Focus: Gordons - Gordons’ tonic
23 October 2011 | Updated: 24 October 2011 9:15 am | By Joanne Harris
1 May 2012
3 May 2004
10 September 2001
21 January 2008
9 July 2007
How does a Bradford firm pay Slaughters-level remuneration? The managing partner behind this stellar performance reveals all
Leeds and Bradford, centres of industry built into the harsh Yorkshire landscape, are not obvious places to spawn some of the legal profession’s most successful businesses. Yet these two cities have been the foundations of immensely ambitious firms.
Some, such as DLA Piper, are now global brands. The scale of others’ ambitions may not have quite the same reach, but if you look at the profitability rankings you will find several Leeds- and Bradford-based practices near the top.
One firm that is likely to surprise by its inclusion in this list is Gordons. For the past decade the firm has quietly and steadily grown year-on-year. In 2010-11 Gordons reported a turnover of £23.3m with a net profit margin of 36 per cent. Its nine equity partners took home an average of £917,300 each, up from £700,300 in 2009-10, putting the Yorkshire firm right up there with the magic circle in profitability terms.
Most astonishingly, the firm’s £1.9m top of equity figure for last year tops all those of the big City firms except for Slaughter and May’s.
Gordons managing partner Paul Ayre claims there are no hidden secrets to how the firm has done it, but looking out over a blustery Leeds landscape when The Lawyer meets him, he admits that the firm’s background is important.
“I think coming out of Bradford as a business in a sense helps,” muses Ayre. “In all likelihood you have a more direct contact with your clients - it’s a less transactional relationship. That’s definitely the case with a number of our oldest clients.”
The client with which Gordons is associated most closely is supermarket chain Morrisons, which also began life in Bradford. The company still instructs Gordons, although Ayre does not like to place too much emphasis on the relationship.
However, retail clients are a cornerstone of Gordons’ practice, which is also characterised by being a go-to firm for a large number of small and medium-sized owner-run businesses from Yorkshire.
Other significant clients include electrical and heating group Glen Dimplex, construction company Saint-Gobain, local motor group JCT600 and brewer Molson Coors.
For some time Gordons tried to market itself as an alternative to bigger firms in Yorkshire.
“This region’s a great centre for legal services and has been the home for some amazingly successful firms,” Ayre points out.
But Gordons recently decided that positioning itself by reference to the rest of the market was not “right”.
“Going forward, I think having a clear understanding of what we are as a business, and also what’s relevant, is the key,” explains Ayre. “We want to be the best kind of different.”
Gordons’ current cycle of growth can be traced back to 2007, when it acquired Bradford firm David Yablon. In the 2008-09 financial year Gordons consolidated the resulting two sites into one office, achieving overheads savings of 15 per cent.
Between 2008-09 and 2009-10 overall staff numbers reduced by 13 per cent, partly as a result of this consolidation, and staff costs were cut by 28 per cent, or £2.6m. Meanwhile, chargeable hours rose by 1.7 per cent and turnover was up by 1.4 per cent. Turnover rose a further 6 per cent between 2009-10 and 2010-11.
“We didn’t lose that many staff through recessionary reasons,” Ayre says, adding that throughout the turmoil of the past few years the firm’s trainee retention rate has remained at 100 per cent. Saving money by not keeping trainees on, he says, would have been a “very short-term cost benefit”.
“The growth strategy that we’ve had for over 10 years now has been consistent,” Ayre continues. “We’ve done that largely organically, but when opportunities have presented themselves to acquire teams or other firms we’ve looked at quite a few, and we’ve done it on a number of occasions.”
The resulting shape of the firm is largely responsible for its high levels of partner profitability (average earnings for the whole partnership stood at a distinctly unshabby £345,900).
In addition to the lean equity of nine, there are now another four junior equity partners, with another set to join soon, and 18 fixed-share equity partners. Salaried partner roles are gradually being phased out, with the majority having switched to fixed-share equity status in 2009-10.
