Allen & Overy’s big ask” />Here’s an exercise in persuasion. At a firm where average partner profitability was over £1m last year, how in a recession do you try to convince your clients to accept higher charge-out rates?
That is precisely what Allen & Overy (A&O) is discussing at the moment (see story). This is bold. Counterintuitive, even. Actually, forget the euphemisms: if A&O doesn’t get its story right it risks winning the award for this month’s least popular magic circle firm (current incumbent, Linklaters).
To most people who are immune to warped business school logic, the very fact that A&O is discussing upping headline rates appears bafflingly grasping.
A&O’s PR has never been particularly savvy, but this will be an impossible one to spin.
Naturally, old law firm hands know this is all about negotiation and magicking up discounts off the headline rate. Unfortunately, most clients aren’t quite that dumb.
It will be interesting to see whether Barclays, for example, will be happy with A&O’s rates not budging.
As we reported last week (26 January), Barclays has provided general counsel Mark Harding with a new chief of staff with a remit to cut legal spend – and there’s a panel review just around the corner.
I suspect that this move is much more about trimming the client list. Like Linklaters, A&O is taking a look at its customers and deciding which ones are worth sticking with and which aren’t.
In the midst of all this, I still wonder if A&O is missing the point. This whole thing smacks of the logic of the boom. It’s all about being fitter, leaner and, yes, maintaining margins that will benefit partner profits.
Astonishing, really. Firms are being transparent about redundancies, but many partners are worried that a reduction in profit per equity partner (PEP) will reflect badly on their talent and intellect.
Like it or not, PEP is still an indicator of financial health, but there is such a thing as appropriate profit level. Nobody needs a million pounds or even £900,000 to live on, and clients don’t think so either.
The onus is on the firms to prove they’re worth it.
Like I say, A&O has a lot of persuading to do.