law firm clients

Loyalty programs revisited

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Back in March of this year I blogged that loyalty programs were likely an under-utilised means by which Australian law firms could differentiate themselves in a highly competitive legal market. I was, then, particularly happy to see that recently Australian Government Business (www.business.gov.au) blogged  on a similar issue – ‘Customer loyalty or reward programs‘ – which looked at, among other things:

  • What customer loyalty programs are.
  • The benefits and risks of a customer loyalty program.
  • Tips when implementing a customer loyalty program.
  • Legal and compliance issues for customer loyalty programs.

A lot of which is directly relevant to law firms looking to implement a customer loyalty program.

Why you should think of implementing a customer loyalty program in your firm

As far as law firms are concerned, the perennial question has been:

How do we make sure that our customers [clients] understand the benefits of being exclusive to our brand?

Here, while we have known for a long time now that the ‘customer experience‘ has been the bedrock of customer loyalty, it has only been in recent times that we have been able to show that loyalty programs can, and do, add to this overall customer experience.

But customer experience isn’t the only reason why law firms need to think carefully about implementing a loyalty program. Other benefits include:

  • gaining a better understanding of the customer buying behaviour – which practice groups are they using, when, how often, why? Are they using more than one partner in a practice group or the same partner?
  • increase you brand recognition within your existing customer base – putting in place a formal loyalty program should go some way to helping you promote you law firm internally within your client’s business; if for no other reason than water-cooler chat.
  • increase your word of mouth referrals.
  • provides an added incentive for clients to give you work rather than a like skilled and experienced firm (i.e., all things being equal).
  • can be used to help recognise referrers to the firm – if you include referrers in the program, all things being equal they will more likely refer clients to your firm than a competitor.
  • it can help you implement formal and informal customer listening and feedback programs (as part of the program offering).
  • it will help members of your firm get to know who your key customers are and what they do.
  • it should provide your firm with a platform to cross pollenate into other service areas without looking like a hard sell.

You could also find that putting a customer loyalty program in place leads to greater use of your much underutilised CRM systems!

All that said, a word of caution for those who are intending to implement a customer loyalty program in their firm:

  • customer loyalty marketing must start with the law firm demonstrating loyalty to the client. Much like the trust it is built on, you cannot expect loyalty from your client if you are unwilling to offer the same type of loyalty to your client,
  • the foundation of a customer loyalty program is a promise. If for any reason whatsoever you are unable to fulfil on that promise, then you shouldn’t implement the program, and
  • always keep in mind that while the lawyer inevitably gets the credit when things go well, it is the brand that gets the blame when things go wrong – so make sure that at the heart of you customer loyalty program is always a dialogue between you and your client.

Get it right though and a well implemented and executed customer loyalty program could be just he thing your firm need in order to differentiate itself from the market.

Australian-based law firms are failing to sell Australia as a forum to Asian clients

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Today [29 July] the Australasian Lawyer has a post detailing a recent report by Baker & McKenzie that:

“cross border IPOs in the Asia Pacific region have increased by 75 per cent in the first half of this year.”

 Wow, Capital Markets and Corporate teams across the Region have really struggled since the GFC and seen a lot of layoffs in their teams so this must be music to their ears!

But what about Australia?

Well, it appears the news here is not so good. According to David Holland, head of Baker & McKenzie Corporate Practice in Australia:

“Australia didn’t see much activity and the regional boom is unlikely to have any significant effect on the Australian market specifically”.

Sorry but this is not acceptable.

Australia not only has a robust principal stock exchange in the ASX, but we can also offer traditionally family run Asian companies access to a very friendly IPO forum in form of the National Stock Exchange (NSX) of Australia, pitched as being:

“the market of choice for SME and growth style Australian and International companies.”

Listing and reporting rules for both are pitched as being much less onerous than is the case with other stock exchanges across the region.

So, why are we missing the boat here?

To my mind the answer to this question is this:-

Australian law firms and government bodies are failing in their duty to sell Australian law as a viable forum for international business.

Yes we missed the boat on selling Australian law as the governing law for international agreements – the English and Americans (New York) beat us at to that. But in this case we have a very distinct advantage that we are simply not pursuing or pushing.

To be clear, we’ve known for some time that Asian governments (particularly China) have been advocating for their domestic companies to list overseas in order to show transparency. We’ve known for a long time that control remains a massive issue for Asian companies (particularly family run businesses) and IPOs are, as their name suggests, capital raising exercises.

And what have we done about it?

Pretty much nothing. Few, if any roadshows. The occasional newsletter. Maybe the odd seminar.

In short, nothing.

Looking for a silver lining?