The junior equity partners participate in all the discussions of the full equity partners. The only difference between the two classes is that a portion of their remuneration is guaranteed, with a merit-based profit share on top. Full equity partners have no guaranteed element, and remuneration is reviewed annually and is dependent wholly on merit.
In the strata below partner, Gordons employs around 60 lawyers (Ayre dislikes the term ’associate’) and another 60 or so fee-earners, mainly paralegals and legal executives. Equity partner-to-lawyer ratio was 1:9 in the past financial year, although according to Ayre Gordons did not deliberately set out to create the structure it has ended up with.
“I suppose we’ve grown quite a lot, but it hasn’t always been like that,” Ayre muses. “One of the good things about that is, when you look at the quality of the non-partner group, there’s some great talent and energy there. You’ve got to satisfy people’s aspirations, so if you’ve got a quality person, whatever their professional standing, you’ve got to make sure they feel valued and appreciated and that the opportunities are there in front of them.”
Ayre claims a “very low churn rate” among Gordons’ fee-earners, an assertion backed up by the rest of the market, with rival lawyers admitting that they do not often see Gordons CVs out there.
The introduction of a junior equity partnership is an example of Ayre’s thinking on ensuring that lawyers feel valued. He says there were
four younger fixed-share partners in particular who were making significant contributions. Ayre denies that the equity is a closed group and says he wants to ensure that the people who contribute are rewarded adequately.
“They were great, and knew that they were valued - but we wanted them to see that there was scope available; and also we wanted their input at the highest level. We think these guys will play a big part in the future of the firm,” Ayre says. “It’s very much not a club here.”
Young ’uns go for it
Gordons has also been looking to the future by way of its recent introduction of legal apprentices, leading the way in the developing trend for law firms to take on school-leavers to train them up from scratch.
Ayre does not think of the firm as a trailblazer necessarily, although Gordons is one of the first to actually have apprentices at work. He believes it is just one of the ways that the legal profession will need to become more flexible in the way it offers legal services and careers, and sees a “sound business reason” in offering the apprenticeships.
There is also a more philosophical side to it.
“We’re against the idea that someone should be denied something when they have the abilities but circumstances conspire against them,” Ayre stresses.
He reports a lot of support for the scheme among staff, who have welcomed the “freshness” brought in by the five 18-year-olds who joined in September.
There is no saying whether all five apprentices will stay the course and qualify as legal executives in four years’ time, but so far Ayre is satisfied with the project as well as with the feedback from clients.
Responding to clients is clearly something that needs to be top of every firm’s agenda and is a topic Ayre returns to continually. Although the regional client base remains important, he sees a growing amount of clients with wider national or international elements to them.
This increasing proportion of work coming from either outside the region or involving Yorkshire clients doing deals outside the region led Gordons to open a small office in London in January this year. The primary aim is to be close to clients if they are doing something in the South East, or to guide work from the South up to the North. Being in the capital is also an advantage when providing private client advice to the owners of Gordons’ corporate customers.
The state of the economy was another driver, adds Ayre.
“The reality of life is that in London and the South East the economy’s moving at a different pace to the rest of the country,” he says.
This is not going to lead Gordons to try to create a full-service office in London, as some other regional firms have attempted. But Ayre does hope the new office will help Gordons pick up more deals, such as work for Chinese retailer Bosideng, which recently instructed the firm on its £20m foray into the UK market with a shop in London.
London, however, is as far as Gordons is going to go. Rather like its larger counterpart Walker Morris, which has carved out a place for itself as a firm advising a wide range of clients from its single, extremely profitable Leeds office, Gordons is aiming to remain a Yorkshire firm.
Lawyers in Leeds’ larger firms say they rarely come across Gordons on larger regional corporate transactions, although the firm did advise the management of Wakefield greetings card business Card Factory on its £350m management buyout, backed by Charterhouse Capital Partners, last year. The deal was cited by several much bigger firms as one of the more significant regional transactions in recent times.
