Walker Clark Worldview

On Monday 14 June 2010, I had the privilege of moderating a panel discussion about the adoption of a business approach to law firm strategy.  This was part of the very successful Managing a Modern Law Firm conference, organized by the Law Firm Management Committee and the Latin American Forum of the International Bar Association, and was held in Buenos Aires.

As part of my comments, I discussed three general lessons that many law firms worldwide have learned from the economic crises in 2008-2009 (and continuing into 2010 for some countries).

1. The need to be alert to emerging economic and geopolitical trends before they arrive in the form of a crisis
2. The need for a more intense focus on profitability, particularly with respect to lawyer productivity and efficiency
3. The need for fully-informed business decisions, based on facts, not hunches or hopes.

Norman Clark

The Wharton Business School of the University of Pennsylvania has recently published a very interesting article “Family Firms in the Middle East:  The New Rules of Engagement.”

A significant number of Walker Clark clients are “family” law firms in emerging legal markets. We have observed how the strategic management of such a law firm sometimes requires a thoughtful balance between:

• A compelling business need to complete a transition from what has been essentially a “family business” to a modern “institutional” law firm; and
• The continuing strengths provided by close family relationships, “traditional” workplace values, and the visibility and reputation of the family in the legal market and business community.

The Wharton article points out several important changes that family businesses in the Middle East are now undertaking.

• Creation and documentation of a formal system of governance, to replace informal ad hoc decision-making by family members
• Introduction of contemporary management structures, such as management boards, audit boards, and independent advisory boards
• A better definition of the relationship between the family and the business, with a clear segregation of ownership of the business from the operation and management of it

These changes are similar to those that Walker Clark, LLC, has helped family law firms to introduce and manage in emerging legal markets in Africa, the Middle East, and Latin America. If you practice in a family law firm, the Wharton article could be quick, but interesting and potentially valuable, reading for you and your colleagues.

Norman Clark

Save the date!

The Law Firm Management Committee of the International Bar Association, in association with the IBA Latin American Regional Forum, will present a one-day conference on contemporary issues in law firm management in Buenos Aires, Argentina, on 14 June 2010.

The conference will focus on four timely subjects, each of which has a profound influence on the business performance and profitability of law firms everywhere:

• How to write, implement and measure results of a marketing plan
• Applying a business approach to strategic and tactical development of a law firm
• Career management:  What do associates need?
• Know-how management in a small or medium law firm

My Walker Clark colleague, Fernando Moreno — one of the top experts on law firm marketing strategy and tactics worldwide — will be speaking during the session on writing, implementing, and measuring the results of marketing plans.  I will participate in the session on a business approach to strategy and tactics. Other participants will include highly successful law firm leaders and managers.

This conference is designed for managing partners, practice group leaders, and law firm managers and their advisors.  For more information go to the IBA website. It also will be one of the premier networking opportunities to meet and become better known among the leaders of leading law firms throughout the Americas.

Norman Clark

I think that it is very appropriate that South America will be the venue for three major international legal management events in the first half of 2010. During the past ten years, Latin American lawyers have emerged as global leaders of the legal profession; and some of  the best-managed, most progressive law firms in the world are based in the region.

Mark these three major events on your calendar, and click on the links for more information:

• Biannual IBA Latin American Forum Regional Conference , 17-19 March 2010, Santiago, Chile - This major international conference is produced by the Latin American Regional Forum of the International Bar Association. It  will include a showcase session on 19 March 2010 dedicated to law firm management issues, including interactive audience polling. I will be co-chairing this session with Jaime Carey, the managing partner of Carey & Companía, one of Chile’s leading law firms.
• Arbitration Practice Management, 12 June 2010, Asunción, Paraguay – This half-day program is produced by CEDEP, on of South America’s leading continuing legal education institutes in association with the Law Firm Management Committee of the International Bar Association. It is a special session of CEDEP’s annual Latin American Arbitration Conference, which attracts leading international lawyers worldwide. I will moderate this session, which will be a roundtable discussion focusing on the special issues in the management of an international arbitration and dispute resolution practice.
• Managing a Modern Law Firm, 14 June 2010, Buenos Aires, Argentina – This one-day conference is produced by the IBA Law Firm Management Committee and the IBA Latin American Regional Forum. It will cover four contemporary challenges for modern law firms: writing and executing a marketing plan; a business approach to law firm strategy; career management of associates; and know-how and knowledge management in a small or midsize law firm. My Walker Clark colleague Fernando Moreno will be one of the panelists during the session on marketing plans; and I will chair the session on law firm strategy.

