law firm management

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…

Beware of wolves in sheep’s clothing

“Beware of the false prophets, who come to you in sheep’s clothing, but inwardly are ravenous wolves.” – Matthew 7:15

It might seem a little melodramatic to start a business development related post off with a biblical reference, but when the global leader of EY Law, Cornelius Grossman, says “I don’t think any firm should feel threatened“, vis-à-vis the march of accounting firms into the legal space, and particularly why law firms have nothing to fear from accountants practising law, it seems entirely appropriate.

On further reading, the firms Grossman says he is refusing to target – and thus by extension don’t need to feel threatened by the continued march of accountants into this space – are those doing “the highest level – “bet the company” – work and premier corporate clients” and who “have established their brands over hundreds of years…”

In other words, so-called Magic Circle firms, their work and client base are safe from the invasion.

But, as Grossman then goes on to say in this legalweek.com article:

“he believes EY Law will succeed with multi-disciplinary teams doing mid-market transactional work”.

adding further that:

“We [EY Law] want to be known for compliance jobs that span over tens of jurisdictions and for large international reorgansiations.”

In other words, the work that just about 80 per cent of us have been trying very hard to secure for a couple of decades now (and in many case incurring significant losses while we try and secure this work)!

So, while Grossman may believe that:

“The threat of accounting firms to the legal market is overstated.”

and that:

“There’s so much work out there that we all compete for – I don’t think any firm in particular should feel threatened by that.”

unless you work for an elite law firm, I would like to suggest that you be a tad weary of wolves in sheep’s clothing telling you that there really is nothing to be overly concerned about and that there really is enough food out there for all of us to feed on.

From the client’s perspective

Overnight (Australian time) Bruce MacEwen, President of Adam Smith, Esq and a leading commentator on professional services, wrote an outstanding blog post – ‘The Client Seat‘.

The post outlines some of the personal experiences Bruce has recently encountered as part of his role as Chair of the Finance Committee of his local church, St. Michael’s Episcopal Church at West 99th Street and Amsterdam Avenue, who own a vacant corner lot abutting the rear of the sanctuary and are looking for ways to realize some value from the asset; and, specifically, as it relates to the process of interviews the church is going through to select and engage a law firm to assist them in this process.

I anticipate there being a lot of commentary written about Bruce’s post – if there isn’t already. It raises a number of thought provoking issues of what it feels like to be sitting in the client’s seat as part of this process and some of the gems that lawyers and law firms come out with to try and impress a prospective client into appointing them to do the work – even where they may not be qualified to do the task at hand.

But what really grabbed my attention in the post was the following observation Bruce makes:

The other asymmetry is one of disclosure and, to be pointed about it, candor: The client needs to tell the firm as much as honestly possible about the engagement and what the client knows, while the lawyers’ instinct and practice is to guard information, hedge predictions, and avoid definitive statements. This is true even when the firm is posed direct questions about simple business arrangements and not ultimate outcomes, such as “Who will be working on my matter?”

This is such an on the money observation of the profession, but think about it for a second:

In an age where open candour and transparency around both your personal and your firm’s credentials will most likely win you and the firm the trust of clients and prospective clients, and thus a lot more work in the long run, why do lawyers still feel the need to be guarded and reluctant to give straight answers to straight questions?

How often do you let your clients know the value you provide to them?

Based on interviews with 188 independent lawyers and more than 500 clients, the LexisNexis Bellwether Report 2015: the Age of the Client (published earlier this week) found that:

“80% of lawyers think they’re delivering above average service…

… but only …

…40% of clients say they’re receiving it.”

What does this mean?

Well, either:

You’re not as good as you think you are; or
You’re not communicating well enough to your clients the value you bring to the transaction/relationship.

I’ll leave it for you to decide which you think applies to you.

CommBank Legal Market Pulse report – Q3 2014/15

The third quarter (Q3) FY2015 edition of the CommBank Australian Legal Market Pulse Report (Report), with research conducted by Beaton Research + Consulting, has just been published.

As usual, the Report provides useful insights into the latest thinking of Australian law firm managing partners/leadership, as well as the trends and developments impacting on the Australian private practice legal industry sector.

