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Alex Novarese, Legal Business: How is the market generally?<\/strong><\/em><\/p>\n Lee Ranson, Eversheds Sutherland:<\/strong>\u00a0Most of the managing partners around this table will say it was a better 2017 than expected. We had some of our highest numbers against a budget where we were very, very wary with Brexit and uncertainty. Very strange. We are going into a new budget now and management is more cautious than the practitioners.<\/p>\n David Patient, Travers Smith:<\/strong>\u00a0I was pretty pessimistic at the beginning of 2017 and it surpassed all expectations by some way. I can see the next six months being pretty good. Beyond that is harder to predict. You hope for the best, and plan for the worst. Inevitably something is going to slow us down.<\/p>\n Lisa Mayhew, Berwin Leighton Paisner:<\/strong>\u00a0It is unnerving because management is more cautious than the business. We are all reading the same reports of an M&A boom. There are a lot of real estate transactions. Disputes are continuing. But there is unease because 12 months ago we were all feeling pessimistic about what might materialise post-Brexit.<\/p>\n Simon Levine, DLA Piper:<\/strong>\u00a0Even when you look at firms that operate across other jurisdictions, they all seem to be on the up. We had a difficult time in Australia for a long time. But that market has picked up incredibly over the past year or so.<\/p>\n David Pester, TLT:<\/strong>\u00a0We are trying to balance the structural piece around profitability against that backdrop and at the same time consider a longer-term investment play we might need to be making.<\/p>\n Sharon Lewis, Hogan Lovells:<\/strong>\u00a0The accountants have been clever. Think back to the 1990s, their clients could no longer afford to pay for throwing hundreds of people at audit, so they invested in technology. Over the last ten years, they have used that technology to harvest data. They package in a way which is very appealing to CFOs and COOs. They must be taken as serious competitors, not least that they have a war chest they can yet invest more in technology.<\/p>\n Alex Novarese: Let us have a crack at the accountancy issue. I am on the record as saying it I do not rate them in law.<\/strong><\/em><\/p>\n Sharon Lewis:<\/strong>\u00a0I do not disagree but they can sell.<\/p>\n Lisa Mayhew:<\/strong>\u00a0Why do you think that, Alex?<\/p>\n Alex Novarese: Look into the claims they have made over the years, they do not stack up. Look at the incentives of their staff, the great majority of people [at the Big Four] have no interest in doing law. And they are riven with conflicts.<\/strong><\/em><\/p>\n Simon Beswick, Osborne Clarke:<\/strong>As technology becomes a bigger part of our business, they become bigger competitors. It would be interesting to be privy to their conversations as to why they feel now is right. I am sure it is related to investment capacity and the productisation of the law.<\/p>\n Lee Ranson:<\/strong>\u00a0How many people around this table are audited by the Big Four? Audited by competitors. It is remarkable!<\/p>\n John Joyce, Addleshaw Goddard:<\/strong>\u00a0I suppose a separate question is how many intend to remain audited by them.<\/p>\n Simon Levine:<\/strong>\u00a0I asked hypothetically the chair of a big accounting firm a while ago: \u2018Why do we not merge?\u2019 He said: \u2018We could never merge with a big law firm. We cannot have litigation. We cannot have regulatory work because of conflicts.\u2019 That made me wonder about where they were going. Having said that, the Aussie accountants seem to have made a lot more inroads.<\/p>\n Mark Rigotti, Herbert Smith Freehills:<\/strong>\u00a0Will they cause disruption in trying to succeed? I think they will. They could be very potent competitors in certain areas. Emerging markets would be one. And the context can change very quickly. If Deloitte or PwC spun out their audit division and were left with consulting, then you can have a full-service law firm tacked onto the side. The conflicts decrease 85% and there are banks out there pitching the concept. It is a complex cocktail of strategies and cultures inside those firms around what they are trying to achieve.<\/p>\n Alex Novarese: There are product lines where they can have impact \u2013 financial regulatory, cyber security and data compliance. But it is very difficult for them to replicate the M&A or disputes machines.<\/strong><\/em><\/p>\n Sebastian Prichard Jones, Macfarlanes:<\/strong>\u00a0In my world [private client], they have been there for the last 30, 40 years. They are going to face challenges of their own. [Labour Shadow Chancellor] John McDonnell wants to break them up. We should not be afraid to take them on.