Luckily for us there is one in an ABC article from February of this year “China-based companies to list on ASX to avoid Asian stock market costs and free float requirements“, which points out that:

“Smaller Chinese companies are looking to list on Australian stock market operator the ASX to avoid the cost and free float requirements of larger Asian exchanges.”

All we need to do now is get out there and spread the message!

“A bridge too far” : When international law firm mergers turn sour

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“There were a lot of people who thought there wasn’t a very deliberative process around the decision, and a lot of people wondering how it would help us,” one partner said. “And when it didn’t go well, there were a lot of people who thought it was a bridge too far.”

The above quote is attributed to a K&L Gates partner in a recent Above The Law post by David Lat (‘Barbarians At The K&L Gates?‘), which was then linked to in Bloomberg BNA’s Business of Law overnight (‘Wake Up Call: What’s Going On At K&L Gates?‘), and is said to relate to the firm’s biggest single merger to-date, its deal with Middletons two years ago, which, apparently, has “has failed to bear fruit.”

First off, I don’t think K&L Gates’ merger with Middletons is alone here. Market chatter would indicate that a number of partners at international law firms who merged with prominent Australian law firm brands have since wondered what they got themselves into. On the flip-side, a number of the partners in the prominent law firms who merged with the international firms have felt likewise and since moved on.

So while not unique, what probably differentiates the K&L Gates situation is also, in my opinion, one of its greatest strengths – its transparency and openness.

In any event, to my mind what this story highlights is two issues:

  1. mergers between international law firms are akin to the courting stage in any joint venture arrangement: a lot of trust is given on both sides without much due diligence.
  2. when things turn sour in international law firm mergers, lots of reasons get cited by all parties; but rarely, if ever, is the reason that they hadn’t discussed the merger properly with the clients of both (all) firms to see if the client had  any perspective on this merger (e.g., commercial conflicts, lack of trust, etc.) and whether they would support (financially) the merger.

I will add that it would be a great shame if the K&L Gates / Middletons merger turned into a public spat, because I really liked the legacy Australian firm of Middletons and given Australia’s interaction with the US market I believe there is a place for K&L Gates here.

That said with the A$ tipped to go below US70¢, its lowest level since the merger, the partners on both sides of the Pacific need to:

  • reiterate why they merged,
  • communicate this with their clients,

and move forward on that basis.

And do this quickly [preferably at, or before, the next global partners’ meeting] – something law firms are not known for!

Again though, I doubt very much that K&L Gates will be alone among international law firms in Australia having these discussions.

“You actually need to be in Asia to understand Asia.”

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“You actually need to be in Asia to understand Asia. You cannot look at it from a distance, or certainly run a business in Asia from a distance. So, unless you are actually in Asia and focused on Asia and the different markets in Asia, it’s very difficult to understand the different markets, their stages of development, and how you need to run your business in those markets. And certainly you can’t do that from London or New York. That’s a fundamental point.” – Stuart Fuller, King & Wood Mallesons

The above quote, which I couldn’t have put better myself, is from an interesting interview between columnist David Parnell and Stuart Fuller, Global Managing Partner of King & Wood Mallesons (‘Stuart Fuller Of King & Wood Mallesons, On Vereins and Succeeding in China’s Legal Market‘) posted to the Forbes website on 20 July 2015.

A lot can be said about the ‘Mallesons’ strategic approach to Asia (or, probably more to the point, the lack of it) in its days as ‘Mallesons Stephen Jaques’ – when the firm was rumoured to be heavily courted by the likes of Clifford Chance and Linklaters in the UK – but since the tie-up with King & Wood (and the subsequent merger with SJ Berwin), the firm that is KWM, as it is now affectionately known, has certainly turned a corner, got its strategy ducks lined up and come a long way.

To my mind evidence of this is clear in the following two paragraphs by Fuller:

“Secondly, it’s a business model issue. If you come into Asia and run a Western business model, then you are likely to lose money. That’s quite difficult for many of the international firms because they have such powerful and strong business models in their home markets, and they export them to the rest of the world.

Thirdly, some markets are more developed than others, so if you come into Asia and think that because the law firms are younger, that they are less developed, or frankly, in some ways less professional, then you’ll be surprised. There are firms here — us for instance — who have 1200 lawyers and 2000 people across 12 cities in China alone. We have an impressive international business in China operating at an international standard. There are a number of firms across the market like us, and I think that is a surprise to Westerners.”

Absolutely spot on!

Indeed, probably the only thing missing from Fuller is the strength that relationships play in the overall marketplace throughout Asia – both at government level and in many of the region’s family run businesses.

