My colleague Jordan Furlong and I penned an article in August 2014 on NewLaw  for the ALPMA website. In that we defined NewLaw as “any strategy, structure, model, process or way of delivering legal services that represents a significantly different approach to the creation or provision of legal services than what the legal profession traditionally has employed”.

We featured some firms as examples of NewLaw, including some from Australasia. At the time it was quite easy to identify firms ‘doing something different’. In the short time since then, this type of ‘new’ simply does not seem so unique and special any more, and a number of firms are doing something in this space.

We didn’t mention Nexus Law Group then, mainly as we didn’t know of them or what they were in the process of doing. That has changed: Nexus Law seems to be getting a lot of attention and recognition and it appears, for good reason. Continue Reading New angle on NewLaw

In the May edition of Edge International Communiqué Edge partners highlight three key focal points for legal leaders:

Nick Jarrett-Kerr in ‘Core Competence and the Competitive Edge  considers three vital attributes that make up the core competence of a law firm,which he argues goes way beyond mere ‘competence’ – it:

Nick Jarrett-Kerr on the core competence of firms (Sean Larkan, Edge International)
  1. must imply sustainable value, in other words sustainable competitive advantage over the long term, something which firms have real difficulty focusing on and building;
  2. should enable a firm to outperform its rivals, usually through specialist skills, tailored solutions and know-how resources; and
  3. must have strategic importance and so be strategically valuable and should help the firm in a number of different ways to out-perform rivals.
LLB views:
I like Nick’s treatment of this concept which we tend to bandy around without really carefully considering the implications. The first core competency around sustainable value can also be addressed by getting partners to think differently about their role and to focus them on building the long term, fundamental capital fabric™ of the firm as a key pre-requisite to carrying out their roles. Very few partners do this; those that do differentiate themselves and their firms. I think the second and third competencies can be tackled (at least in part) via a strategic treatment of brand – understanding brand in all its key forms and implementing a brand strategy which builds charisma i.e. a brand for which there is no substitute. This will strengthen and differentiate a firm in all the ways Nick highlights.
Sean Larkan reasons that some key financial activities are so strategic as to require active leadership involvement. Some are obvious, others not so. They do provide wonderful opportunities to stress-test many aspects of the firm’s operations. (Sean Larkan, Edge International)

 

The author in ‘Financial Budgeting Is Strategic: Leaders, Get Involved’ urges a more active role for leaders around some key financial activities and for a start a health monitor should be placed on the budgeting process and the firm’a approach to budgeting. It is a terrific opportunity to do more than simply get the numbers together – a time for leadership communication, listening, coaching, and focusing your people on the key thinking, behaviours and processes that are critical for success, as well as aligning strategies within your firm, all with a view to supporting the overall firm vision and strategy. It is also about building true accountability on the part of partners. Done well, budgeting is also a fantastic stress tester of so many activities in a firm.

LLB views: since writing this short article I have come across a few situations where firms clearly do not regard their key financial processes as strategic – once a competent CFO or finance manager is in place ‘its in good hands’ and nothing more needs to be done. Maybe technically, but certainly seldom in the sense outlined in this article. It is a golden opportunity to do something special using what is after all one of the most common of all processes in any firm.
Michael White in ‘Lateral Partner Integration‘ focuses on a vital area – what a firm and its new lateral needs to do, together, to achieve ‘success’ in relation to the hire? This is important, as a track record of getting this right can help with later lateral hires down the line.  He outlines some very interesting and useful steps that should be taken by a firm to ensure success in an area which is often fraught with risk and uncertainty both for the firm and the new lateral. It is also something which firms tend to leave to sort itself out as it goes along.  
LLB views:  a little like merger discussions and agreement, lateral hires often get a lot of thought and energy in the lead up to and finalisation and announcement of the ‘deal’ but unfortunately, little structured thought and management in the aftermath, the so-called ‘golden hour’ (you may also like to read this EIC article on the post merger golden hour).

Mike White highlights key things that both the hiring firm and a lateral hire partner need to consider and implement to ensure success for both parties. (Sean Larkan, Edge International)

Post merger implementation is such an important part of the success of mergers and I think Mike has highlighted a very important point here – to place the same sort of emphasis on lateral hires. After all, they cost a lot in time and money to put together and there is invariably a great deal riding on a successful outcome both for the firm and the lateral – so much so that neither can afford for it to fail.

Sean Larkan, Partner, Edge International

Law firms seldom pay much attention to their capital structures. This has certainly been the case traditionally. Management of this important area was and still is often delegated to ‘the partner who seems to have the best handle on the financial stuff‘, sometimes the banking partner as he or she works with financial institutions! Given recent experiences via Dewey & le Boeuf and Goldman Sachs this seems like a risky option. Instead, very careful strategic financial advice and planning is required.  Far more attention should be given to the strength of firm balance sheets than they received in the past. I asked Cameron Taylor to join Legal Leaders Blog as a guest on this important subject.

Cameron has for the past decade annually analysed, reported on and presented the financial and performance results from Australia’s leading Legal Benchmarking Survey, FMRC, at their large firm meeting. He has 15 years experience in law firm management at a senior level and as a consultant working with international and domestic law firms in Australia on financial strategic issues.

After the Goldman Sachs meltdown, the CEO, speaking to the U.S. Treasury Secretary: “I’ve never rooted so hard for a competitor (Morgan Stanley). If they go, we’re next!”

His first comment to me on this was: ‘predicting rain doesn’t count – building a financial ark does!’ He continued:

A 2007 study described Goldman Sachs as one of the truly great professional partnerships, “a global juggernaut with such strengths that it operates with almost no external constraints in virtually any financial market it chooses, on the terms it chooses, on the scale it chooses, when it chooses, and with the partners it chooses”.1   

A year later its financial position was so dire its CEO speaking to the U.S. Treasury Secretary said “I’ve never rooted so hard for a competitor (Morgan Stanley), if they go, we’re next!2

Two decades of rising profits and few disasters have resulted in law firm balance sheets being a dull subject which is given limited attention by management and boards. This benign neglect of fundamental financial structures, when they are capable of generating infrequent but severe adverse consequences, is dangerous.

CAPITAL STRUCTURE MATTERS FOR LAW FIRMS

It doesn’t matter whether your firm is big or small, your capital structure matters. Undoubtedly, it is a subject of strategic import and it deserves serious attention on a regular and technically thorough basis. Make sure you get good advice and understand it.

Continue Reading Ignore your law firm capital structure at your peril