academy in 2012 to help develop practitioners´ arbitration knowledge and skills and the Singapore International Mediation Court (SIMC) in March 2014.

As the epicentre of international trade increasingly moves from the more court litigious West to a more negotiated dispute resolution culture in the East, there is little doubt that this strong initiative by Singapore will pay dividends in the near term. Indeed, with already near to US$2 billion in annual revenue for Singapore-based legal services practitioners, it could be said that it already is.

While it can also undoubtedly be said that Singapore’s aggressive marketing of itself as a centre for mediation and arbitration work – which includes a very generous tax treatment on revenues generated locally for this type of work – is aimed at the slightly older, and previously more successful, Hong Kong International Arbitration Centre (HKIAC), it’s hard to see how these developments cannot have anything but a negtative impact on the ambitions of the Federal and NSW State governments to promote the Australian Centre for International Arbitration (ACIA) as the regional centre for arbitration and mediation resolution work. Indeed it will be interesting to see what, if any, response the Federal government, NSW government and ACIA have to these latest regional developments.

In the meantime, Singapore’s proximity to India, its long tradition of being a proponent of the rule of law, as well as the ongoing preparations for ASEAN integration later this year are all likely going to go a long way to helping ensure that the SICC achieve its ambition of becoming “Asia’s First Choice” for commercial dispute settlements.

In 2015 the challenge we face is ourselves

Happy New Year to you all.

At this time of year you’ll likely read your fair share of articles predicting what the year ahead will bring. You may even read the odd article or two on the trends that are likely to impact on our business during the course of this year.

I should state for the record that I enjoy reading these articles and in many cases the predictions are not too far off the mark.

Indeed, in previous years I would have been one of the first to gaze into my crystal ball and give you my prediction on the 10 or so issues that we are most likely going to face in 2015.

But not so this year.

To my mind the biggest challenge we, as business developers, face in 2015 is the fact that our business development efforts have been missing their mark in recent years.

To be clear, this is not a message I’m sending out there as a business developer.

I wish.

No, this is something our clients are telling us loud and clear.

In short, we, as business developers, have not been listening to what our pay masters are telling us.

Crucially, in 2015 we are also likely to see our marketing and business development messages lost in the noise surrounding chatter around AEC, ASEAN (as the region decides whether 2015 really is the year) and other such regional and global initiatives (Free Trade Zones being one).

While each of these will undoubtably be important factors for our business over the next 12 months, it is my belief that none is likely to lead to our down fall.

For the answer to that question, again we only need look at the resounding message being sent to us by our clients (yes, our clients), over a prolonged period now:

business development activities by law firm [in Asia] in 2014 missed their mark.

In 2015 then, we business developers need to be lifting our game and constantly asking:

what can we, as a law firm, be doing differently that will help our clients win more work, generate more revenue, and earn them higher rates of profitable return?

Alternatively, carry on as normal in 2015 and don’t be surprised if, at year-end, this is the result:

“If you always do what you’ve always done, you’ll always get what you’ve always got.”

-Henry Ford

International trade of Australian legal and related services is now a billion-dollar industry

Last Monday (15 December 2014) saw the publication of the Law Council of Australia‘s ‘Fourth Legal and Related Services Export Survey‘.

Key findings from the Report – which relate to the FY2010-11 period – are fascinating, not least of which is that total income from exports and international activity of Australian legal services was $932.8 million.

Other stand-out findings include:

‘Asia’ remains Australia’s largest “regional” export market.
‘Asia’, as a region, contributed $320.5 million in total exports.
‘Asia’, as a region, is the only global region to have experienced continuous growth since FY2004-05.
Interestingly, the export of legal services to China and Hong Kong grew slower than the average growth rate (at 31.6%) – which is probably reflective of how mature this market is.
Export of legal services to China/HK amounted to $124.1 million – dropping from second largest export market to fourth. It is worth noting, however, that the China and Hong Kong market – in dollar ($) terms – still represented the largest by country in the Asia region.
Indonesia saw the biggest per cent increase in exports, up a whopping 115.2% (although the dollar sum is still fairly low at $8.1 million – and it remains to be seen in future reports if this was a transactional glitch or part of a growing trend).
Singapore saw 80% grow from $32.5 million to $73.1 million.
South East Asia (excluding Indonesia and Singapore – termed “Other South East Asia” in the Report) contributed $35.5 million to exports. Given what I blogged on Friday, SE Asia would now have to be considered one of the real growth prospects for Australian legal services going forward and this is indeed reflected in the Report which states that “South-East Asia has grown much more strongly than North Asia since FY2008-09 as a destination for exports of Australian legal and related services“.
Somewhat surprisingly to me; at $272.9 million, North America and Canada are the largest “single” export market for Australian legal and related services.

Another interesting number in the Report, given that FY2010-11 still represented a fairly youthful period for international firms in Australia (and its worth noting that K&L Gates didn’t open its doors in Australia till 2013) is that $150.3 million of the overall $932.8 million is represented by “billings from overseas offices of Australian practices“. Moreover, the value of fly-in/fly-out legal services actually fell during this period (from $52.9 million to $39 million).

One surprise in the Report was the relatively low dollar value of “Arbitration” related work (at $3.6 million); but this could be accounted for by the fact that this period (FY2010-11) pre-dates [2011] the Australian Government confirming the Australian Centre for International Commercial Arbitration (ACICA) as the sole default appointing authority competent to perform the arbitrator appointment functions under the amended International Arbitration Act 1974 (Cth) and concerted efforts by both the Commonwealth and New South Wales Governments to make Sydney a leading arbitration centre globally.

And for those of you who have ever wondered why so many international law firms have entered the Australian market in recent years I will end this post with a crunching number to mull over:

“The 10 largest national law firms exported $609m (65.3% of total market) of legal and related services in FY2010-11”