Then again, possibly that’s what Fuller is eluding to when he says:

“And for Western business coming into Asia, the big thing you need to know is how to get things done. The system is different. It’s the lore as much as the law.”

In any event, it is clear that KWM has moved forward a long way since 2012, and I’m not sure the rest of the pack are giving this firm the appropriate credit they deserve.

“Berlin is closer to Beijing than Brisbane is”

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“Berlin is closer to Beijing than Brisbane is. And it will always be so.”

– Andrea Myles, CEO China Australia Millennial Project (CHAMP)

I recently had the great fortune and pleasure to attend the opening ceremony of the inaugural CHAMP. Unlike many other events I attend, this one was driven by a group of young adults looking for ways to improve cooperation between China and Australia, principally from what I can tell in the areas of research and development (R&D).

Leaving aside the fascinating work being done under the CHAMP banner, two comments that Andrea Myles, CEO of CHAMP, said in her opening remarks really resonated with me.

The first was the opening quote to this post: “Berlin is closer to Beijing then Brisbane is.”

The second was this:

“China is Australia’s largest trading partner, but also the largest trading partner of 124 other nations.”

Yep, 124 other nations can claim that China is their largest trading partner.

So if Australia isn’t geographically closer to “Asia” than Europe is (and flying time from the UK to Thailand is roughly the same as Sydney to Bangkok), and if economically (from both a trade and investment perspective) Australia isn’t streets ahead of the rest of the world in the eyes of those conducting business in Asia, why in the world would so many law firms be “Driven here by the lure of Asia” – as the Australian reported last Friday (3 July) [“International legal firms see Australia as a hub for Asia” NB: subscription may be required to read this]?

Personally I’m not 100 per cent sure I understand the need for global firms to be in Australia if the only reason they are doing this is to create a hub for entry into the Asian market more broadly. I rather suspect better cases to that type of strategy could be made for Singapore (which historically it has been) and even Hong Kong.

Nonetheless, Patrick Sherrington, Hogan Lovells’ regional managing partner for Asia and the Middle East and author of the said article in last Friday’s Australian sets out his case for why he thinks this might be so.

These include:

“The Australian legal services market is characterised by its ­concentration, innovation and sophistication. Although globally the sector is generally characterised by low concentration, the market shares of the major players in ­Australia have been and remain particularly high, especially compared with the US, where no law firm accounts for more than 1 per cent of the industry.

This concentration yielded high levels of competition between those leading firms, which spurred innovation and sophistication throughout the market.”

Sorry, but having worked in the English, Asian and Australian legal markets during the course of my working life I can categorically say that the Australian legal market is no more innovative nor sophisticated than any other. While this might have been the case in the 1990s, I would venture that the US market is probably more innovative than the Australian market is at the moment and the stuff that the likes of A&O, Lawyers on Demand, Eversheds, and Riverview Law – to name but a few – are doing in the UK is streets ahead of where the Australian market currently is.

Sherrington then goes on to write:

“More critically, it [the GFC – my comment] affected the faith many leading national firms had in their business models. The hitherto boundless belief in the limitless growth of legal services in a country accounting for nearly 40 per cent of the Asia-Pacific legal services market was lost to the ­existential and strategic dilemma of how and where Australian law firms should operate in an increasingly global market.

Suddenly, market entry became a practical proposition for the major international firms. Since then we have seen the large national firms scramble for Asian and global exposure through ­alliances and combinations of varying intimacy.”

I’m of the view that flat, depressed markets in the UK and Europe more widely made the bigger English firms look up and think of other markets where they could still get growth. The mining boom that was going on in Australia at the time, plus historic highs of almost parity in exchange rates between the Australian and US dollars, meant that the Australian market looked very attractive at the time.

Ironically, a shift in the sands have now made these much less favourable reasons to be in Australia (the Australian dollar has fallen off to somewhere in the region of 75 cents now) and one has to wonder if the internationals would still be clambering to get here if the current market existed then.

Sherrington also notes that:

“We [Hogan Lovells] concluded that not having a focused high-end legal practice in Australia would be strategically detrimental to the ambitions of our long established practice in Asia and would have an impact on our ability to service global clients.

Australia is uniquely positioned to assist international law firms achieve growth in Asia. With the third largest pool of investment funds under management in the world, the largest stockmarket in Asia (ex-Japan) and the fourth largest economy in Asia, as well as being the single largest beneficiary of Chinese foreign direct investment since 2005, Australia is an ­integral part of the Asia region and also a global player.”

I think there is a lot to be said for the second part of this quote. Much less so for the first part. Having an Australian practice is one thing; having an Australian presence as a hub to Asia is a completely different issue.

