Leading from the front
The UK200 2011
With the Legal Services Act on the horizon, strong leadership will be key to navigating the changing landscape of the UK legal sector. By Matt Byrne
This year, we’ve done things differently. But then this year, potentially, everything changes. This is the year that - finally - the Legal Services Act will be fully implemented. The likelihood is that it will be a slow burn. The true impact of the legislation will probably take several years to be felt. But the UK legal market’s very own Big Bang is certain
to have far-reaching structural and strategic implications for most firms, making 2011 in a sense year zero.
In that context, this year’s The Lawyer UK 200 Annual Report frames the traditional round-up of how well - or badly - the UK’s leading firms performed financially last year in the context of how well they are managed.
Why? Because whatever happens, the firms that are going to succeed in this new dawn of ABSs, corporate ownership and publicly listed legal services providers are likely to be those that are well run.
Flick forward to page 30 and the start of the individual firm-by-firm write-ups. There you will find that focus on management highlighted alongside the regular under-the-skin commentary on each of the top 200’s turnover, profit, revenue per lawyer and lockup. But this year’s there’s more.
Over the summer we canvassed partners at the top 100 firms for the first time, seeking their thoughts on how their own firms are being run. With the generous assistance of numerous partners and consultants across the market - thanks again to all concerned - we tailored the questions to address the core issues related to managing large law firms and the partners that populate them.
We broke the questions down into three core categories: vision, execution and governance (effectively, transparency and a supportive culture). These broad headings also included questions dear to most partners’ hearts, such as whether they are consulted on key issues, whether management is effective at managing partner performance and how well the latter matched up with individual partner remuneration.
The results were astounding. Almost 700 partners answered some or all of the questions.
We stressed that we would keep the identity of the individual partners under wraps. And we will. But we also said that in the interest of benchmarking, transparency and generating useful feedback for the firms involved, we would name the firms.
In the main, it makes positive reading for most of those involved in senior management. In particular, if one assumes that among the most important attributes for a convincing management team is having a credible strategy, then the fact that 85 per cent of respondents ticked ’yes’ to that question should be some comfort.
Similarly high marks were scored when partners were asked to rate their management team’s ability at executing that strategy (79 per cent), whether partners generally thought that strategy was achievable (78 per cent) and - in a direct nod to the finances – whether they felt management had a good grip on the financial metrics (88 per cent).
The responses were spread relatively evenly throughout the top 100, our core group of firms in terms of financial focus, with 25.7 per cent of responses coming from firms with 200 or more partners.
The largest proportion of respondents (32.4 per cent) came from partners at firms with between 51 and 100 partners, followed by those at firms with between 101 and 200 partners (30.9 per cent), with the remaining 11.1 per cent coming from smaller firms with up to 50 partners. Seventy-seven per cent of respondents were based in London and the south east.
One-partner Minster Law can probably be excused for not responding. But all four magic circle firms are represented, as are the majority of firms throughout the top 100 list.
Scattered through the one-to-five rankings is a treasure trove of pithy comments directly aimed at addressing management issues at the UK’s largest firms. Not every partner who gave poor marks to their firm’s management team also made a comment, but a sufficient number did for The Lawyer to publish a selection.
Our gameplan is not to name and shame but to reflect several of the common themes, worries and criticisms currently levelled at senior law firm management. Most will be aware of these issues already. Some may not be.
For each question we have published the overall results alongside a selection of comments with the firm in question identified. Yes, the occasional disaffected partner may be among them, but the generally positive overall scores should give most management teams comfort that, broadly, they are doing most things right.
Using a combination of the survey results and The Lawyer editorial team’s exhaustive research throughout the summer to create the write-ups, we have also produced a star ranking for the management teams at the UK’s top 50 largest firms.
For the first time we identify what we believe to be the 10 strongest and 10 weakest management teams among the top 50.
Is it scientific? No. Is it an accurate reflection of reality and perception (which often amounts to the same thing)? We’d like to think so.
1.Do you believe your management board has a coherent strategy and vision for the firm?
