Camerons’ own 10-year milestone is also a good time to reflect on what has been achieved company-wide. Or more broadly: what has the profession as a whole had to tackle during this past decade? And what are the challenges and opportunities that lie ahead?
Bringing Cameron Markby Hewitt and McKenna & Co together was not an easy task — mergers never are. But there was a great confidence in it being the right step to take. Of course, there are fond memories of the original firms, but the firm that exists today bears little resemblance to either. Such is evolution: the capacity to change is a critical component of survival and success.
The key lesson over the past 10 years has been that the most important aspect of growing a law firm is growing the culture. Culture means reputation, and reputations are hard to build and easy to lose. It is the culture that adds value to the services that Camerons provides to its clients, and gives it the distinctive and competitive edge. There may not be a finite limit to how big law firms can become, but there is a finite speed at which they can grow, particularly if they are focusing on maintaining and developing a culture.
Looking to the future, it is evidently a competitive market for law firms, and one that is only likely to get tougher. Like most firms, Camerons has a three-year strategy. Planning even three years ahead is a hard discipline — looking 10 years ahead, and predicting how the market will be, is best left either to futurologists or fortune tellers.
Looking back at what has happened over the past few years indicates the breadth of change that we can expect over the next 10. There has been the transition between recession in the early 1990s via the dotcom boom and bust to the bull market of today. The European Union (EU) has grown to become the world’s largest trading entity, with 500 million consumers and a gross domestic product close to $15trn (£7.6trn). The events of 9/11 cast a political, social and economic pall over much of the world. The Enron scandal of 2002 saw the demise of the once-great Andersen, and ushered in widespread corporate reform and the Sarbanes-Oxley Act.
In the legal world, there has been significant change too. The post-Enron fallout effectively sealed the fate of the accountancy-tied law firms in the
Associates’ salaries have risen sharply. Camerons’ newly-qualified salary is almost twice what it was in 1997, up from £34,000 to £64,000. This is ahead of increases in charge-out rates. It is a development across the market that must be approached with caution and realism. More positively though, firms are far more aware of the voice and concerns of their associates than they were 10 years ago.
Not all of the trends that have been seen over the last couple of years in law firms’ financial results are as healthy as we might like to think. Many of the increases in headline profitability have been helped by the reduction in equity partner pools. And although revenues continue to rise, the trend is for more work to be taken in-house as corporates expand the size and scope of their in-house capability. Many corporates are now taking the use of panels to the next stage, by significantly reducing the number of firms they use.
The profitability figures mask some worrying trends on margins, which are under increasing pressure. Lower utilisation rates (as firms address work/life balance), salary increases, rising costs for IT and training and escalating property costs are all having an impact. They are not yet matched by efficiency or productivity gains. Profitability will, therefore, remain under pressure.
So, looking ahead, what else is likely to cross the desks of law firm leaders? The array of issues looks challenging: liability capping, commodity pricing, the war for talent and talent retention, diversity, implementing meaningful corporate social responsibility programmes and changes brought by the Legal Services Bill spring to mind.
Moves towards the opening up of
There is a notable exception to the above: the identity of the top 15 UK-headquartered firms has changed very little over the last decade. It would be very surprising if the same was true in 10 years’ time. Some degree of consolidation is inevitable, and arguably, needed. The magic circle model is susceptible to high-quality, cost-effective alternatives. Firms have an opportunity to differentiate themselves by focusing on specific geographical territories; by establishing durable, rather than transactional, relationships; and by providing industry expertise and routinely high levels of client service.
Culture and behaviours are crucial for law firms in forging a distinct and compelling proposition for clients, and that is increasingly the ground where I see the battle for leadership in the legal sector being fought. And it takes courage: strategy is generally about building depth not breadth; it is about investing in strengths, not shoring up weaknesses; and it is about going to where the competition is not, rather than where it is.
Above all, strategy is about anticipating, listening to and responding to the needs of clients. All of the above are either choices or dilemmas, depending on your point of view. The shortest and most reliable route to the right answers is to put our clients’ needs first, before our own ambitions or the activities of our competitors.
Much has changed in the legal profession since 1997. One of the constants is the need for strong and clear leadership from senior management. Napoleon’s maxim that “a leader is a dealer in hope’’ is just as relevant today. One thing for sure is that law firm leaders will need loads of vision, courage, conviction and hope over the next 10 years. A challenge to relish.
Dick Tyler is managing partner of CMS Cameron McKenna.