<\/p>\n Lee Ranson:<\/strong>\u00a0We did a client event recently. There were two messages clients gave clearly. The first was: \u2018We do not want the Big Four as our lawyers. You do relationships better and we do not want to put more eggs in that basket.\u2019 The second message was more concerning: \u2018You need to get your act together.\u2019 If they invest and change how they deliver, that may change the answer.<\/p>\n Sharon Lewis:<\/strong>\u00a0Just look at Brexit, they have been clever around that and sold a consultancy piece.<\/p>\n Mark Rigotti:<\/strong>\u00a0The world was easy 15 years ago: we were a supplier, the client was the buyer and there were accountants or McKinsey on the side; everyone is crossing over at the moment. I wonder whether there is a piece around collaboration. We talk about investing in technology to compete with the accountants. Why not invest alongside them?<\/p>\n Simon Beddow, Ashurst:<\/strong>\u00a0I do not see the Big Four as a special threat other than for commoditised work, but all of us need to respond to that challenge. We opened Glasgow four years ago; it is between our third and fourth biggest office. We all need to look at how we process commoditised work to make sure that, for the real added-value stuff, we are still first choice. That is why most law firms in the City will get smaller over the coming decade.<\/p>\n Simon Beswick:<\/strong>\u00a0Is anybody seeing the consultants going down the law road? There were rumours for 12 to 18 months that McKinsey was going to enter law.<\/p>\n Mark Rigotti:<\/strong>\u00a0No, but you see crossover areas. We have marketed with McKinsey in parts of Europe on crisis management. McKinsey are good at wrapping around that. What we do not want to be is a sub-contractor.<\/p>\n Chris Lowe, Watson Farley & Williams:<\/strong>\u00a0You have to pay attention but you should not be distracted from what we have to do.<\/p>\n Alex Novarese: Changing the subject, how well do you think the profession is treating women in terms of retention and supporting female lawyers?<\/strong><\/em><\/p>\n Penelope Warne, CMS:<\/strong>\u00a0There is a whole load more to do. Things have become a huge amount better with initiatives like the 30% Club. Law has got so much better but has not cracked it.<\/p>\n Alex Novarese: Judging it against ten years ago has it changed a lot?<\/strong><\/em><\/p>\n Penelope Warne:<\/strong>\u00a0It has. I can give one example. We have a ground-breaking maternity policy, not just in terms of generous remuneration; in terms of allowing women to come back to work more flexibly when it is better for them. There is a 12-month window where a returning mother has her job guaranteed. We offer a more flexible return whether it is 12 months, 18 months, two years or three years. Also, there is more emphasis on agile working.<\/p>\n Alex Novarese: Chris, how progressive is your firm?<\/strong><\/em><\/p>\n Chris Lowe:<\/strong>\u00a0Not enough.<\/p>\n Alex Novarese: Do you hold onto the talented mid-level associates?<\/strong><\/em><\/p>\n Chris Lowe:<\/strong>\u00a0No. We see quite a lot of returning talent but I do not think the infrastructure exists in the UK or many of the jurisdictions where we operate. Germany is good and Denmark and Norway are good but the UK is a long way behind. You look at our management executive and six out of 17 are female. The statistics are quite good at the high and low end, but rubbish in the middle.<\/p>\n Alex Novarese: Roughly, what would the partnership proportion be?<\/strong><\/em><\/p>\n Chris Lowe:<\/strong>\u00a0Less than 30%.<\/p>\n Alex Novarese: Better than some.<\/strong><\/em><\/p>\n Chris Lowe:<\/strong>\u00a0It is not great, is it?<\/p>\n Alex Novarese: There is such a heavy influx of talent in the legal industry of women flocking through. That keeps translating in many firms into 15% to 20% at partner level. This is now a 20-year phenomena. Is that not embarrassing?<\/strong><\/em><\/p>\n Penelope Warne:<\/strong>\u00a0It is not about policies. It comes down to culture. There are still some perceptions that for large transactions a woman with family commitments may not be able to do it.<\/p>\n Sharon Lewis:<\/strong>\u00a0The banks have some very good returnship programmes where they can support both women and men returning to the workplace. I would be very interested in making this much more widespread in the legal profession.<\/p>\n Penelope Warne:<\/strong>\u00a0Some of the young guys want flexibility too. We are introducing a policy called \u2018time out, no questions asked\u2019, where staff can take a month in any calendar year away from the office. That is ground-breaking.