“They did, but partner departures caused a kneejerk reaction and they’re now running around like headless chickens.” Barlow Lyde & Gilbert
“There’s been a significant improvement in this respect since Mark Dembovsky joined as chief exec.” Howard Kennedy
“The strategy appears to be along the lines of ’wait and see’, with a hope that the public sector and Gulf markets come back. The overall aim appears to be to run the firm in such a way that the equity maintain a £500k, plus PEP. Expect further cuts if the markets don’t bounce back strongly.” Trowers & Hamlins
“Our new managing partner is a strategic thinker and has brought some real impetus to the firm.” SJ Berwin
“It’s an utter disaster - a blind man would have better vision.” Bircham Dyson Bell
2. How satisfied are you that this strategy is achievable?
“It’s a strategy around expanding into Europe and we can do it, but it will be difficult as we may have got there a little too late.” Pinsent Masons
“In the absence of a strategy it’s not possible to be satisfied or dissatisfied.” Shakespeare Putsman
“Having an international strategy when we, as a firm, can’t run the Scottish and London offices properly is laughable. It has no relevance other than to massage certain people’s egos.” Dundas & Wilson
“While the strategy is coherent, performance against it isn’t measurable or quantifiable, and as such it’s difficult to demonstrate whether it has been achieved or not.” Field Fisher Waterhouse
“Just achieved it!” Beachcroft
3. How satisfied are you with your management team’s ability to execute strategy?
“Apart from the disaster in the Middle East, they’ve been pretty sure-footed. No one gets it all right all of the time.”
“We’ve had one of the worst performances of any equivalent firm over the 10 years our senior partner has been in office and have thus fallen badly behind our competitors.” Nabarro
“We need to drive out some of the inertia.” Bird & Bird
“Yet to be tested - we haven’t succeeded in our 2006 five-year strategy, but derailed by economic woes.” Bond Pearce
“Our management has proved itself in the past and is still delivering.” Speechly Bircham
4. How confident are you that your management team has the right quality of people on the board to lead the firm successfully?
“The right mix between dynamic entrepreneur and safety-conscious reliability at the helm.” CMS Cameron McKenna
“After 10 years of the same duo running the firm we suffer badly from groupthink. We need to bring in more strategic minds as well as some people to help rebuild morale.” Nabarro
“There’s an increasing awareness within the firm of the need for those on the board to earn their place by way of suitability, not simply rank, status or position. “ Field Fisher Waterhouse
“The board includes four elected members as well as three members of the management team and the senior partner - all widely respected individuals.” Addleshaw Goddard
5. How satisfied are you that your firm’s management consults widely and takes
account of partner feedback?
“Salaried partner input is rarely sought.” Cripps Harries Hall
“There are good lines of communication between partners and management. Added to which, the managing partner’s door is always open.” Taylor Wessing
“Not sure that it can possibly take account of partner feedback - put 10 partners in a room and get at least 15 opinions.” CMS Cameron McKenna
“On some occasions it consults too much.” Pinsent Masons
“Plenty of information flow and discussions but feeling that big decisions taken already.” Berwin Leighton Paisner
6. Would you welcome a more corporate, executive board style of management?
“The balance is right already.” Shoosmiths
“We already have a corporate, executive board style of management and it works well.” Mishcon De Reya
“We already have an efficient corporate structure.” Ward Hadaway
“We strike a good balance between the collegiate consensus that’s inherent in partnership and being able to move quickly when the need arises.” Freshfields
“It’s a difficult balancing act. I have no problem with management having a fair amount of executive power, provided that they exercise that power in consultation with the partners where appropriate/ practicable.” Allen & Overy
“We have a good balance between corporate-style management, but with the benefit of the more traditional law firm structure for checks and balances.” Reynolds Porter Chamberlain
7. How satisfied are you with the method by which senior management figures are appointed at your firm?
“We have a notoriously small equity and all management appointments are determined by the equity.” Trowers & Hamlins
“We now operate through a formal nominations committee process, which also includes succession planning.”Addleshaw Goddard
“Not much of a system; heads of department make up board.” Berwin Leighton Paisner
“Not all partners are involved in the appointment as only certain classes of partner are entitled to vote. The appointment threshold on a first vote is 60 per cent but the results published don’t identify the actual percentages, merely a pass or file, making it difficult to assess the strength of the mandate of the appointed representative, even among those able to vote.” Field Fisher Waterhouse
“It remains a closed shop within the equity, with no consultation of any kind.” Howard Kennedy
“Self-selecting cabal for the most part.” Dundas & Wilson
“Oh yes, the partnership deed is a disaster on this. We needed a silk’s opinion on how to work it. So much for senior management knowing about partnership law.” Bircham Dyson Bell
8. How satisfied are you that management has a good grip on the current and prospective
financial measures of the firm’s performance?
