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Nearly $1bn was invested in legal technology and New Law disruptors in 2018. That was across more than 50 funding rounds and included start-ups through to more established players, according to research from Investec. Venture capital, private equity, non-legal companies and trade buyers are increasingly interested in what they see as a highly-lucrative legal sector.

The frequency and scope of legal tech funding has also jumped markedly: a Thomson Reuters report in mid-2017 put investment into UK legal tech start-ups at just £16m in the previous 18 months. Hundreds of legal tech companies have subsequently popped up. Every law firm is quick to tout its latest innovation or partnership with a technology provider, while some even have incubators where they work with start-ups over several months, honing products.

But the adoption of legal tech and automation tools by in-house legal departments is harder to track. Many general counsel (GCs) complain it is difficult to deduce the substance from the noise, believing in-house tech solutions largely fall into the latter camp. Others are more upbeat on progress made over the last few years: ‘There’s been a shift,’ comments easyJet group GC and company secretary Maaike de Bie. ‘Where tech and automation were once looked at by some in-house legal teams, they are now definitely mainstream.’

The growing influence and prevalence of in-house legal operations teams, continued pressure on budgets and a desire to improve the quality of work for in-house lawyers are all contributing to the change. There is no shortage of vendors looking to crack the in-house market either. With this in mind, we surveyed 70 legal departments and spoke to more than two dozen GCs to assess how much progress has been made with legal tech; what is being used and what for; the major barriers to adoption; and expectations for the future.

‘There’s been a shift. Tech and automation are now definitely mainstream.’
Maaike de Bie, easyJet

With two-thirds of in-house teams reporting they have no dedicated annual budget for legal tech and a third not currently exploring new tools, the conversation is shifting from what is out there to how teams can make use of existing technology and the importance of the broader digital transformation triumvirate of people, process and technology.

‘Technology is a facilitator and part of a solution. It is never in and of itself a solution to a problem,’ says Pearson associate GC for technology and operations, Robert Mignanelli. ‘You first have to scope your problem, understand what you’re trying to solve and then find a piece of technology that can help automate and drive that.’

Going mainstream

GCs constantly talk about running their legal teams like a business. To do that, however, you need to know exactly the nature of that business. Document management systems, workflow tools, e-billing solutions and management information services have existed for many years, but there has been a rapid evolution and increasing sophistication of these products. They have crucially become more user friendly too.

Broadly, there has been an increase in basic management tools that are not necessarily cutting edge but vital to running a department. Increasingly, the point has been about finding systems that can talk to others so that, for instance, your workflow tool and document management system work in tandem. As an example, Neota Logic – which offers document management, expertise automation and workflow automation all in one platform – finds many legal departments need to start with a simple triage application to work out exactly what their department has to deal with on a daily basis and route those requests to the right people.

‘It’s changed rapidly,’ notes UBS investment bank and EMEA GC Simon Croxford. ‘I’m a big fan of the technology and process efficiency developments we’re seeing in the industry because there is a lot that we can improve in our legal departments to become more efficient.’

Meanwhile, Barclays has integrated its matter management, e-billing, time recording and external legal spend tracker over the past three years. Head of legal transformation Ben Eason comments: ‘We’ve taken the time and the effort to do that, even if it’s not deemed the fancy work. That enables you then to start looking at stuff like AI.’

The consensus is that using tech has moved from rhetoric to action, particularly for larger in-house teams. At Vodafone Business, the FTSE 100 telecoms company’s B2B arm, legal director Kerry Phillip implemented a contract lifecycle platform three years ago. There are more than 60,000 searchable contracts on that system now, used across ten countries, while the workflow tool sends work directly to the relevant team. Phillip says that at the time it was first used, however, Vodafone was an outlier: ‘It is now accepted you need to do it and there are a huge range of providers out there. It’s unusual not to be thinking about or implementing some form of tech, which was not the case three years ago.’

‘What you’ve got now is a lot of market entrants and that’s driving competition among providers, but we are still in a period of development.’
Neil Murrin, Trainline

As a further sign of growth, Thomson Reuters made a significant play in this area with the mid-2019 acquisition of secure file-sharing and collaboration platform HighQ for a reported £200m. HighQ sells to both law firms and in-house legal departments, marketing itself to the latter as a tool for streamlining operations. There has also been a boom in contract tools, broadly split into pre and post-signature analysis: contract review, due diligence, contract lifecycle management and understanding the data within contracts. Israel-based contract review automation company LawGeex, which announced a partnership with Neota Logic to automate a third-party NDA approval process, is cited by multiple GCs. Liberty Mutual Insurance innovation director for corporate legal, Jeffrey Marple, comments: ‘In the last year or so there’s been a massive explosion in the contract space. Based on the number of products, there must be a market, because they seem to be popping up everywhere.’

Trainline GC and director of regulatory affairs Neil Murrin adds: ‘What you’ve got now is a lot of market entrants and that’s driving competition among providers, but we are still in a period of development. Certainly with some of the AI and legal tech we’ve used, we’ve been the guinea pigs.’

Back to basics

Automation of repetitive, low-value work has become more commonplace in-house, however. Tools for automating non-disclosure agreements (NDAs) and self-serve tools are widely provided by GCs as examples of successful recent tech projects. Just over a third of the in-house legal teams surveyed say they use tools to automate contract and data management, while NDAs and other forms and templates are automated by 8% and 14% respectively.