Interesting outtakes from the latest edition of the Report include:

although short-term (next 12 months) economic confidence is fairly dire, the long-term (24 months+) outlook is very positive.
surprisingly, given the lack of confidence in short-term economic conditions, every single top-tier surveyed firm is forecasting higher revenue in the next six months. As Marc Totaro’s introduction covers, top-tier firms expect this [next six months] revenue growth to come from Europe, Asia and Sydney; but this paints a little too rosy a picture to me.
both top-tier (67%) and mid-tier (47%) firms anticipate seeing revenue growth coming from their employment teams.
insurance (60%) related work gets the nod as the expected highest revenue growth area for mid-tier firms. While the Report doesn’t elaborate on whether this is claims related or commercial work, the recent re-jig in the market – with insurance teams moving from the top end of town firms to mid-tier firms – must certainly account for some of this positivity. This is probably also reflected in the fact that top-tier firms surveyed forecast a fall in their insurance practice revenue over the next six months.
excepted revenue growth within taxation (50%) ranked higher than I would have guessed among top-tier firms; but maybe this is more reflective of the time of year (Q3).
one possible hidden indicator in the Report: mid-tier firms seem more optimistic about getting their hands on “construction, engineering and major infrastructure” (50%) work than top-tier firms – who don’t rank this area in their top 3 revenue growth practices. On the flip-side, clearly the recent M&A work in “IT, telecoms and media” (think 9 Network and iiNet) has been going to the top-end of town with 67% of top-tier firms expecting this practice area to be one of their highest growth areas.
top-tier firms forecast revenue growth in UK/Europe, Asia, Brisbane, Canberra, Melbourne and Sydney, but revenue in both Adelaide and Perth are predicted to contract.

The Report also provides forecasts on expected realisation rates (and if you thought these couldn’t possibly get any worse, think again), expenses* and outsourcing.

But, saving the best to last, probably the biggest shock the Report contains is the forecasted change in staffing; and, in particular, the bloodbath that is anticipated to take place within the partnership ranks of top-tier firms. And to be clear, a 33% and 67% forecasted decline in net proportion of equity and salaried partners respectively can only be described as a “bloodbath”!

As usual, I suggest you download and read the Report – it’ll make for an interesting weekend read.

* on a personal note, I see there is a forecasted 17% reduction in “Marketing and Business Development” expense by top-tier firms in the next six months. I can only hope that doesn’t come about.

Report: A snapshot of Asian Australian diversity in the Australian legal profession

Last night – Tuesday 14 April 2015 – saw the publication of “The Australian Legal Profession: A snapshot of Asian Australian diversity in 2015” (Report) an inaugural report prepared by the Asian Australian Lawyers Association.

At 8 pages, the Report is exactly what it says it is – a snapshot. Moreover, its a snapshot of the profession and doesn’t include information about the number of Asian Australians there are studying law at university (nor for that matter does it include in-house lawyer numbers).

Having said all that, in my opinion the infographic on page 4 of the Report tells a more compelling story than any 1,000 page report into diversity could.

Asking the question:

Is there a “bamboo ceiling”

the infographic details that:

While Asian Australians make up 9.6% of Australia’s population, Asian Australians account for a mere 3.1% of law firm partners (incredibly these numbers are actually worse for barristers and the judiciary). If that were not bad enough, 50 (yes, 50) “medium” (10-40 partners) and “large” (>40 partners) law firms in Australia have no (as in zero or “0”) Asian Australians in their partnership.

To be clear, this isn’t limited to female Asian Australian partners, but Asian Australians period.

While, by its own admission, limited by the nature of the subject matter – and there being relatively basic public material available -, thus great care needing to be taken in interpreting the data, I’m left asking: “how can this be?”.

And it is worth restating:

out of 97 ‘National’ and ‘International’ law firms in Australia, with collectively 4,100 partners, a mere 125 are identified as being Asian Australians.

In an era where almost every medium to large law firm in Australia is on record as [strategically] actively seeking work from the Asia Pacific Region, the findings in this Report are nothing short of bewildering and staggering.

However, as disappointing as the findings are, publication of the Report is nevertheless important if, as is hoped, it forms the start of “a constructive dialogue for the legal profession in Australia.” A dialogue that is clearly well overdue.

My only hope is that any future report extend the survey findings to include a breakdown of male and female Asian Australian law firm partners. Because, if anecdotal evidence from my own life is anything to go by, female Asian Australian law firm partners are a very rare breed indeed.

*Disclosure: As the proud husband of an Asian Australian lawyer and the father of an Asian Australian daughter, I have more than a vested interest in the subject matter of this post.

A conversation with Lucy Fato, General Counsel at McGraw Hill Financial

Last week Bloomberg’s new Big Law Business website published a two-part extract [It’s All About Relationships and ‘Gut Checks’ Are Better than AFAs] from a recent interview Bloomberg had with Lucy Fato, General Counsel of McGraw Hill Financial (among others, parent company of Standard & Poor’s).

