In 1995, DJ Freeman felt it had aachieved the goal of market focus, but the firm was still in need of one thing:a vision.
The BUZZ words for the medium-sized firm today is “market focus”. DJ Freeman was one of the first firms to latch on to the concept when it was still reeling from the effects of the recession back in 1991. But it wasn't enough.
The firm needed vision as well, Jonathan Lewis told delegates at “The Focused Firm” conference earlier this month, hosted by Hodgart Temporal and The Lawyer.
The story begins at the start of the property recession in 1990. In the space of a year from April 1990 to April 1991, two swathes of redundancies saw the firm shrink by a third and its annual intake of trainee solicitors deferred. At the same time its charismatic founder and senior partner David Freeman, hit by ill health, told partners he would be retiring at the beginning of 1993.
In the midst of the redundancies in 1991, chief executive David Solomon brought in consultants from Touche Ross to review the firm. A series of seminars of staff and a poll of clients determined that the firm should split into four departments – litigation and three market-sector divisions: property, insurance and media.
Lawyers from the existing tax, company commercial and litigation departments were moved to work alongside the insurance and property lawyers.
In insurance, around two thirds of the lawyers are now insurance litigators, the remaining third are corporate financiers, particularly specialising in introducing corporate capital to Lloyd's bank.
In property the role was to bring in property investors, and property liquidators and recovery experts. Property developers, so badly hit by the recession, would no longer be the key clients.
Later, more lawyers from commercial and litigation were moved together to form a new media division for broadcasters, with clients including Channel 4.
Although not a market sector, litigation remained as a separate section. The firm believes it has brought focus to the marketing of litigation, with litigators concentrating mainly on in-house lawyers.
The moves were not without pain, nor without hiccups. Some in litigation and commercial were uncomfortable with moving alongside other areas and left the firm.
Jonathan Lewis, who took over as chief executive in 1993 when Solomon became senior partner, told The Lawyer: “Corporate lawyers think they need to be generalists. Litigators feel they need to be with other litigators. It takes time for people to change.”
Part of the original “one firm” plan was to set up a partners' code of conduct, setting out how partners should behave. Everyone in the firm was to have a say in how it was drawn up. The code was posted on every notice board. But the exercise, admits Lewis, generated cynicism. Staff looked to pick holes in partners' behaviour and the scheme was eventually dropped.
By 1993/94 the firm's financial position had become relatively stable. DJ Freeman
had restored its reputation but, Lewis said: “We were aware there was dissatisfaction among the staff. Everyone knew their business plan, but there was still something missing.”
In 1995 Deloitte & Touche consultants were called in again. They organised a survey of all staff, from the post room upwards, to find out what they felt about the firm.
Three things came back. Finance and admin staff did not feel respected, fee earners felt their goals needed defining and the overall opinion was that the firm needed a vision. Said Lewis: “I couldn't understand that at all. We had a business plan. We had a strategy and we had good practices.”
The question was, he realised: “What was the longer term future? Without a vision we haven't got a chance of becoming a focused firm. We should have asked ourselves this earlier, but we just didn't have time. We had had to focus so much on restoring profit, that we had not dealt enough with the other issues.”
So how does a law firm develop a vision? “Partners are great at criticising proposals but weak at coming up with help. If we had just put up a vision, they would have knocked it down,” said Lewis.
Alan Hodgart, of Hodgart Temporal, came in and organised a series of focus groups at which groups of 10 partners were asked to express their choices.
A consensus formed. People wanted to be known, and they wanted the firm to be known, as lawyers that understood business. It was a fairly simple message but incredibly it had never before been articulated together by all the lawyers.
“Lawyers who understand business” became a rallying cry for the firm. The phrase may not sound different to the outside world, said Lewis, but what was important was how it would change, internally, the behaviour of the firm and its staff.
From then on, candidates for traineeships for each of the four business areas were told they would be expected to be interested in their particular industry sector. The same applied to lateral hires. It was no longer enough just being a good lawyer. Only people who also had business sense were taken on.
As part of the training, clients are invited in to talk to lawyers in their particular market sector about their business.
In appraisals, used with a merit-based equity system for partners, the emphasis would not just be on billings, but also on strategic goals. “The bottom line doesn't motivate people, but give them a strategic goal and that's motivating. In the end that makes for profitability,” says Lewis.
Today DJ Freeman is a smaller firm and has a stable financial position. But it still lags behind many of its rivals in terms of profitability. In 1996/97 it averaged £158,000 profits per equity partner, well below Wilde Sapte and Reynolds Porter Chamber lain – two firms which DJ Freeman has lost partners to recently.
In the booming 1997/98 financial period, when City firms averaged between 15 and 20 per cent growth in fees, DJ Freeman's income increased by only 11.5 per cent to £24m.
In addition, while Lewis says each department is well known in its target sector, there is no cross selling – mainly because there is little natural synergy between the three market sectors.
This may dilute its profile, even within industry sectors. A recent survey asking executives in the property industry to name the first three UK firms for property, put DJ Freeman only at number 13. And insiders say there are still some lawyers at the firm who haven't adapted to the need to work in market groups.
Lewis is the first to admit that DJ Freeman's market sector approach is a work in progress. But the firm's efforts to introduce vision and market focus deserve attention. Its founder David Freeman would have approved. For him, understanding business always came first.