If you have an Australian practice for all the reasons Sherrington sets out in the second part of the quote above, and you have a core client-base operating in Australia, then I commend you and wish you well.

But if what you are saying is this [Australia] is your hub for Asia, then I ask: “where does your senior Asian management sit?” Because one firm aside, nearly all of the senior “Asian” management teams I’ve seen sit offshore (ie, outside Australia).

A final comment of Sherrington’s is that:

“While the manner and mode of market entry will continue to ­differ between international law firms, it is a trend that will not be reversed.

The regional and global economic case for an Australian presence is too strong. It remains to be seen whether the flood of international entrants will reduce the concentration of the Australian legal service market.”

Sherrington and I will have to disagree on this one. I think it is a trend that could very easily be reversed – and to some extent already is.

And we should always remember that law is a very fickly business – who knows what might happen if you had a downturn in the Chinese economy and a European nation that was refusing to pay its debts.

Oh wait…

A tale of two Asias

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Two separate comprehensive reports on the state of the legal market in Asia have recently been published. While both look to have been very thoroughly researched, that, and the shared (as in, this) week in which they were published, is, however, about all the two appear to have in common.

As to the two publications in question: one was published by the UK’s The Lawyer and the other by The Asian Lawyer – part of The American Lawyer stable. As such, the two publication represent a fairly comprehensive review of how international firms are fairing in the ever competitive Asian market.

The Lawyer

Turning first to the The Lawyer publication, the executive summary of which you can read here and the full report of which you can purchase here.

On reading this publication, “teething troubles aside“, you are left in little doubt that international law firms have positioned themselves well for the uptake in demand in the increasingly important Asia-Pacific legal market. Importantly, those who made the decision to invest in Asia a decade or more ago would appear to be seeing that investment finally paying dividends, with international firms in the region recording 5.7 per cent growth [in headcount] between 2013 and 2014.

In addition:

  • international law firms now make up 16 per cent of the Asia Top 50 (which is the same make up as two years ago).
  • five (six if you include KWM) of the Top 10 Asia firms hail from China – but number two in the list, Dacheng, has approved a merger with Dentons and so arguably is now an “international firm”.
  • no doubt because of the abundance of Swiss Verein these days, Australian law firm Minter Ellison sneaks into Top 10 Asia firms despite not being financially integrated but rather because the firm is integrated under “one brand”.
  • continued prosperity for internationals in the region is seen on the back of robust M&A activity and 5+ per cent growth predications by the IMF .

Overall though, content and opinion in this report can largely be summed by the comment that Freshfields Asia managing partner, Robert Ashworth, “is generally bullish about the region“.

The Asian Lawyer

Turning our attention now to The Asian Lawyer publication (and please do because the graph in this article is fantastic!) and we find we get a very different picture being painted of how the market is shaping up for US firms operating in Asia.

The context of this post, based on results of The NLJ 350 Annual Survey of the [US] Nation’s Largest Law Firms, can be summed up from its title: “Signs of Slower Growth for U.S. Firms in Asia“.

Although the post starts out saying: “Asia has been a powerful magnet for international firms over the past decade” – with the number of Am Law 200 attorneys having nearly tripled in that time, the latest year-on-year stats show a near flat-lining in these numbers.

It is also no secret that a number of US firms have been looking closely at their Asia strategy – the latest of which is Latham & Watkins, but even the US arm of DLA Piper has taken a financial interest in the Asia business in the hope of moving things along following some turmoil in the region.

It should not, therefore, be a surprise that this post finishes on the note: “Are more dramatic cuts to Am Law 200 lawyer counts in Asia coming? Stay tuned“.

So who is right?

I think you’ll agree that the two publications are very contrasting and paint different pictures of international law firms operating in the Asia legal market.

In a world of two Asias, a question arises: “Whose version is right?“.

My answer to that question is – probably both.

There is certainly some – finally some cry out! – positive signs for international firms operating on the ground in Asia (as opposed to those who may still operate a fly-in/fly-out operation). The market looks like it might start to deliver on some of the rich rewards it has promised for a long time. But to do this firms have to come to the realisation that they need to get over two crucial hurdles:

  1. they must have a strategy for the whole of Asia and not just China, and
  2. while staffing maybe cheaper in Asia, headcount doesn’t tell the story of financial size or profitability.

What law firms can learn from Taylor Swift

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Unless you have been hiding under a rock, or living in a world of news blackout, you’ll of heard about Taylor Swift’s 21st June open letter (via Tumblr) to Apple (‘To Apple, Love Taylor‘).

