law firms

What are Asia regional in-house lawyers looking for from their outside counsel?

The end of November saw Legal Week (legalweek.com) putting on the second of its Asia regional ‘Corporate Counsel Forum’ events in the Gallery Room of Singapore’s Grand Hyatt hotel. Judging by the impressive collection of 220 regional in-house lawyers who attended, this event is likely now a firm fixture in the diaries of many in the industry. And rightly so. Events of this calibre are few and far between and should not only be welcomed, but encouraged.

Legal Week’s Elizabeth Broomhall wrote up a very succinct account of what took place at the Forum in a post on the Legal Week website on 5 December [2014].

In summarising the day’s events, and following subsequent discussions with Lucy Siebert, international counsel at Australia’s Telstra, and Julia Shtepa, managing director of legal for South Asia at Accenture, Elizabeth’s article highlights the following 5 issues (among more) as issues in-house team in the region have identified as being important to them when selecting outside counsel.

1. Local or International?

It would appear that in-house counsel in Asia are not immune to a discussion that is taking place on a more global level; namely:- should we be hiring local or international law firms?

On the one hand, there are many benefits to hiring an international law firm to act on your matters. On the other, particularly in the mixed legal landscape of Asia (where common and civil law sit side-by-side), there really is no substitute for – as Siebert calls it – “on the ground knowledge”.

I would wholeheartedly agree that there are complex issues in play here, as it is indisputable that there are very clever lawyers working with leading country and regional law firms. That’s why I was particularly drawn to Shtepa’s comment that:

“Sometimes Accenture will engage an international firm to play a ‘deal coaching’ role, she said. “Depending on the regulatory environment and the language constraints, it may be that the deal is led by an international firm and supported by a local firm”.”

If you can afford it, then this seems to me to be a very clever approach to take.

Alternatively, a case could be made that in-house counsel in Asia, as is the case in other parts of the world, look to instruct the lawyer and not the law firm.

2. Panel or no panel?

Client legal panel arrangements are the bane of many a private practice lawyer and their marketing team. Many an hour is spent responding to these and Australia, the home of Telstra, has undoubtedly played a major role in the development of this arrangement. Indeed, many of the ASX 200 have both Australia and Asia legal panels in place. So I was surprised to see Broomhall write that:

“many regional counsel believe these [panels] remain difficult in Asia given the limited capacity foreign law firms have compared with in their home markets, the different practice restrictions on foreign law firms across jurisdictions, the high turnover of partners in the region and the fluidity of the markets.”

While each of these is valid in their own right, none are unique to the region – and certainly would not seem to me to be an impediment to implementing a panel arrangement if the desire was there to do so. No, I would contend that there are two additional factors that mean panel arrangements are not, yet, as prevalent in Asia, which are: (1) relationships still trump all when assigning work; and (2) the rise of procurement is still to come.

That said, as Broomhall herself says: “An increasing number of companies, including Chinese state-owned organisations, have been moving in this direction in a bid to control costs” – and given the number of tender writing jobs that require local/regional language skills (notably Mandarin) that I have seen advertised in the last 3 months, my guess is that this [implementing panel arrangements] will be one of the major growth areas in 2015. Indeed, I will be interested to see what the position on this issue is at the Forum in 2015!

3. Where are all the Alternative Fee Arrangements (AFAs)?

Throughout my time in Asia, law firms have had to be very conscious of their cost-base as clients have always been value drivers. And with annual ROI profit margins of around 20% (which translates to probably the lowest ROI returns in the industry globally), many would say rightly so.

Leaving this aside however, I found myself in total agreement with the comment that when it comes to innovative fee arrangements, Asia lags behind the West.

Actually, with my interest having been spiked in this issue I went online to try and see how many firms had ‘on the ground’ regional Pricing Directors (a role that has seen phenomenal growth in both Europe and America, and less so here in Australia) and I couldn’t find one law firm that had an on the ground head of pricing present in the region.

All of which screams: law firms who can create opportunities to genuinely discuss the value exchange and AFAs with their clients have a massive opportunity to differentiate themselves in what is currently an extremely tight market.

4. Secondments and other value adds

It was interesting to note that both Siebert and Shtepa agreed that “secondments are also an opportunity to add value”.