<\/p>\n Alex Novarese: Has anybody found anything particularly effective in terms of retention?<\/strong><\/em><\/p>\n Declan Black, Mason Hayes & Curran:<\/strong><\/em>\u00a0The most effective thing is to allow women who are mothers to work when they want to. We have people who have made it to the highest levels of the firm who took that option. We never phrase the issue as a gender issue. All of the energy is to make sure we do not lose people permanently to parenthood unless they want to.<\/p>\n Alex Novarese: Are law firms intolerant if a big biller is acting badly?<\/strong><\/em><\/p>\n Lee Ranson:<\/strong>\u00a0I think so. We revamped our remuneration system for partners eight or so years ago. We had to set the examples of what was the right behaviour and what was not and show that there were consequences to both. If lawyers see that is the culture they quickly either leave or adapt.<\/p>\n Alex Novarese: A lot of law firms have pretty policies; if you get to what happens on the coalface, there is big a gap with reality.<\/strong><\/em><\/p>\n Lee Ranson:<\/strong>\u00a0You have to show it is real by making it happen.<\/p>\n Simon Beddow:<\/strong>\u00a0We all completely get it. Over the course of my career the whole agenda has changed. We also employ highly-accomplished HR people. If you were to put us all in the room and say, \u2018Solve this\u2019 we would, but clients are saying, \u2018You have to do this\u2019, \u2018You have to do that\u2019. In the 30% Club, we say to clients: \u2018Will you help us to solve it by moving the expectations you have?\u2019<\/p>\n Alex Novarese: Why do you need clients to help you?<\/strong><\/em><\/p>\n Simon Beddow:<\/strong>\u00a0Because a lot of it is about having to work 48 hours to get a share purchase contract agreed and you depend upon someone else to take care of your kids while you are not there.<\/p>\n Alex Novarese: That is only an issue for clients, surely, because their point of contact becomes unavailable when they need it. So you need team allocation to support flexible working.<\/strong><\/em><\/p>\n Simon Beddow:<\/strong>\u00a0We have all tried that. When we say to clients in the 30% Club, \u2018Will you help us to solve this by helping us with job share?\u2019, the answer is: \u2018It is your problem, you solve it.\u2019<\/p>\n Alex Novarese: They are right. It is your problem.<\/strong><\/em><\/p>\n Simon Beddow:<\/strong>\u00a0It is a societal problem. My wife is a university professor. She collaborates with colleagues in Sweden. For them, everybody getting involved in childcare is the norm. Our society does not accept that. I do not think we should beat ourselves up overly about this because we are marginally worse than the accountants but not any different to the consultants.<\/p>\n Sharon Lewis:<\/strong>\u00a0I sat at a women\u2019s event a few months ago and wanted to jump up and down. There was a woman GC from a well-known company who was all into, \u2018I use agile working with my team\u2019, and, \u2018I expect my lawyers to do the same\u2019. In the next breath she said: \u2018But if I want to get hold of my lawyer at 6.30am, I expect only two rings and for you to pick up. If I have to go to somebody else to get those two rings at 6.30am, I will consider moving firms.\u2019<\/p>\n David Pester:<\/strong>\u00a0Partnership structures have got worse. There must be something behind the way the businesses are structured that does not align to all the other things we are trying to achieve.<\/p>\n Penelope Warne:<\/strong>\u00a0Sometimes women self-select that they do not like the culture of the City.<\/p>\n Richard Crump, HFW:<\/strong>\u00a0Clients themselves will assist the process because you are going to see greater representation of women among the clients. Some of the businesses we are in were traditionally incredibly male-dominated \u2013 insurance, shipping, construction, etc. We are now seeing many more female clients. It is just going to take time to work through the system.<\/p>\n Alex Novarese: Were you all surprised about the Presidents Club headlines?<\/strong><\/em><\/p>\n Penelope Warne:<\/strong>\u00a0Many people were very shocked.<\/p>\n Chris Lowe:<\/strong>\u00a0If what they said happened, happened, it is unacceptable in this day and age.<\/p>\n Penelope Warne:<\/strong>\u00a0I noticed many of the male partners contacted me and said the dinner was really inappropriate. There are several dinners being led by 30% Club and Mark Carney where City firms and companies are invited to take tables as a protest and to reimburse money to charities. We will be taking a table.<\/p>\n Simon Beddow:<\/strong>\u00a0I am just astonished anybody thought a male-only dinner of that scale was appropriate.