As you will also undoubtedly known by now, the Tumblr post is Taylor’s way of explaining why she will be holding back her album – 1989 – from the new streaming service Apple Music (an album I understand she also doesn’t permit to be on another music streaming service, Spotify). And while I don’t particularly like Taylor Swift’s music (nor do I really participate in music streaming services), I have to applaud the reasons she outlines for her decision.

In particular, I like – and 100 per cent agree with – Taylor’s remark that:

“Three months is a long time to go unpaid, and it is unfair to ask anyone to work for nothing.”

Taylor’s right on the money there – so to speak, three months is a very long time to go unpaid.

But wait: what’s your law firm’s average lock-up days?

If you firm’s average lock-up days are anywhere near the industry average, then your firm’s lock-up is going to be somewhere between 100 and 120 days. Which means your firm typically gets paid 100 to 120 days after you have done the work for the client.

Aside from being a period of close to four (4) months to go unpaid for your work, you are also providing your client with an interest free working capital loan during this time – a period you will likely be paying interest to your bank on the working capital (overdraft) facility it has extended to you (otherwise known as a double-whammy)!

Simply put, that should be unacceptable and it is time law firms took a take a leaf out of Taylor’s book and started to tell clients (and some law firm partners I might add!) that four months is a long time to go unpaid!

Not possible? Will likely kill the client relationship?

Well, interestingly, in this case the giant corporate might of Apple has listened to Taylor’s complaint and has decided to back down. And I suspect your clients would be more than willing to listen to alternatives you could offer too – but you won’t know unless you have the conversation.

Wikipedia killed the #BigLaw firm star

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Reading my notebook from 2013, to check if an industry statistic has progressed from a fad to a trend, at the weekend I came across a note to myself that reads:

“The Googlification of law: The belief that everything is on Google and is free.”

Although it clearly meant enough to me at the time to write it down (and apologies if this belongs to you as I didn’t write a credit in my notes – which usually means I thought it), as I didn’t end up writing a blog about it I must have been trying to process this idea/thought.

Anyhow, the note and a print by Hugh that was on special – which I ended up purchasing – on the Gapingvoid Art website (‘Information / Knowledge‘) got me to thinking:

‘Open source law’ – as some people are calling it – is one thing, but information and knowledge are not automatically one in the same. As such one ought to tread carefully if one is merely buying information, without the accompanying application to turn this information into knowledge.

Indeed, one could go further and as to say that the era of the “knowledge economy” is about the application of knowledge, rather merely knowing. And this will require professionals – including lawyers – needing to move the conversation forward from a belief that I can find the information for “free” (or at least “cheaper”) elsewhere and to start demonstrating [via the application of knowledge] that the solution they are providing to clients’ problems is indeed a better solution than the “free” or cheaper alternative.

The two crucial elements here are:

  1. demonstrable evidence that your experience, service or product offering is of benefit to the purchaser’s problems – i.e. not just a capability statement saying how wonderful you are, but a story with real evidence showing how what you do can be of real benefit to the target/client, and
  2. demonstrable evidence that you are acting in the best interests of the client and not merely a wishy washy statement to that effect.

It won’t be easy, and it will necessitate a move away from technical brilliance and towards commercial excellence.

In short, the legal advisor of the future will be one who is adept at finding solutions to client problems – even for those that haven’t arisen yet – rather than merely highlighting that a problem exists.

But, crucially, it is no longer the role of the client purchaser to consider this ( – are the days of Caveat emptor over?), but rather it is the role of the law firm seller to demonstrate it.

Only 33.3% of corporate counsel recommend their primary law firm to a peer

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Anyone who has been in law firm marketing and business development for more than five minutes will tell you that word of mouth referrals are worth their weight in gold. After all, who needs to do marketing if you have enough advocates championing your business with their networks? And aren’t these potential clients going to listen to their trusted contacts way more than they do you?

Of course they are. Which is why cultivating a referrer network has always ranked high among the “to do” list of business development managers.

That’s why for many of these business development and marketing managers it may come as something of an unwanted shock to learn that according to the latest post by BTI Consulting Group’s The Mad Clientist:

Only 33.3% of corporate counsel recommend their primary law firm to a peer

Which marks the second biggest drop in 15 years and which The Mad Clientist puts down to a change in ‘The Client Expectation Gap‘; namely no matter how great or bad, whatever work you just did for your client will be the yardstick your client treats as your new minimum performance standard.

A little unfair maybe: but if only roughly one in every three of your clients is willing to go into bat for you and recommend you to others in their network with like-minded legal issues, then your law firm has an issue and there’s no time to waste getting to work on the firm’s word of mouth referral program and make sure you ask as many advocates of the firm as you can find to champion you within their networks.