Page 105 - MASTER COPY LEADERS BOOK 9editedJKK (24)_Neat
P. 105
Leaders in Legal Business
Really Global?
Despite the trends mentioned above and the development of $1 billion and $2 billion law firms, it is
questionable as to how close we are to the creation of truly global law firms. The $1 billion firms are dominated
by U.S.- or U.K.-originated firms, with King & Wood Mallesons being the honorable exception. Indeed, of the
Global 100 firms, only seven do not have a major U.K. or U.S. presence, and all of these are ranked 80 or below
in the Global 100. This is understandable, given that the U.S. and U.K. are the two largest legal markets in the
world. Of the 30 law firms with revenues more than $1 billion, in 2013 only 11 had more than half of their lawyers
outside their home country and nine (all from the U.S.) had fewer than 25 percent of their lawyers based outside
their home country. In part this reflects the depth and maturity of the U.S. legal market, but, given the global
dispersion of GDP and the growth rates achieved in developing markets, it is probably fair to say that firms with
say less than half of their lawyers outside their home market are not truly developing a global capability. Of course,
many firms will not want to develop a global capability — and for good reason. If you are highly placed in a major
business and financial center running a very profitable law firm, then investment outside your home city (even
into your home country) is likely to be expensive and ultimately dilutive of firm profitability. Spending money to
lose money is not a great investment decision. For this reason many of the most profitable firms in major markets
(especially New York) will take a rather jaundiced view of international expansion and only make any such
investments when they need to do so in order to protect their major investment bank and other key client
relationships. Even then they will (probably rightly) build the smallest international outpost that is acceptable to
those clients. It is partly for this reason and differential profitability, culture and control issues that we have never
seen a truly top-tier combination between a U.K. and U.S. law firm.
The different approaches taken by different firms means, for perfectly understandable reasons, that neither
the global legal market nor the firms inhabiting it will, or will need to, develop in a consistent way. Firms will
identify their own markets. Some will succeed and some will fail, but so be it. The diversity of the business models
in the legal sector enhances creativity and client choice, so even as the global legal market develops, firms are
unlikely to be fixed with purely binary choices.
Leadership
In an era of larger law firms, whether with multiple offices in the home country and/or a significant
international presence, the challenge of leading and managing such firms become more challenging and time
consuming. No longer will the partners come from the same cultural, educational, or ethnic background. Language
issues will inhibit communication. The sheer size of the firm will mean that partners will not know one another
well or at all. The scope for misunderstanding and inappropriate behavior is compounded as a firm gets larger and
more diverse both geographically and culturally. Defining a firm’s culture and the glue that holds the partners
together becomes more complex.
In many ways the most important issue for a leader in these circumstances is to know when to let go and
to realize that firms of that size and complexity, often operating in different time zones, cannot be micromanaged.
Leaders of offices, practices, client teams and sectors need to be empowered and given clear responsibility for the
effective performance of their team. They certainly need to be held accountable by the firm’s leadership, but not
second-guessed or required to seek approval for every minor decision. This is difficult, as the pool of real leaders
in a firm is often limited. Training and mentoring may be necessary, as certainly will be succession planning.
The firm’s leaders need to paint a clear vision for the firm and devise its strategy. They should be visible
inside and outside of the firm. Furthermore, they must understand the issues the firm’s clients are facing, and have
a good grasp of the firm’s financial performance and key metrics. The balance between being decisive or
dictatorial needs to be achieved.
As firms have been growing both organically and by merger, especially in a subdued trading environment,
the interpersonal skills, communication skills, empathy and sheer stamina of the leadership team is increasingly a
determinant of the success of the firm. Some leaders have been found wanting.
98
Really Global?
Despite the trends mentioned above and the development of $1 billion and $2 billion law firms, it is
questionable as to how close we are to the creation of truly global law firms. The $1 billion firms are dominated
by U.S.- or U.K.-originated firms, with King & Wood Mallesons being the honorable exception. Indeed, of the
Global 100 firms, only seven do not have a major U.K. or U.S. presence, and all of these are ranked 80 or below
in the Global 100. This is understandable, given that the U.S. and U.K. are the two largest legal markets in the
world. Of the 30 law firms with revenues more than $1 billion, in 2013 only 11 had more than half of their lawyers
outside their home country and nine (all from the U.S.) had fewer than 25 percent of their lawyers based outside
their home country. In part this reflects the depth and maturity of the U.S. legal market, but, given the global
dispersion of GDP and the growth rates achieved in developing markets, it is probably fair to say that firms with
say less than half of their lawyers outside their home market are not truly developing a global capability. Of course,
many firms will not want to develop a global capability — and for good reason. If you are highly placed in a major
business and financial center running a very profitable law firm, then investment outside your home city (even
into your home country) is likely to be expensive and ultimately dilutive of firm profitability. Spending money to
lose money is not a great investment decision. For this reason many of the most profitable firms in major markets
(especially New York) will take a rather jaundiced view of international expansion and only make any such
investments when they need to do so in order to protect their major investment bank and other key client
relationships. Even then they will (probably rightly) build the smallest international outpost that is acceptable to
those clients. It is partly for this reason and differential profitability, culture and control issues that we have never
seen a truly top-tier combination between a U.K. and U.S. law firm.
The different approaches taken by different firms means, for perfectly understandable reasons, that neither
the global legal market nor the firms inhabiting it will, or will need to, develop in a consistent way. Firms will
identify their own markets. Some will succeed and some will fail, but so be it. The diversity of the business models
in the legal sector enhances creativity and client choice, so even as the global legal market develops, firms are
unlikely to be fixed with purely binary choices.
Leadership
In an era of larger law firms, whether with multiple offices in the home country and/or a significant
international presence, the challenge of leading and managing such firms become more challenging and time
consuming. No longer will the partners come from the same cultural, educational, or ethnic background. Language
issues will inhibit communication. The sheer size of the firm will mean that partners will not know one another
well or at all. The scope for misunderstanding and inappropriate behavior is compounded as a firm gets larger and
more diverse both geographically and culturally. Defining a firm’s culture and the glue that holds the partners
together becomes more complex.
In many ways the most important issue for a leader in these circumstances is to know when to let go and
to realize that firms of that size and complexity, often operating in different time zones, cannot be micromanaged.
Leaders of offices, practices, client teams and sectors need to be empowered and given clear responsibility for the
effective performance of their team. They certainly need to be held accountable by the firm’s leadership, but not
second-guessed or required to seek approval for every minor decision. This is difficult, as the pool of real leaders
in a firm is often limited. Training and mentoring may be necessary, as certainly will be succession planning.
The firm’s leaders need to paint a clear vision for the firm and devise its strategy. They should be visible
inside and outside of the firm. Furthermore, they must understand the issues the firm’s clients are facing, and have
a good grasp of the firm’s financial performance and key metrics. The balance between being decisive or
dictatorial needs to be achieved.
As firms have been growing both organically and by merger, especially in a subdued trading environment,
the interpersonal skills, communication skills, empathy and sheer stamina of the leadership team is increasingly a
determinant of the success of the firm. Some leaders have been found wanting.
98
