Finance for beginners

It is something of a running joke in certain circles that business lawyers are as famed for their lack of under-standing of commercial reality as they are for their technical proficiency in complex and often obscure legal matters.

Similarly, clients are increasingly coming to expect their transactional lawyers to have some under-standing of the business rationale behind the deals they are paid so handsomely to implement.

In response to such concerns - and as part of the relentless intensification of competition in the UK legal market - law firms have in recent years scrambled to present themselves as inherently more 'commercial' and business-savvy than their rivals.

Indeed, where advisers once spoke of offering a seamless international service or a 'one-stop shop' for legal advice, the mantra now is 'we understand your business'.

While such familiar calls to arms can often be dismissed as a symptom of law firms at last getting to grips with the concept of properly marketing their services, some firms have taken tangible steps to enhance the business knowledge of their lawyers - and that of their central management.

In a move that is likely to have gone down well with clients, Birmingham firm Wragge & Co responded to that increasing need for practical, commercial awareness by last year launching its own in-house training programme, designed to boost its lawyers' under-standing of client business.

The idea for the training programme was born some 18 months ago, after corporate finance partner Julian Henwood attended a three-day business awareness course run by the Institute of Directors (IoD), 'Finance for Non-Finance Directors'.

Henwood was surprised to find himself the only lawyer in a class comprising chief executives, sales directors and other senior managers from various spheres of business.

"From a group of about 20 people, there were no other lawyers," he comments. "I think they were all intrigued to find a lawyer there. I hope they were pleasantly surprised."

Henwood felt the lack of representation from his profession on the course was indicative of the narrow, legalistic perspective on deals that transactional lawyers can sometimes be guilty of.

He comments: "As you would expect, 99% of the training for lawyers, either internal or external, tends to be legal in nature - statutes, case law and so on. My feeling was that many lawyers are in danger of being too blinkered in terms of the advice they are giving - that people are just focusing on the legal issues and not really understanding the financial principles of the transactions they are advising on."

He also felt it was an issue that could be easily addressed. With the support of central management, Wragges subsequently approached the IoD with a view to designing a bespoke training programme for senior members of the firm's key transactional team.

In line with the IoD's aims to broaden under-standing of business principles among professionals, a course was drawn up utilising practical examples to illustrate the business rationale behind particular transactions.

"When we act on a deal, the decision-making process is already way down the track. I wanted to know why those decisions were being made," Henwood adds.

"The firm's view was that the IoD could provide something that we could not offer our own people. We want lawyers to be business people. That means putting the law into a business environment [and] understanding the main financial drivers behind clients' decisions."

A 'potted and tailored' one-day version of the course was subsequently rolled out for the corporate finance team, utilising previous Wragges deals as case studies - although only financial information that was publicly available was used.

The first phase of the training programme took place last year and saw around 15 senior transactional lawyers, including former corporate finance chief Jeremy Millington, undergo the course.

Another 15 or so corporate finance lawyers took part in the scheme this year, forming a relationship that both sides say they expect to continue.

"A programme like this can give law firms a distinct and real competitive advantage over rivals," says Alan Bayley, a consultant at the IoD.

"Lawyers are realising that simply having the legal qualifications is no longer enough. Advisers need to have a wider knowledge of business skills such as finance and HR if they are to contribute fully to the decision-making processes of clients. Wragges is, to some extent, ahead of the game."

Henwood is in little doubt that the course has already had a positive impact among his corporate finance colleagues and indicates that he expects the arrangement to continue in coming years.

The innovative move comes as Wragges institutes a major shake-up of its senior management team in a bid to reinvigorate its corporate practice Henwood says that the feedback from clients has been universally positive.

Of course, client satisfaction - and the ability to win new business - remain the truest indicators of whether business training of the type Wragges is experimenting with has given that firm a new competitive edge.

The move is certainly indicative of the increasing dedication law firms are showing to developing the broader skill-sets of their senior fee earners.

Earlier this year, DLA Piper Rudnick Gray Cary unveiled details of a new arrangement with Harvard University to provide its partners with what the firm called 'leadership' training, in the first tie-up of its kind between a law firm and Harvard's prestigious business school.

Under the terms of the arrangement, partners will undergo a one-week residential course focusing on firm-specific issues, including post-merger integration between the firm's US and Eurasian arms, with all partners expected to undergo the training within the next few years.

City giant Clifford Chance takes a different approach, offering its lawyers business skills training through its own internal 'academy', while senior figures in strategic roles are put through their paces in leadership 'master-classes'.

Meanwhile, the so-called 'City' Legal Practice Course (LPC), operated for firms including Slaughter and May and Freshfields Bruckhaus Deringer, will in future be broadened to incorporate key elements of Masters in Business Administration (MBA) training.

The non-legal element is expected to comprise about 30% of the new course and will cover areas including finance theory, management strategy, marketing and accounting issues.

Bayley stresses the bespoke nature of the Wragges course, indicating that there is "no standard formula" for delivering that commercial sense that clients place such emphasis on.

The IoD has worked with a number of other commercial law firms, in addition to Wragges, with a view to developing the business skills of their partners. Each programme is tailored to reflect the specific needs of the target firm and takes into account variables such as the make-up of the firm's client base, its own strategic aims and the internal culture of its partnership.

"The partnership structure does not necessarily encourage the type of corporate training activities you get in a normal company," adds Bayley. "Law firms are now beginning to understand the importance of these issues... which have been given greater topicality by the Clementi reforms."

While the main aim of the course at Wragges has been to improve the service the firm can offer to clients, there is surely scope for law firms to look again at how they might further develop the skills and structures of their senior management - beyond simply sending the managing partner to do an MBA.

Indeed, with the repercussions of various high-profile corporate scandals - as well as subsequent regulatory changes - still being felt in the US and beyond, the issue of governance remains high on the agenda for businesses of all types.

Already, many firms are coming to adopt more corporate management structures, while non-lawyer chief executives seem likely to take over from an increasing proportion of managing partners over the next few years. Such changes are not merely cosmetic. Indeed, with the ownership of law firms set to be thrown wide open by the sweeping programme of reform laid out by Sir David Clementi, the trend could be set to accelerate.

It is against this backdrop that the IoD is now looking to market its 'chartered director' qualification to professional services groups, including law firms.

The professional qualification addresses issues for executive and non-executive directors, including director duties and liabilities, finance, strategy and performance management.

"It is a very welcome badge of competence, which applies to lawyers as much as anyone else," says Bayley. "The issue of corporate governance is in the newspapers every day," adds Henwood. "That includes the role of directors. So the concept of a chartered director could be an attractive proposition for law firms."

It is clear that for a modern commercial law firm to remain an equally attractive proposition to prospective clients, excellence in black letter law alone is no longer sufficient.

With clients becoming increasingly aware of the need to make the most of their legal budgets, it may only be a matter of time before business training comes as standard for senior lawyers everywhere.