<\/p>\n Lee Ranson:<\/strong>\u00a0It sounds like a dreadful event, frankly. The world is not like that anymore.<\/p>\n Chris Lowe:<\/strong>\u00a0Look at the Grammy\u2019s, look at Hollywood, look at sport. I am sorry, it is. It is still very much prevalent and complacency is not acceptable. There should be zero tolerance, although it does potentially create a witch hunt culture. There will be some unfortunate consequences. We, the legal profession, are amongst it.<\/p>\n Alex Novarese: Let us return to strategic issues. We did a feature recently looking at long-term patterns of performance. A group of firms in the mid-tier were standout performers. Osborne Clarke was one. Watson Farley another. Are there forces driving this? Simon, why are you awesome?<\/strong><\/em><\/p>\n Simon Beswick:<\/strong>\u00a0Growth is easier when you are smaller. To hit those levels of growth is so much easier than if your firm is four times bigger.<\/p>\n Alex Novarese: But how are you doing it?<\/strong><\/em><\/p>\n Simon Beswick:<\/strong>\u00a0Focus, largely. We came out of 2008 and thought various things. One was about moving upmarket and then there was a realism that clients want us to do a broad spectrum of work. A lot of firms over the early 2000s had become a lot bigger and more international than us. We were trying to figure out how we compete in this changed world. The conclusion was we had to focus the business. We chose sectors as a way of doing it.<\/p>\n When we split the business in the middle of the 2000s and had a look at it, we had 30 different services all going to market separately. Sectors enabled us to rein that in. It enabled us to have a conductor in an orchestra and play the same tune.<\/p>\n Simon Levine:<\/strong>\u00a0Would you ever go the whole hog and move from a practice group structure to a sector structure?<\/p>\n Simon Beswick:<\/strong>\u00a0No, but the big thing was moving the whole of business development to sectors. We moved all marketing budgets and promotion to sectors.<\/p>\n Alex Novarese: How much impact did that have?<\/strong><\/em><\/p>\n Simon Beswick:<\/strong>\u00a0Massive. Taking some of our best people and making them sector leaders, together with moving all the BD budget to sectors made it change. We had a go at trying to move to a sector-focused way in the late \u201890s and it never worked. When we had a go second time we felt we have to be 100% committed. We made a change overnight. It took everybody 24 months to realise: \u2018They are serious and not coming back.\u2019<\/p>\n Alex Novarese: The first 12 months was just moaning, I bet.<\/strong><\/em><\/p>\n Simon Beswick:<\/strong>\u00a0Yes, and \u2018Why can I not do this?\u2019 Then they sort of got into the swing of it. The other benefit is we have always had to fight for growth and clients. It made the firm very flexible.<\/p>\n Alex Novarese: There seems to be a link between simplifying the business of law and sustained growth.<\/strong><\/em><\/p>\n Richard Crump:<\/strong>\u00a0It is about focus. If you look at OC and ourselves, Watson Farley, all of us went down that industry sector route in seeking to differentiate ourselves. We have had people who have worked in those industries. A lot of that then starts driving an international strategy because those sectors have an international direction. You need to know your sector, your industry and push it.<\/p>\n Alex Novarese: If you look from the late 1980s through to about 2006, the Magic Circle cleans everybody else\u2019s clock. Then it goes flat. They shrink in real terms. Does this not signal a fundamental shift in the industry?<\/strong><\/em><\/p>\n Penelope Warne:<\/strong>\u00a0You have to have an edge. To be generalist is a dangerous place.<\/p>\n Lee Ranson:<\/strong>\u00a0I would say virtually everybody around this table has a similar structure in that.<\/p>\n Alex Novarese: The numbers indicate they do not, based on growth rates.<\/strong><\/em><\/p>\n Lee Ranson:<\/strong>\u00a0A lot of people talk the theory. Getting the business to respond is a very different thing.<\/p>\n David Pester:<\/strong>\u00a0One advantage I have had is we started with a clean sheet of paper. We did not exist until 2000. Ninety percent of our fee income sits in only five sectors. It is an interesting example of how it can drive where you target your investment. Execution is absolutely key.<\/p>\n Alex Novarese: I often come across this idea of profitability versus revenue growth. There is a strong link between revenue growth and profitability growth. Yet we come back to this notion we can retrench to global domination.<\/strong><\/em><\/p>\n Simon Levine:<\/strong>\u00a0Why is it US firms continue to do so well? They are growing internationally and have increased profitability.