The legal market place – carnage or opportunity?

7 10 2011

When you look at the legal marketplace, what do you see?

With the implementation of the far reaching Legal Services Act finally happening in the UK (albeit with some fairly significant delays in related regulation), it seems the right time to step back and assess the state of the market.

Talking to people in the profession about this, from partners to in-house lawyers, business development directors to IT professionals, through to trainees and law students, one thing is clear.

There is no single opinion on the state of the market right now.

In fact, nothing could be further from the truth.

Opinions are strong and polarised.

Is the glass half empty or half full?

The world of pain

One group see the profession as an industry in decline.

Painful struggles with increasing firm overdrafts and personal debt are symptomatic of underlying structural problems with the profession, and the cash flow challenges facing many firms are just another indicator that it’s time to get out before the interest rates rise and bankruptcy looms large.

With lawyers at both small and large law firms working harder than ever, increasing competition from overseas firms and LPOs becoming more visible, and constant talk of a new wave of competition, does not fill them with hope that easier times are ahead.

Small firms worry about hyper efficient, large scale competitors with a resource base, national reach, consumer brand and technology platform  that they simply can’t match. Large firms worry about transactions being disaggregated and large chunks of profitable work being placed with legal service providers with a cheaper cost base. Mid-sized firms talk about being squeezed, with larger firms looking for work in new markets just to keep their associates busy while they weather the current economic storm, and about smaller, more agile firms  punching above their weight.

These people can often see the need for change, but despair of the pace of change in many law firms, pointing out that the culture and consensual nature of partnership often make decisions glacial when they need to be made at the speed of the digital world we now live in.

They look at the management of their firm, and question whether they have the right skills and experience to thrive in such a turbulent environment. Management themselves wonder how they can free themselves from operational fire-fighting to spend time focussing on the strategic questions that will define their firm’s future.

The lawyers lower down the pyramid see equity structures remaining in some firms that encourage low performing partners to sit back and coast, while the best talent works their asses off and often still finds it impossible to break into the club.

Below them are a generation of students who have made a huge financial and personal commitment to enter the profession, and are finding training contracts like gold dust. Those that are lucky enough to find work may be confronted by suggestions that the legal training system is in need of reform and is not equipping graduates with the skills they need to excel in the profession and exceed client and colleague’s expectation.

They may also be confronted with a linear career path, and find that if that’s one they are willing to follow, then the demands made by the firm are at odds with a generation Y philosophy that puts greater emphasis on work/life balance.

Those who see the world in these terms often point to clients showing less loyalty and who have ever increasing expectations in terms of service standards, yet in the same breath are looking to pay less for that service. A widespread rejection of the hourly rate billing model leaves many firms struggling to come up with a viable alternative and without the capability to re-engineer their business model to support these new fee structures.

The downward fee pressure squeezes profit margins further, and even after several rounds of morale-sapping restructurings and redundancies, with economic growth in the core western markets slow at best, there’s no end in sight.

Pretty grim huh?

Now those that know me know that I’m on balance, a pretty upbeat person, so let’s try and bring a bit of balance to the picture.

There are plenty of people out there in the profession who don’t think like that. Who see the current time of change as tremendously exciting. These are the people who see

A world of opportunity

First and foremost they see an incredibly profitable sector that has weathered an unprecedented recession and shown real resilience with relatively few high profile casualties.

They see businesses with the ability to offer a broad portfolio of services that add real value to clients at critical points in their lives or organisational existence. Many of these services are counter cyclical (helping manage difficult economic conditions) and many of which allow the lawyer to genuinely claim that coveted position of trusted advisor.

It’s not hard to point to law firms that have access to senior people at some of the best and biggest companies in the world and advise some of the most influential people who are shaping society.

For those in the UK, having a core competency in the English language and the common law system that underpins many other legal markets means firms are well placed to support global businesses and expand intro higher growth international markets (as indeed many UK firms have done very successfully).