“The financial acumen of the management is shambolic.” Barlow Lyde & Gilbert
“This area is very closely monitored and realistic expectations and goals are set.” Speechly Bircham
“There’s too much emphasis on chargeable hours per day and not enough on the type of work/recoverability. That said, I do get the sense that the numbers are watched closely and despite a rough year last year we still have cash in the bank and control of cash flow/collections is good.” Trowers & Hamlins
“Concerned that outside the managing partner, the board (and some heads of department) don’t have a sufficient understanding of financial measures.” Bond Pearce
“Recent poor results have put pressure on our management team, who have responded in a balanced and appropriate way with strong leadership from the managing partner and the board. Prospects for the current financial year look to be much improved and will, I believe, make the partners feel ’extremely satisfied’.” Addleshaw Goddard
“Finances are extremely tightly run, monitored, managed and reported across all offices, with detailed information freely shared across the partnership.” Field Fisher Waterhouse
“A number of the members of the management board have the highest aged debts in the firm. They should lead by example.” Brabners Chaffe Street
9. How satisfied are you that management has installed the appropriate culture among partners about financial targets and discipline?
“Still too much reliance on individual client partner figures, which encourages a protective attitude to clients.” Taylor Wessing
“At the moment there’s a disconnect between the client service culture and the billable hours culture. Yet to be reconciled satisfactorily.” Bond Pearce
“There’s a bit of an EP v SP divide, with SP being more on the ball and EPs being a bit secretive.” Shoosmiths
“We need to do more to make the partners fully financially aware and responsible.” Russell-Cooke
“All stick and no carrot. Partners are punished for failing to achieve - often unreasonable - targets through drawings retentions, rather than encouraged to improve.” DLA Piper
“Discipline is simply not enforced and those who have significant billing and WIP holding aren’t properly managed.” Dundas & Wilson
10. How satisfied are you with your management’s ability to communicate key messages to the partnership in a clear and concise way?
“Too much corporate speak.” Shoosmiths
“Historic lack of transparency, beginning to change but not enough yet.” Howard Kennedy
“There has been a breakdown of trust between management and staff.” Barlow Lyde & Gilbert
“The senior partner does make an effort to keep everyone informed. You may not like what he has to say but you know where you stand.” Trowers & Hamlins
“The strategy for release of messages is often reactive and piecemeal, which can lead to confusion, ambiguity or lack of clarity and, in turn, lack of buy-in to the related process.” Field Fisher Waterhouse
“There’s no real communication (the occasional email) and the SP and former MP are exceedingly secretive.” Nabarro
11. How satisfied are you with the market’s perception of your firm?
“I still think the magic circle firms get more respect, despite the fact that we’ve been braver and bolder in growing our business, in client care and seeking internationally the bigger picture.” DLA Piper
“Maybe we’re the ones who are too shy to showcase our successes?” CMS Cameron McKenna
“Still seems you can take the lawyer out of the City but not the work. The quality of lawyer is the same, the commitment to client care higher, but still clients cling to big names and one-off stars.” Shoosmiths
“It’s hard (unfairly) for us to be thought of as a top-tier firm outside the technology sector when we have true talent in dispute resolution, regulatory, employment, India, Middle East etc.” Taylor Wessing
“We need to do more to raise the firm’s profile.” Russell-Cooke
12. To what extent are you satisfied with management’s ability to manage partner performance?
“It’s better than at a lot of firms, but more feedback direct from senior management would be helpful.” Taylor Wessing
“Appraisals are rigorously done in some groups but it needs to be in all. Underperformance is sometimes tolerated for too long.” Pinsent Masons
“There’s no adequate method to assess performance or to manage poor performance.” Brabners Chaffe Street
“They are all stick and no carrot. Morale needs urgent attention.” Nabarro
“It’s not managed consistently.” Wragge & Co
“Behaviours at this firm are in many cases disgraceful and completely self serving. There’s no collegiality - it’s everyone for themselves, which is due to the way in which the remuneration system is structured.” Dundas & Wilson
13. How satisfied are you that partners’ remuneration at your firm generally reflects their overall contribution?
“I do think the old law firm model is broken. There are too many people who take home too much at the top. The turkeys won’t vote for Christmas though.” Pinsent Masons
“The bands for fixed-share partnership bear no relationship to the relative contribution. Movement among equity bands is insufficiently fluid and there’s a perception that some are reaping the financial benefits of what have become quite historic successes.” Field Fisher Waterhouse
“There’s a substantial discrepancy between remuneration of equity and non-equity partners with roughly similar client partner billings.” Taylor Wessing
“Our lockstep has been managed to reward loyalty more than contribution.” Nabarro
“Too many senior equity partners/managers who draw significant amounts but contribute very little. The firm has a bad habit of hiring over-the-hill laterals.” DLA Piper