In my experience, the staffing structure of law firms in Asia – which need to necessarily be tight because of the control on costs – has, historically, not leant itself to law firms offering secondments to corporate clients (historically, as part of a global offering, financial institutions have tended to fair better here).

Clearly, going forward, one of two things will happen: either law firms will need to revisit this discussion, or New Law providers –such as Lawyers on Demand and Riverview Law – are going to find a very nice gap in the market – indeed, many may argue that Advent is already taking advantage of this exact situation.

And law firms who doubt this should note Siebert and Shtepa’s comment that:

“secondments help lawyers in private practice gain a better understanding of their businesses. Indeed, they believe this is the key overall message to get out to firms: get to know our business; understand our drivers.”

and one of the best ways to do that – a secondment.

5. A more diverse profession

I wanted to finish this post on what I consider to be an important note of hope from Siebert’s comment that:

“We [Telstra] specifically look to see that they’re ensuring the best possible talent pool for us – not just white Anglo-Saxon males. We’ve got a very strong diversity policy and so we expect that to be something that is also important to our panel firms.”

If you haven’t already read Elizabeth’s article, I would like to strongly recommend that you wander on over there now…

I know the Burberry brand but that doesn’t mean I buy from them

I know the iconic luxury goods brand ‘Burberry’. Established in 1856, Burberry have been clothing the rich and famous pretty much continuously since. In Sydney they have a flagship store at 343 George Street. Here’s the kicker though: I have never knowingly bought anything from Burberry.

While this may all sound fascinating, you could well be asking yourself about now what this has to do with the selling of legal services? And it wouldn’t be an unreasonable thought too.

So without further ado, let’s move on to the issue at hand.

Last week saw the publication of the Acritas Global Elite Law Firm Brand Index 2014 to much fanfare. As Acritas themselves proclaim, the Index:

“…reveals the firms which are adapting most successfully to the changing market and winning client loyalty and favorability as a result.”

And while this would seem to be a pretty compelling reason to analyse the Index more closely by itself, managingpartner.com goes on to comment, according to the results of the Index, that:

“Multinational clients are more likely to instruct law firms which have a strong multi-jurisdictional presence and capabilities and a collaboratively working style and value focus”.

All I can say is – “Wow!”. If this is truly the case, then it goes without saying that the Index should be considered one of the most important and compelling benchmarks in the industry and it needs to be in the reading list of every managing partner, business development director and head of finance. Because the simple fact is, if my firm isn’t on and near the top of this list, I need to be very concerned.

But, before the panic starts to set in, how is the Index compiled?

Ahh, well here is where it seems to start falling apart. According to the Acritas website,

“The Sharpelegal Global Elite Brand Index is determined through four open-ended questions from the full survey to find out from general counsel:

the first law firms to come to mind

the firms most considered for multi-jurisdictional deals

the firms they feel most favorable towards

the firms most considered for multi-jurisdictional litigation.”

Did you notice that there was/is not a single open-ended question to the effect:

Did you actually buy legal services from this firm?, or
If you bought legal services from this firm, in how many different jurisdictions did you buy them in?, or
Did you use the same firm of lawyers in multiple jurisdictions in one transaction during the course of the last 12 months?

And therein lies the problem with the Index: while it is certainly really nice for my ego that my firm is one of the most recognised legal brands in the world (and just to be clear, I don’t actually work for the firm that came out top in the Index by some margin -Baker & McKenzie), the simple fact is that this doesn’t pay the bills.

Which brings me back to Burberry, a brand I most certainly know, would consider buying from (if I won the lottery), and feel very favourable to, but from whom I’ve never actually purchased anything…

Foreign exchange woes hurt Australian arm of K&L Gates

Back in March 2013 I wrote a blog post on how foreign currency fluctuations were likely going to hurt international law firms with a presence in Australia, over the following 12-18 months, unless the firms hedged against this exposure.

Not wishing to be one who says “told you so”, but a report in today’s Australian newspaper (‘Exchange movements take their toll on global law firm K & L Gates‘ [subscription required to read whole article]) affords me the luxury of being able to say exactly that.