While there would be an acknowledgement that the bar for client acquisition and retention is being constantly raised (particularly by increasingly sophisticated business development professionals and practices) this is raising standards in the profession and represents progress. There is still a huge opportunity to win by being ahead of this curve and setting the pace.

For those with one eye on the future, advocates of the profession will point out that the chance of a career offering not just the potential to earn big bucks, but one that can offer a lifetime of intellectual challenge and stimulation, will always attract its fair share of top talent, and that the training and development opportunities within law firms have improved massively over the last ten years.

Those who see opportunity see the ability to innovate as being a genuine source of competitive advantage, and are looking at technology, process and efficiency as ways of maintaining and indeed improving profitability in a fast changing market. The ability to change quickly is a key enabler, and they recruit the people with the ability to adapt and thrive to make this a reality.

They also see that market consolidation can offers opportunities. Low price acquisitions, the ability to pick and chose individual teams, to make strategic acquisitions of particular clients or relationships, and the clearing out of some of the noise in the market place.

Yes clients are demanding “more for less” but that’s a common refrain across all business these days – the change facing the profession is not unique and in  many other industries there are organisations that came out as big winners.

A somewhat simplistic categorisation, but I urge you to reflect – which messages resonate most, and critically, what are you going to do about it?





Your training was useless. Discuss.

3 08 2010

I asked an experienced law firm partner recently what percentage of his academic training he had used in his career as an outsourcing lawyer. The answer? Less than 10% Now I know that here in the UK, there has been debate for a number of years as to whether the vocational training given on the Legal Practice Course was sufficiently tailored for the large commercial firms, and as a result, the choice of provider and course content has widened, which is undoubtedly a good thing. That, as you might expect, is not the thrust of this post.

Discussion about the latest cases was encouraged in class

Firstly, the classroom based elements of a lawyer’s training take four years via the traditional law degree route. However, non-lawyer graduates can cram those three years into a single year with the CPE conversion course. This raises a number of questions. If it can be done in a year, why take three? I’ve heard hypothetical arguments that CPE students don’t have the same understanding of the law as law graduates, but I’ve never heard of any practical consequences of this. More critically, I would challenge anyone to work with a selection of five-year qualified lawyers and identify those that did the CPE rather than a law degree. I have however come across lawyers who have excelled because their first degree was something else relevant to their practice (a science, a language), and certainly if I had my time again I would have done a business or economics degree and then the CPE course before qualifying.

So, if the core “black letter law” can be covered in a year (albeit a hard one!), why not spend a chunk of those two “spare” years on the law degree either giving more depth in the areas that are of more interest to the students, or create different learning experiences to create a richer understanding of the topics? For example, for the commercial modules, why not teach the students to apply the principles to real world examples (rather than hypothetical problems)? Why not broaden their business understanding with some more commercial knowledge? For aspiring family lawyers, why not give a broader understanding of the emotional dynamics that create a context for a lawyer’s work? Why not arrange the type of six month work experience placements that are common on business degrees?

The second area to examine is the on-the job training. My belief is that the practical experience and supervision that young lawyers get is actually a critical component of their development, and for all the talk about investment in people, once a young lawyer gets on the chargeable hours treadmill, this can often come second to revenue generation. Now to be fair, there are many firms that take their trainee development seriously and do an excellent job at it, but I suspect even the best firms can (and should) strive to be even better. Think world class. Technical training. Commercial (or other context-specific) training. Interpersonal skills. Project management training. Financial acumen. Management training. Leadership training. Mentoring. Coaching.

Finally, with all this focus on effective training for young lawyers, what about those who are “fully formed”? Is training then off the agenda? Is every year another last minute struggle to rack up some CPD points by going to a nearby seminar and working on the blackberry while waiting for lunch to be served and then the event to finish? In my experience some of the best lawyers are those that never stop learning. Always curious, whether it’s a new area of law, a client’s business, a new technology or a new business development opportunity. This life-long learning should be celebrated, not least because these people can be great role models for the younger lawyers, and because they create new intellectual capital for the firm and new value for clients.

