law firm strategy

Is putting profit before culture such a bad thing for law firms?

In 2004, while working at Linklaters, Tony Angel – the then recently appointed Managing Partner of the firm – introduced a new strategic direction that was to become known as ‘Clear Blue Water-– A Vision for Linklaters in 2007‘. Much as was being advocated in Renée Mauborgne and W. Chan Kim’s Blue Ocean Strategy, published around the same time, the intention of Angel’s Clear Blue Water strategy was to create a clear space (as opposed to red oceans) between the firm and it rivals.

For many of us who worked in the firm at the time, this represented a high-water mark. It was made very clear to all that Linklaters was now very much a business: profit trumped culture.

Sure culture was nice to have, but not if it had any material impact on profit.

But was this such a bad thing?

As someone who lived through the 2004-2007 era at Linklaters, I can honestly say “no”.

To be clear, there is little doubt in my mind the firm became more “professional”. Many of the business development, marketing and knowledge management work that had traditionally been done by lawyers was taken off them and given to dedicated teams. The firm introduced key account programs around their top clients. Blue Flag (Linklaters online client portal – that included early use of HotDocs) was a flagship program. Precedents and ClauseBank were core strategic projects.

But importantly, financial analysis was undertaken to determine the difference between revenue and profit and how both revenue and profit could be increased (which didn’t necessarily mean a reduction in costs – for example, the business case behind Blue Flag was the first example of an alternative revenue stream I saw in a law firm).

All of this was then extended to sectors when clients started to say they valued, and appreciated, sector specialists (Linklaters was the first place I worked at that had a virtual practice – The Indian Desk, back in 2005-ish which operated from London, New York, Singapore and Dubai).

Despite – or even because of – an overall strategy to significantly increase profit, large amounts of money were invested in putting in place strategic teams that could help implement and execute on this strategy. Professional KM, marketing and business development people came in to the firm from all walks of life and people who had never worked in professional services firms previously were now doing so.

Importantly, my personal experience was that their voices, counselling and advices were being taken onboard. Sure partners may disagree – and ultimately we all knew that the buck stopped with them, but it was also made clear that they appreciated and valued our input.

Another important aspect of Angel’s Clear Blue Water strategy though was transparency.

Everybody in the firm knew what we were trying to achieve. We knew what was required to get us there (including I might add an absolute understanding that this would involve an incredible amount of hard work). We knew how we were tracking and which parts of the business were struggling to achieve their goals. From my memory (and it was 10 years ago now), this wasn’t done with malice but so that we knew who needed help.

In short, the strategy bred a culture. A culture that many who were not in the firm may have considered elitist, but a culture nonetheless: to be at Linklaters at that time was to know you worked among the best (and if you doubt that, track the CVs of many of the leading BD/Pricing/KM people around the world and see who they worked for during that time).

So why, 10 years after I left, have I decided to bring this all up now?

HSF

The answer to that lies in the decision this week by Herbert Smith Freehills (HSF) to open a second office in Sydney.

This second office will be at 66 Talavera Road, Macquarie Park, while the principal office will remain at 161 Castlereagh Street. It is currently being reported that between 200 and 300 support staff (that may not – for now – include BD people) will be moved to this Macquarie Park office.

To my mind, this move eradicates all pretence of a ‘one firm’ culture having anything to do with the running of this firm. Conversely, it cements the ‘us’ and ‘them’ culture. If you are in Castlereigh Street, you’re ‘in’. And if you are in Macquarie Park, well you’re not! Worse, if you get moved from Castlereigh Street to Macquarie Park, you could consider it a demotion (especially given there will be no train line servicing that office for 10 months in the next year or so!).

But again, as someone who has advocated for the outsourcing of support services in law firms (in much the same way as a number of firms in Asia did post the Asian Financial Crisis) for more than 10 years the question should be: is this such a bad thing?

And my answer to that is “no”.

But my answer comes with an important caveat from someone who has been through similar strategic processes, and that is this: everyone at the firm in now on notice – perform, or you’ll be in Macquarie Park – or even out altogether – before you know it!

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Will a ‘One Asia’ strategy work for BLP?

Business Development image

I spent just over a decade in Asia between the 1990s and mid-2000s. In all the time I spent there I never considered the Region as ‘One Market’ – but rather as a multitude of diverse and different markets.

By way of example, almost everything we did in Asia was “ex-Japan“. This wasn’t because we didn’t see Japan as part of “Asia” – as it very much is – but rather because the international legal market there (NB, the Japanese local legal market is a very different issue) has far more in common with the US market than the Asian. As a result, we lumped Japan in with the US when discussing strategy (and you’re free to question that thinking/strategy).

Likewise, any strategy discussions we had that involved Singapore almost always included India, the Middle East and the Philippines. Similarly, strategy discussions that involved Hong Kong included not only mainland China but also Indonesia.

Finally, SE Asia (Thailand – where I was located, Myanmar, Laos, Cambodia and Vietnam) was its own regional discussion.

All up then, when discussing “Asian” strategy we had four or five discussions – not one.

That said, I worked with (but not for) firms (notably Herbert Smith as it was then) who operated on a fly-in fly-out basis. In my day we called this the “hub and spoke” approach, where the expertise went to the client need and, I have to assume, strategic discussions were done on a Regional basis.

While not criticising firms who took this approach – some did very well out of it – I didn’t think it worked for the firms I worked with as we held the view that, probably more so than any other market in the world, Asia operates on a relationship basis. Our experience was that relationships trumped expertise, and in the very family operated business world of Asia at that time, cost.

So why the history lesson?

Last week, in the Asian Lawyer, I read Bob Charlton – Asia Managing Partner of Berwin Leighton Paisner (BLP) – comment, following the firm’s Asian retreat, that:

“…in broad terms we agreed we must have a one Asia approach.”

Interesting, I wonder what BLP could mean by “a one Asia approach“?

Fortunately the article sets out exactly what that means:

“BLP’s “one Asia” strategy means the firm is doing away with the concept of geographic and practice area distinctions, focusing instead around sector groups. These groups include aviation, construction, oil and gas, private wealth and shipping.”

Now that really is interesting because, frankly, I’m not sure it is going to work.

A sector focus in Asia is a sensible move. A sector only approach to market in Asia is gutsy to say the least.

I say this for two reasons: (1) ‘relationships still trump in Asia’, and (2) Asia is not now, nor will it be for a very long time (if ever), one economic zone. That’s the case both for inbound and outbound work. And even if you don’t want to have people on the ground (which I would strongly recommend you do), you need to consider the geo-political economic implications separately.

And I’ve said all of this without mentioning the elephant in the room: “AdventBalance”. I wonder if they take a sector approach to their strategic thinking in Asia…

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