<\/p>\n Alex Novarese: Exactly. They are growing revenue and profitability.<\/strong><\/em><\/p>\n Simon Levine:<\/strong>\u00a0But there is a danger of assuming it is about structure as opposed to something else.<\/p>\n Alex Novarese: I do not believe the problems of the Magic Circle are that they have not made enough ground in America. That is a big issue, but the bigger problem is they are not growing in Europe.<\/strong><\/em><\/p>\n Sharon Lewis:<\/strong>\u00a0They have tried to slim down and become more profitable, like the bride getting ready for their wedding, for a US merger.<\/p>\n Alex Novarese: How\u2019s that working out for them?<\/strong><\/em><\/p>\n Sharon Lewis:<\/strong>\u00a0They have relied on having, including from publications of your own, this brand which has allowed them to restructure and throw off good profits to make them attractive across the Atlantic. So far, we have not seen the results of that.<\/p>\n Alex Novarese: Let\u2019s put a little nuance on it, I can see how you restructure a law firm over one or two years. I do not see how you can restructure a law firm over a decade continually.<\/strong><\/em><\/p>\n Sharon Lewis:<\/strong>\u00a0That is what they have done, though.<\/p>\n Alex Novarese: And it is not working. Linklaters was a world-beater in 2007; it is not a world-beater now.<\/strong><\/em><\/p>\n Sharon Lewis:<\/strong>\u00a0But you still call them Magic Circle.<\/p>\n Alex Novarese: Magic Circle means the top of London.<\/strong><\/em><\/p>\n Lisa Mayhew:<\/strong>\u00a0It does not have the same connotation if you go to America. It does not have the same royalty tag that we grew up revering.<\/p>\n Alex Novarese: Is the Magic Circle on borrowed time? They are great firms but are they calling their strategy wrong?<\/strong><\/em><\/p>\n David Patient:<\/strong>\u00a0There are all kinds of models that can be very successful. The Magic Circle is a model that continues to be very successful. We have not gone for a sector approach; we have gone for a very simple and focused approach with flexibility to turn and focus on those parts of the market that are very profitable.<\/p>\n Lisa Mayhew:<\/strong>\u00a0There has been a wake-up call in the Magic Circle. There was an arrogance and complacency in lots of firms. Perhaps there is a moment of waking up to where clients have moved.<\/p>\n Richard Crump:<\/strong>\u00a0They are quite arrogant but are run in a completely ruthless way. I would hesitate to bet against them but the Americans are coming. That would seem their bigger challenge.<\/p>\n![\"\"](\"\/events\/wp-content\/uploads\/sites\/5\/2019\/01\/mayhew_lisa-1-1.jpg\")
\u2018There has been a wake-up call in the Magic Circle. There is a moment of waking up to where the clients have moved.\u2019
\nLisa Mayhew, Berwin Leighton Paisner<\/em><\/p>\n<\/div>\n![\"\"](\"\/events\/wp-content\/uploads\/sites\/5\/2019\/01\/beddow_simon-1-1.jpg\")
\u2018When we ask clients to help us support women in law the answer is: \u201cIt is your problem.\u201d\u2019
\nSimon Beddow, Ashurst<\/em><\/p>\n<\/div>\n![\"\"](\"\/events\/wp-content\/uploads\/sites\/5\/2019\/01\/lowe_chris-1-1.jpg\")
\u2018There should be zero tolerance to inappropriate behaviour, although it does potentially create a witch hunt culture. There will be some unfortunate consequences.\u2019
\nChris Lowe, Watson Farley & Williams<\/em><\/p>\n<\/div>\n![\"\"](\"\/events\/wp-content\/uploads\/sites\/5\/2019\/01\/levine_simon-1-1.jpg\")
\u2018A cyber attack is a nightmare but a cope-able nightmare. Losing client data would be a real nightmare.\u2019
\nSimon Levine, DLA Piper<\/em><\/p>\n<\/div>\n![\"\"](\"\/events\/wp-content\/uploads\/sites\/5\/2019\/01\/ranson_lee-1-1.jpg\")
\u2018The future may not be like the past. There is now greater investment needed. We have to get partners thinking about that.\u2019
\nLee Ranson, Eversheds Sutherland<\/em><\/p>\n<\/div>\n![\"\"](\"\/events\/wp-content\/uploads\/sites\/5\/2019\/01\/warne_penelope-1-1.jpg\")
\u2018People were very shocked by the Presidents Club. Many male partners told me it was really inappropriate.\u2019
\nPenelope Warne, CMS UK<\/em><\/p>\n<\/div>\n![\"\"](\"\/events\/wp-content\/uploads\/sites\/5\/2019\/01\/beswick_simon-1-1.jpg\")
Simon Beswick, Osborne Clarke<\/em>: Sectors enabled us to have a conductor in an orchestra and play the same tune.<\/p>\n<\/div>\n![\"\"](\"\/events\/wp-content\/uploads\/sites\/5\/2019\/01\/rigotti_mark-1-1.jpg\")
\u2018If Deloitte spun out audit you can have a full-service law firm tacked on the side. The banks are pitching the concept.\u2019
\nMark Rigotti, Herbert Smith Freehills<\/em><\/p>\n<\/div>\n