Transcripts from the interview make for interesting reading. While not agreeing with all Ms Fato has to say, her take on the following issues run close to how a number of in-house counsel feel here in Australia:

On the role of in-house counsel:

But my view is that the role of in house counsel is, in many ways, to be the face of the company in these situations. Outside counsel can never really have perfect information about what a board or a CEO is thinking. They can never really step into the shoes of in-house counsel.

That’s how in-house lawyers really add value. They can connect all the dots. I think, historically, general counsel deferred more to outside counsel than what you see today. It’s a process that has evolved.

On the role secondments can play in developing personal relationships with in-house counsel:

Secondments are a great way for a firm to build a relationships. The associate is actually here, in our building, getting to know our people, getting to learn our business, and when they go back to the firm, they bring all of that knowledge with them. It’s especially effective when a firm is new to the company.

On the developments going on in in-house departments:

“In-house departments have become much smarter about how we manage our departments and how we manage our legal expenses. In-house departments are becoming bigger, more global, and many companies, including ours, spend a lot of money on outside counsel. Getting a handle on that is extremely important.”

On the role data plays on the modern relationship between in-house and external legal:

I’m very big on data and having a lot of information to work with…

E-billing gives you enormous visibility into how law firms make money.

On alternative fee arrangements:

Getting better control over who we’re spending money with, how they are staffing deals, how much time is being spent on matters — taking a hard look at those types of questions is more effective over the longer term than trying to do alternative fee arrangements.

On hourly rates:

But I will say it’s gotten a little out of control. It’s eye popping even for me, and I’ve been doing this a long time, when I see an hourly rate that’s over $1,000 an hour. I look at that and think, “Really?”

Ms Fato makes a number of other good observations and comments, both about the evolving role of in-house counsel and the relationship between in-house departments and their external legal advisers, but I wanted to finish this post with probably my favourite:

Firms have to be mindful that their client is not just the lawyer. It’s also the business person.

Absolutely.

The two types of efficiencies law firm associates need to become familiar with…

Really interesting article [‘What Associates Should Know About In-House Rates and Efficiencies‘] by Gina F. Rubel was published overnight (7 April 2015) on The Legal Intelligencer website – discussing the two types of efficiencies that law firm associates should become familiar with – contains a gem of a quote from an in-house general counsel that I wanted to share/pass on.

First, to put some context around the quote below by Gino Benedetti, as Rubel states:

“There are two types of efficiencies with which lawyers need to be familiar. The first is general efficiency, which is the state or quality of being efficient and the actions designed to achieve optimal results. The second is economic efficiency, which requires optimal production and distribution of a firm’s resources.”

And while both are extremely important to in-house counsel, the following quote in the article by Gino Benedetti, General Counsel of SEPTA, should give some indication to private practice law firm associates which of the two bears more commercial importance to their in-house clients:

“Associates should understand that every case does not require a full-court press,” said Gino Benedetti, general counsel of SEPTA. “Associates add value when they think creatively by identifying the core issue in dispute and focus their case work on things that impact that issue. Often, associates work on an aspect of the case that does not have any meaningful impact on the ultimate outcome. So, associates should appreciate that their time may be less expensive, but that does not justify inefficiency. Associates should communicate often with the partner or the client directly so that the client’s objective is understood and the work is driven by that objective.”

If you haven’t already, I’d like to suggest you go over and read the entire article. It’s full of sage advice from several in-house GCs.

In the meantime, if you are a private practice law firm associate, the next time your supervising partner asks you to undertake a task on behalf of your client why not ask yourself which type of the two types of efficiency you are going to bring to the task…?

Law firms: cannibalisation is the only way you can beat cheaper competitors

The only way for a company to deal with cheaper competition was to set up a different company with an “invitation to kill its parent”

So says Harvard Business School professor Clayton Christensen during a recent visit to Hong Kong – as cited in an interesting article published in the South China Morning Post on Friday 20 March.

With the fairly recent introductions to the legal market of:

Allen & Overy’s Peerpoint
Pinsent Masons’ Vario
Berwin Leighton Paisner’s Lawyers on Demand

to name a few of the internationals, as well as Corrs Chambers Westgarth’s Orbit closer to home, makes me wonder if the legal sector has taken this message to heart and is now processing this strategy to their business.

All of this activity also reminds of the time I once overhead someone saying the day would come when Riverview Law would be bigger than DLA Piper. Might not happen in my working life, but not totally unthinkable in this day and age.

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!