Although these programs are being held in South America, I recommend them to any lawyer anywhere who is responsible for the management of a law firm or practice group, but especially for those from small and midsize law firms. Each one is also an outstanding networking opportunity, especially for lawyers from North America and Europe who are interested in meeting top lawyers from some of the best law firms in Latin America (and the world).

Norman Clark

What can law firms expect in 2010? Here are two points to factor into your planning for the new year.

• Most of the world will see economic recovery in 2010. Most Latin American economies will recover to, and surpass, 2008 performance — especially in GDP growth. We also expect to see recovery by the end of the year in every other region of the world. Recovery will be significant and sustainable, even in the United Kingdom and the European Union; although it might not be until 2011 that some national economies see a return to 2007 levels of performance.
• The picture is not as optimistic for the United States, however, where business failures and personal bankruptcies are likely to continue at record levels. Recovery in the U.S. will also be hampered by the dysfunctional economic policies of the Obama government, and its stubborn failure to acknowledge candidly and address honestly the issues that have decayed the foundations of the American economy and the American political system over the past 30 years.

What will this mean for law firms?  The answers will be highly firm-specific and will vary by jurisdiction, law firm specialty, and size.   There are four issues, however, that I am hearing discussed frequently among our clients and professional friends in law firms worldwide:

• Profitability.  Small and midsize corporate and commercial firms in the United States will continue to struggle with profitability issues, particularly on the revenue side.  Cash flow and management of working capital will continue to be problems for many firms.  We also expect to see continued business failures, downsizing, and partner departures, especially in local firms with fewer than 50 lawyers.
• Outsourcing.  There will be a renewed interest in outsourcing of administrative, marketing, and some lawyer functions in order to control costs.  Some of these efforts will work very well; others will be disappointing.
• New players in the international market.  2009 was a year of retrenchment for large international law firms.   In 2010, we expect to see a renewed interest in carefully selected international expansion. Look for some significant international law firm mergers, some of them involving firms that have not previously been considered to be major international players. We also expect to see regional firms, particularly those based outside North America, enter the international market.
• Quality assurance. There will be renewed interest in the quality of client service and in the efficiency of internal client service operations, not only as competitive advantages but also to reduce operating costs.

These are not the only things that we expect to happen in law firms in 2010, but they are interesting examples how progressive law firms are planning their responses to the economics of 2010, as we perceive them now.

Norman Clark

Lovells and the Hogan & Hartson have agreed to a trans-Atlantic “merger of equals” to form one of the ten largest law firms in the world.

This could be a very smart move. Walker Clark’s market research team rates both as solid “second tier” firms in their respective home countries. Can they find the synergy that they will need to climb those last few hundred meters into the first tier of international law firms?

Most commentators rank London-based Lovells ranks just outside the Magic Circle in terms of overall reputation. With respect, we think that Lovells has been under-rated.  In some practice areas, they have capabilities and a reputation that rival those of some of the Magic Circle members. We regard their litigation and dispute resolution practice as one of the top 15 or 20 in the world. If there are any “holes” in their international portfolio, it would probably be in the Americas, particularly in Latin America.

This is where Hogan & Hartson appears to be a good strategic fit. This Washington-based firm is about 2/3 the size of Lovells. They have a similar geographic spread, but, in our opinion, have not been able to develop the “brand name” that Lovells has.  Hogan & Hartson adds an excellent international business practice, particularly in trade, government regulation, and tax.  They could also provide a missing geographic component — Latin America. Hogan & Hartson already has a 10-lawyer office in Caracas, plus a good regional reputation in arbitration, corporate, and energy.

The new firm, Hogan Lovells, will start operations in May 2010, with approximately 2,500 lawyers. Based on 2009 estimates, they should end 2010 as the world’s ninth or tenth largest law firm in terms of fee revenue — somewhere in the range of US$ 1.7 billion to US$ 1.9 billion, we would expect. This will depend to some extent on the ability of the Obama administration to get a genuine economic recovery underway in the United States by the end of 2010, which we sadly do not expect to happen. Nonetheless, the longer-range prospects look very good for Hogan Lovells.

In the interests of full disclosure, I must point out that Walker Clark, LLC, does not have any financial or professional interest in or with either Lovells or Hogan & Hartson.

But we will be very interested to how they pursue what appears to us to be a smart trans-Atlantic strategy.

Norm Clark