Indeed, Gordons’ recent success has caught the market’s attention. At the moment few have anything negative to say, commenting that Ayre appears to be a sound manager running the business well. Gordons’ average profit per equity partner is a source of some amazement, despite the common aside noting the small size of the firm’s equity.
Some point to Gordons’ recent “clever marketing” as an example of its innovation. This emphasises client relationships by posting prominent positive feedback from satisfied businesses, complete with stylish photographs, on the firm’s website.
Looking ahead, Ayre says Gordons will remain a firm that puts the emphasis on efficiency and matching the needs of the clients it serves.
In essence, he says, this means examining a piece of work and deciding what level of fee-earner can best deal with it - something he believes all law firms should look at.
Continued investment in people is very much on the cards, but ”quadrupling in size” is not, says Ayre. By December Gordons will have recruited 42 staff in the current financial year, including around 16 solicitors, its first barrister and a number of other fee-earners. It is funding the investment from cash and presently has no overdraft at all.
Gordons is budgeting for an ambitious 9 per cent increase in turnover and continued growth in profitability in the current financial year. Meeting those targets would take the firm above the £25m mark. At the halfway point the firm was just behind budget, but Ayre is hopeful that the contribution of this year’s recruitment drive will kick in to bring it back on track.
On paper, therefore, the firm is in a good place. But for Ayre it is very much a work in progress.
“We’ve got a lot of improvements to make, but we have some of the fundamentals right,” he asserts.
Gordons has been carrying out an extensive review of its processes and systems in recent months as another attempt to maximise efficiency. Ayre thinks firms such as Gordons need to set themselves up for change as the impact of the Legal Services Act takes effect. It is likely the firm will use some of the new opportunities presented by the legislation, most probably in the chance to make non-lawyers partners, but it will not be in the vanguard of those hurrying to take advantage of the act.
“It’s good. I’m looking forward to the future, I’m excited by change,” he says. “That’s the challenge for us, to fight complacency.”
The rest of Yorkshire’s legal profession should probably watch out.
“One of the things that we haven’t really effectively put into the market is the level of our ambition,” concedes Ayre.
Gordons might not want to be a global behemoth, but if the success of its past 10 years is any guide, it is a force to be reckoned with.
The market says:
“Gordons is known in the Leeds market for being incredibly well-managed. They’re proud of their collegiate working environment and have good engagement levels among their fee-earners. The firm has tended to be fairly shy when it comes to self-promotion, but nonetheless they’re
well-respected within the Leeds market.”
Adele Callaghan, business director legal, Hays Legal
“We always have candidates ask us to even speculatively approach Gordons as a firm. The feedback’s very much that it’s a meritocracy. We don’t see traffic coming out of Gordons.”
Catherine Hughes, manager, BCL Legal
“I think this is a really impressive performance. They clearly cut costs hard in 2009, which meant the majority of the increase in turnover in 2010-11 flowed straight through to bottom line. I appreciate that they’ll have lower staff and premises costs in Bradford than in other major cities, which clearly helps, but it must also imply that they’re able to achieve billing rates similar to those of firms in major cities. The equity is held very tight and there’s almost certainly one equity partner at the top of equity, but even their bottom of equity is very credible. All in all it’s a very interesting model and just shows that if you run a firm tightly and focus on decent quality work, you can make very good money.”
Key issues for Gordons to consider
- How to ensure partner retention and succession planning
- How to justify distributing such large amounts to a small group of partners
- How to balance its strength and focus in the region with the needs of its national and international clients
- Wm Morrisons Supermarkets
- Glen Dimplex
- Bosideng UK
- Card Factory
HEADLINE FIGURES (2010-11)
- Turnover: £23.3m
- Net profit: £8.3m
- Profit margin: 36 per cent
- Bottom of equity: £373,000
- Top of equity: £1.9m
- Average profit per equity partner: £917,000
- Average earnings per partner: £346,000
- Average remuneration to non-equity partners: £112,000
- Cost per lawyer: £167,000