According to the article,

“[K&L Gates] global revenue increased by 9.3 per cent last year due to the merger with Australia’s Middletons…”

but,

“…things would have been much better had the US dollar not appreciated by 6.8 per cent relative to the Australian dollar…”

As the Australian sets out, it is largely thanks to the extraordinary level of financial transparency on the part of K&L Gates that we are able to ascertain the effect that currency fluctuations have had on the firm, and the firm should be highly commended for this.

That said, it is highly unlikely that K&L Gates will be the only international law firm with a presence in Australia that will be affected by this. Even firms who have to report in British Pounds or Euros, as opposed to US dollars, will likely have felt this effect on their balance sheets. The only real question is the level of effect it has had.

And the warning I put out there to the Australian partners of international firms largely remains in tact:

in order to keep your fellow partners happy in London, New York or Chicago, your Australian-based revenue will need to increase by approximately 10 to 20 per cent over the next 12 months for you just to standstill.

So before you agree to any increased revenue target budget, keep in mind the compound effect foreign currency movement are likely to have on your commitment.

Alternatively, you could get a commitment from your offshore partners that they refer work into you on which you can charge offshore currency rates – say US dollars; in which case, you could get away with working about 10 per cent less over the next 12 months.

And who said being a law firm partner was easy!

RWS_01

A word on the inter-generational issues going on at law firms

When I was growing up, my Grandmother used to tell me that my generation (‘X‘) had never had it so good. Not that we were lazy mind, but that we didn’t have the work ethic of her generation. When I complained one day to my Mother about this treatment she told me that I misunderstood: my Grandmother wasn’t complaining about my slack arse nature, conversely she was pleased that my life was easier than hers had been – she now felt she had succeed in life. I said that I still didn’t understand and my mother told me that she doubted I would until the day I had children of my own. And while I still don’t have children, I do understand this deep need to try and make sure the life of generations to come will be easier than mine and that of my Mother’s (‘Baby Boomers‘).

So it was with interest that I read the recent post on the Australian Lawyer website by NSW Young Lawyers president Thomas Spohr – ‘A dangerous game: How older lawyers diminish their Gen Y colleagues‘ – and the subsequent response by Ken Shepherd, the principal of Shepherd Legal – ‘A dangerous game: A matter of perspective‘.

Both posts are entertaining and raise serious issues and are well worth the reading time. Underlying them both though is a feeling that I’ve had this discussion somewhere before.

Now if you want to read an excellent post on how disenfranchised Millennials (or Gen Y) lawyers must be feeling as they enter the workforce, then you don’t need to go past a post written by Michelle Silverthorn on 17 July 2014 entitled – “My Generation” – which I now consider to be the final word on this issue.

In her post, under the paragraph titled ‘Reframe The Discussion’, Michelle writes:

“I’m often told that Millennial lawyers lack commitment to their employer, that we start looking for another job five minutes after starting a new one. That’s a fair criticism, but look at it from a different angle. Assume that, on average, the youngest Millennial lawyer completed law school at 26. That means that, on average, the youngest Millennial lawyer started practicing in 2007. The majority will be starting their practice in 2014 and later. This entire generation of attorneys will therefore have started working in an utter paradigm shift in the legal market [post 2007]…”

Wow! – given that Australia has a 5 year undergraduate Bachelor of Laws (LL.B.) program, that equates to an entire generation (Millennials/Y) of new lawyers in #Auslaw for whom the #NewNormal has been nothing but ‘normal’.

Further, in Australia that’s an entire generation of lawyers who have never experienced a recession but who have operated – in a professional capacity – under circumstances never experienced in living memory.

Quite simply – that’s powerful. And to my shame, I had never even looked at it like this before.

So when Michelle then goes to say:

This entire generation of attorneys will therefore have started working in an utter paradigm shift in the legal market, where traditions have been upended, expectations have proven false, debt seems overwhelming, and jobs simply aren’t there. Not to mention the whirlwind of layoffs, stalled promotions and hiring freezes that started in 2009 and continue today. In other words, when you ask why Millennial lawyers won’t stay committed to an organization, ask yourself what in the past seven years has demonstrated that an organization will stay committed to them?

it makes me realise two things:

First, Michelle is wise beyond her years.

Second, my generation has failed in our duty to the next generation. We haven’t made life any easier for them – desite our bitching and moaning to the contrary – and the only question that now remains is whether or not there is enough time left to fix the problem and restore the equilibrium?

RWS_01

Which ‘top’ Australian law firms are struggling to enter Asia?

