Hogan Lovells is being run by a sole CEO for the first time since its 2010 merger. As former co-head of US litigation Steve Immelt steps into the job, he reveals the secret formula to doing it well.
Hogan Lovells’ new CEO Steve Immelt has quite a mentor. His brother is Jeff Immelt, the CEO of General Electric, the seventh-largest company in the world according to the Forbes 2000 list. Having run the 305,000 staff conglomerate since 2001, he was just the confidant Immelt needed after being voted in to replace co-CEOs Warren Gorrell and David Harris in December (17 December 2013).
“He told me three things,” reveals Immelt. “Firstly, you have to set out your agenda from the start, there has to be three-to-five items that you’re going to effect. Then three-to-five times a year you have to say, ’we’re going to do this because I said so’. If you do it more than five times, people won’t listen. If you do it less than three times, people think you’re not paying attention. Finally, if there’s something you believe in, you need to be stubborn about it.”
Immelt is taking his brother’s messages on board, but is keeping schtum about what he’s decided those five things to be. I remind him he’s technically only got four left – two weeks ago he decided to scrap the firm’s dual management structure and system of co-heads of practice groups (18 May 2014).
With the merger now four years old, he argues that there was no need to have two heads per department. As a consequence the size of the international management board, down from 17 to 12, is now more manageable.
“If there’s one thing that’s wrong in this world, people just don’t spend enough time thinking,” he insists. “You need to keep some time in every day free, I don’t want to get to the end of the year and realise we spent $300m on meetings but don’t even know what they were about. It’s the same with emails. It’s about discipline within the firm when it comes to using time properly.”
His distaste for time wasting provides some insight into what might be scribbled on his to-do list. But what else will be in there?
The firm’s global revenue climbed to $1.718bn (£1.07bn) last year, a rise of 5.2 per cent from $1.633bn. Does he want to be at the helm of a $2bn giant?
“If you care only about profitability, you should only be in London or New York,” he says, later adding that he wants the firm to extend its reach in Africa, Latin America and Asia. “To get to $2bn we’d have to increase our lawyer headcount by 15 per cent, so it would be more of a question of whether or not that made market sense. Revenue per lawyer (RPL) is a more relevant metric to us than PEP and turnover. If you want to increase turnover you just add more lawyers.”
If that’s the case, the firm hasn’t done badly. Its RPL has grown 7 per cent, from £422,000 to £452,000, since 2010.
But sources insist there have been some complaints about the culture at the firm, particularly within corporate. The moan is apparently that partners at the top of the firm’s echelons hog the key clients, leaving the rest looking around for more interesting work.
“Me and [deputy CEO] David Hudd will be talking to clients, asking them what their relationship partner is doing to involve others and develop the relationship,” responds Immelt. “Our remuneration system [the firm runs a contribution-based scheme] is designed to reward that behaviour, but we will continue to look at how we can spread work across practices and people. It’s seldom done with sinister intent, people just get caught up.”
Another issue has been partner bonuses, with some complaining that the annual process is prejudiced towards those at the top. Will short-term incentives be introduced for more junior staff?
“I always tell junior partners to look at their total compensation, this isn’t a matter of a bunch of old people clutching onto their money,” notes Immelt.
The firm currently runs a contribution-based model, so if a partner is billing millions but not cross-selling or looking after associates they get a smaller slice. Will Immelt be taking another look at that structure?
“You never have the perfect system and what we do isn’t perfect either,” admits Immelt, though he adds that the structure is unlikely to move far from a contribution-based model. “We will always be looking at it, and my most immediate focus will be the process. Between now and the next rebasing of units in 2016, Hudd and I will be working with the board on this.”
Where does he think the firm will be in five years time. Is the future inside the firm’s new low-cost legal services centre in Birmingham (3 March 2014)?
“Who knows,” Immelt admits. “You can’t be too comfortable with the status quo now. You can’t fall in love with what you’re doing today because you need to be ready to change. Everyone’s looking for the legal equivalent of the driverless car.”
What about in an ideal world, then?
“In [five years] I’d like us to have a clear and distinctive brand in the market,” he says. “Some people still hear ’Hogan Lovells’ and go ‘that’s new, isn’t it?’”
Global turnover 2010: $1.664bn
Global turnover 2011: $1.665bn
Global turnover 2012: $1.633bn
Global turnover 2013: $1.718bn
Global RPL 2010: $704,000
Global RPL 2011: $739,000
Global RPL 2012: $716,000
Global RPL 2013: $742,613
Global PEP 2010: $1.144m
Global PEP 2011: $1.165m
Global PEP 2012: $1.097m
Global PEP 2013: $1.2m