To finish, training comes with a cost. But so does attrition and recruitment. While the credit crunch has ensured that recruitment of bodies is not the problem it was a few years ago, the war for the best talent hasn’t gone away. If the training you or your team received in your academic years was not as effective as it could have been, what can you do now, to keep your learning fresh?





Breaking the chains: free the young lawyers

23 02 2010

As we are often reminded these days, the world is flat. Or at least flattening. Trade is global. As the economy picks up, the survivors from the Western economies pick themselves off the canvas, and look enviously at those economies that have continued to demonstrate solid growth over the past couple of years. Whether or not these economies are truly decoupled, the strength of domestic demand has undoubtedly contributed to their recent success, and I feel confident that as the West emerges from recession, the pace of global expansion from the big companies will soon pick up again.

Go on, break them....

So what does this mean for lawyers, and what has it got to do with chains? Leaving the chains question for later, for corporate counsel in companies that are entering new markets, the pressure to get up to speed quickly with local law and compliance, ways of doing deals, company secretarial requirements, labour law etc etc etc is significant.

While many corporate counsel may not be “on the ground” in these new countries (though many will be), the exposure to these new countries is significant and is often very difficult to prepare for even with the support of local lawyers.

I can recall being part of the learning process when my NYSE listed employer began to do business in Saudi Arabia for the first time. It was a steep learning curve for many of us, but fortunately a very positive experience. After a couple of years and a few deals there, the risks that we perceived when entering the market were in fact very different from the day to day challenges that faced us. As a lawyer, one of my first problems was finding the right advisor to help us. After having a less than successful experience with a global firm in the country, we ended up using an American ex-pat, who had lived there for 20 years. His understanding of the local business culture, coupled with his understanding of the modus operandi of  a US client, proved an excellent fit for us. He moved firm during my time instructing him, but the service remained consistent and I learnt a lot about the country (outside the specific legal advice he was providing) from working with him.

So where do the chains come in? Well, as legal markets deregulate, global competition intensifies. English and American lawyers are beginning to find that lawyers from outside the jurisdiction (for example in India, South Africa or the Philippines)  are giving advice to their clients, based on domestic (i.e. UK and US) law. Admittedly in many cases the advice does not extend to the most complex work, but it is substantive legal advice and the lawyers involved are learning fast and their cost structure provides an attractive value proposition.

By contrast, there are relatively few Western lawyers who are able to give substantive legal advice in the emerging markets. Don’t get me wrong, they certainly exist, (and the practice of rotating trainees in the global firms is an excellent way to get genuine experience in other jurisdictions, which can then be taken back “home” and leveraged for many clients) but they are not widespread and are often fully utilised.

But (and here’s where the chains come in), there are many, many lawyers in the US and UK, who never get any hands on experience of advising on projects in other countries. The traditional model of qualifying in one jurisdiction, and advising solely on matters subject to the law of that country is being stretched by the needs of today’s clients. Add to this the inherent risk aversion of many lawyers, and the limits their professional indemnity insurance may put on their ability to give more general advice overseas, and I think we have a set of virtual chains that need to be thoroughly examined.

In thinking about this situation, I think particular attention needs to be given to the impact on tomorrow’s lawyers. How can firms equip their trainees and junior lawyers with the ability to advise clients across jurisdictions. I’m not advocating that lawyers attempt to have a detailed (and up to date) understanding of the law in multiple countries; for all but the brightest, that’s unrealistic. But, I believe an understanding of how to do business in some key countries outside their home jurisdiction, a grasp of the culture, some key legal basics, and a good network of local contacts, would go along way in providing some very valuable assets for the firms, and a set of skills and experience that would equip the lawyers for a very different legal marketplace in future. Not all lawyers will need this training, but increasingly, an excellent grasp of domestic law may not be enough to ensure success.

So go forth and break your chains, but if you invalidate your insurance doing it, please don’t blame me…..