The headline of the lead-off item in Friday’s (8/8/2014) Global Legal Post was:

“Top Australian firms struggle to enter Asia”

Pretty strong stuff, made all the more so by the first line of the post, which reads:

“BigLaw Australia has been ‘bitterly disappointed’ at its limited success in entering Asian markets, according to business consultant Dr George Beaton.”

The post left me wondering:

which ‘top’ Australian law firms are they referring to?, and
is it fair to say that “BigLaw Australia” has been ‘bitterly disappointed’ at its limited success in entering the Asian markets?

So, over the weekend I decided to take a look at this more closely. And, for the purposes of the remainder of this post I have limited my research to:

independent ‘Australian’ law firms (i.e., not international firms with an Australian presence),
with a presence on the ground in Asia (i.e., not looking at firms’ informal or formal referral arrangements – such as Advoc Asia, Lex Mundi or PRAC, which will likely be the subject of a future post).

Also, in undertaking this I have used the most recent ‘Top 10 Independent Australian Law Firms by Revenue’ list I could find – in this case, complied by the excellent Yun Kriegler (aka @TheLawyerAsia) in her 30 June 2014 analysts post for The Lawyer ‘Australia: medium pace’.

So, here goes:

Top 10 Independent Australian Law Firm by revenue	Offices in Asia
1. Clayton Utz*	None
2. Allens**	Beijing, Hanoi, Ho Chi Minh City, Hong Kong, Jakarta, Port Moresby, Singapore, Ulaanbaatar
3. Minter Ellison***	Beijing, Hong Kong, Shanghai, Ulaanbaatar
4. Corrs Chambers Westgarth	None
5. Gadens	Singapore, Port Moresby
6. Gilbert & Tobin	None
7. HWL Ebsworth	None
8. Maddocks	None
9. Sparke Helmore	None
10. McCullough Robertson	None

* Clayton Utz hit the headlines earlier this year for scratching it’s HK association with Haley & Co. but I’m not sure this one incident is enough to warrant a headline like that above.

** Given Allens tie-up with Linklaters, it’s questionable how ‘independent’ the firm remains.

*** as far as I can see, Minter Ellison’s Asian offices are not financial integrated with the Australian operations.

——-

So,

7 out of the Top 10 Independent Australian Law Firms by revenue have no on the ground presence in Asia at all,
for 2 out of the 3 that do have on the ground presence in Asia, it is questionable how financially linked their Asian offices are to the Australian operations, and
out of the 7 that currently have no on the ground presence, only Clayton Utz looks like it has attempted to create any on the ground presence in the past few years.

Which essentially leaves Gadens, listed at #5 on the list, as the only independent Australian law firm with any on the ground representation in mainland Asia itself (Singapore, where it doesn’t appear to have a local Qualifying Foreign Law Practice (QFLP) licence).

Overall then I think it is fair to say that that top Australian laws firms have not struggled to enter Asia – because they are simply not there in the first place and many of them have not even made an attempt to be there!

Is it also fair to say then that:

“BigLaw Australia has been ‘bitterly disappointed’ at its limited success in entering Asian markets”?

I’m not sure, because when you look at the published strategy of leading independent Australian law firms there appears to be three different approaches being adopted:

First, firms who are aligning with referral groups, such as Lex Mundi mentioned above,
Second, firms who are working off informal referral arrangements with firms operating in the Region, and
Third, firms who have decided to stay 100% Australian and are not looking at Asia in any great way for future development.

And so the honest answer is that this will take further analysis.

Now, if we were looking at how happy global firms with an Australian presence were with their Asian operations, then this would be a completely different post!

RWS_01

‘Mark Brandon: UK law is focusing too much on the wrong things’ – A response from Australasia

Over the last weekend I (@RWS_01) got into a tweet exchange with the author of a recent good analysis post on the thelawyer.com – ‘UK law is focusing too much on the wrong things‘ – Mark Brandon (@MotiveLegal). As part of the exchange, I promised Mark a response to his article.

First off, as it has been some time since I worked directly in UK law, my reply to Mark’s post should be read from an Australasian perspective.

Second, in my reply I have used the same numbering and headings as Mark used in his original post.

So, here goes.

1. The mega-consolidators will struggle

I partially agree with Mark on this one.

If, as I think Mark suggests, law firms are merging simply to ‘purchase’ market share, then I generally agree with him. Likewise, if by ‘conglomerate’, Mark means ‘full service’, then I would also agree.

However, as someone who lives and works in an environment (#Auslaw) where there are roughly:

30 law firms,
who earn in excess of A$50 million per year in revenue,
with a population of approximately 23 million people,

then I have to say that the trend of consolidation seen in the sector over the past two to three years here will, and needs to, continue.

Will some of these mergers/consolidations result in regional (Asia-wide) mega-firms? Yes, I believe they will [and indeed, with the likes of King & Wood Mallesons, have].

Will these firms struggle? Some yes (most likely those who, as Mark suggests, have consolidated solely to purchase market share), but those who have the right strategy and culture in place, ie where the consolidation is done in consultation with clients, resulting in a more efficient and better service to the client – rather than solely for the financial benefit of the partners of the firms involved, will likely thrive.

Finally, I have to say that I disagree with Mark’s comment that:

“When it comes to law firms, there is such a thing as ‘too big’.”

2. Vereins are over (more…)

5 steps to take when your client becomes your biggest competitor

One of the more interesting take-outs from an article (‘The Rise of in-house counsel: What does this mean for law firms?‘) published on the Australasian Lawyer website today – on the rise of in-house counsel numbers in #Auslaw – is the following comment by Katherine Sampson – managing director of Mahlab Recruitment:

“It’s not necessarily that they’re [in-house] going to a competitor firm, but they are going in house…”

To me this statement rings alarm bells and reads:

“your client has just become your biggest competitor!”

So, what steps should you be taking when your client has also just become your biggest competitor for that work?

Here are 5 things you should be putting in place immediately:

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The hidden dangers of discounting your fees

Today’s post is a short rant about the practice and dangers of discounting your legal fees, followed by a useful collection of 20 questions I found earlier that you should be asking yourself if you are discounting your fees.

I’ll start off by disclosing that I hate it when lawyers discount their fees. I especially hate it when this is done without any request by the client – a far more prevalent practice than is perhaps admitted – or consultation with others in the firm (including the practice of discounting on other lawyers’ rates in your firm without even asking them if this is OK!).

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That’s another fine mess we’ve gotten into!

“That’s another fine mess you’ve gotten me into!” – Oliver Hardy

A lot has been written in the past few weeks on Dentons* decision to no longer publish ‘meaningless‘ (their word, not mine) annual Profits Per Equity Partner (PEP) figures, the latest of which “Partners divided on reliability of PEP and need for transparency” was published on the legalweek.com website last Friday.

While I have a level of sympathy with Dentons argument – and the reality is that PEP figures really are meaningless to all but those who work in the firm, at the same time I do feel that the makings of this situation are those of the law firms themselves.

To expand, in the days prior to LLP status, law firms avoided the press – both legal and non-legal – like the plague. Then publications such as Martindale-Hubbell, Chambers and Asia Pacific Legal 500 started to gain traction and firms started to disclose the business/deals they had undertaken in the past 12 months in the hopes of getting good listings/rankings. In most cases this was done without firms asking their clients if they put any credit in these rankings and their feedback on the benefits of such a strategy.

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Demand for legal services in Australia is flat – so what can I do about it?

Yesterday’s [4 July 2014] Australian newspaper Legal Affairs section published an article – “Top-tier firms axe hundreds of jobs” (subscription required if you wish to read the full article) – that opened with the following paragraph:

THE nation’s biggest law firms are in the midst of an employment shake-out with hundreds of jobs disappearing as the firms slash costs in the face of flat demand and intense competition.

The point of this post is not to opine on whether or not demand for legal services in Australia is truly flat, nor whether indeed demand among, so-called, ‘top-tier’ firms is intense, which I’ll leave for another day, but rather to comment on whether or not such flat demand, and indeed intense competition, should lead to the loss of hundred of jobs.

First off, anyone who has a memory even slightly longer than a gold fish, will recall that most (if not all) international firms (of whom most make up this so-called ‘top-tier’ level here in Australia) who entered the Australian market post the GFC cited “flat demand” in their domestic jurisdictions, and the need to grow revenue from other jurisdictions, as a strategic reason for doing such.

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