ICICI Bank UK GC Priti Shetty has introduced an internal chatbot, developed by the business itself. It is used to identify which clauses are important and do not necessarily need to be fielded by in-house lawyers. Sheldon Renkema, general manager of legal for Australian retail conglomerate Wesfarmers, used AI automation platform Neota Logic to build marketing review and contract review tools. The former is used to educate the business about the most important aspects of marketing campaigns from a legal perspective, a built-in response to the team being asked the same questions repeatedly. The latter, meanwhile, ensures contract owners in the business provide the legal team with relevant background data and context.

‘Based on the number of products, there must be a market, because they seem to be popping up everywhere.’
Jeffrey Marple, Liberty Mutual

‘We’re looking at further opportunities for self-service tools, but you’ve got to do that quite cautiously because the personal relationship is super important,’ he comments. ‘It means we get a seat at the table because we are helping people and have closer relationships, and get involved earlier on, which makes our lives easier.’

Many GCs are also not convinced their legal teams need to use specific legal tech products. ‘It’s not all about AI and complicated sounding terminology – at one of the biggest tech companies in the world, I have found that the most basic tools can transform how lawyers service their client teams,’ Facebook associate GC Caroline Kenny comments. ‘We use document-sharing tools like Google Docs and Quip, which clients can feed into in real time, saving the back-and-forth and duplication. These things are not specific to legal teams.’

Anglo American head of legal for M&A, Samantha Thompson, joined the FTSE 100 mining company at the end of last year. In March, she took on an optimisation and innovation role with a mandate to assess legal tech offerings. She quickly learned that the legal department was better placed to optimise use of existing tools within the organisation as a priority, such as Microsoft Office 365, rather than bespoke legal tech. That has involved talking to the company’s IT team to put the legal function forward for any upcoming pilots in areas such as document management. ‘What has struck me is there are an awful lot of different options out there, and people are trying to sell me things, and want to talk about legal tech,’ she comments. ‘I stepped back and said: “Lawyers don’t necessarily have special needs – we need to optimise the tech that we’ve got.”’

It is a common sentiment, with many GCs referencing Office 365 in particular, including those at blue-chip corporates Pearson, Centrica, Vodafone, Aviva, Spire, Three and easyJet. Most highlight it as an intuitive collaboration platform, while group communication tools such as Microsoft Teams are also widely used. Former Royal Mail GC de Bie, who joined easyJet in mid-2019, says when she is looking at tech, her first thought is not whether there is a tool on the market, but whether she can improve the process around the problem first and if it can be solved by existing tools within the company. ‘Is there something I can adapt that works already within the enterprise environment, rather than bringing in another tool into the already many applications that many organisations have? The more you bring in, the more you are introducing complexity and risk.’

Aviva’s head of legal operations, Caroline Brown, adds: ‘While there are a lot of nuanced tools out there, there are also lots of non-legal tools we’ve been able to use. We’re looking at working with Microsoft to roll out Office 365 and we’re finding it to be an intuitive tool. People have been able to pick up the features easily, which raises the bar for other technology platforms on things like file and document sharing.’

‘It’s unusual not to be thinking about or implementing some form of tech, which was not the case three years ago.’
Kerry Phillip, Vodafone Business

Three GC and regulatory affairs director Stephen Lerner has similarly turned to a non-legal tech solution provided by Microsoft, using business analytics tool Power BI. Three years ago, he hired four non-lawyer business analysts and IT experts into his legal, commercial and regulatory affairs team of 130 staff. That team is tasked with using Power BI to mine internal data and track things such as resource optimisation – how many matters are coming into the legal function and how they are staffed. ‘It took probably a year or so to get it right, but now I can open up this tool on my desktop anytime and see what demand is coming through the department, and how we are staffed to meet that,’ he comments. Similar outcomes can be achieved with an application built in by Neota Logic using its analytics component on its platform to access the various requests coming into the legal department.

GCs also say the people aspect is more important than the technology. Digital training programmes and the employment of non-lawyer professionals or lawyers with wider skillsets are firmly on the agenda. At the beginning of 2018, UBS kick-started an in-house legal team transformation and digitisation programme. Croxford says there has been a focus on enabling its lawyers to talk technology. This has manifested in a number of ways, including an in-house academy to educate lawyers in areas such as digital literacy – understanding the technology it uses and how it impacts the business. But there are softer aspects, such as sitting product-focused lawyers with data privacy and technology lawyers so they can mix ideas.

‘There are lawyers who exist with data and tech skills or exist with product skills, but the market hasn’t developed to the point where it’s doing what we’re trying to do, which is combine the two,’ he comments. ‘To be a successful in-house lawyer nowadays you need a variety of different skills that were rarely needed five years ago and definitely not ten years ago.’

Making the case

It is clear why GCs turn to existing company tools for solutions. The cost of legal tech, and finding ways to articulate the business case and expected returns, is regularly cited as a major obstacle to adoption. Of the third of survey respondents to report a dedicated budget for legal technology, most were at 10% or less of their overall legal spend. Many GCs say the cost of much legal tech has been prohibitively expensive, although is improving, while establishing which metrics show return on investment remains difficult.

Two-thirds say their company’s IT department is involved in the decision-making process for implementing technology, with procurement and the C-suite involved for a third each as well. But for half of the survey’s respondents, less than 50% of their legal spend is on outside counsel. They are therefore looking for ways to reduce internal costs. Phoenix Group GC Quentin Zentner, who uses legal spend-tracking software Apperio, comments: ‘Securing a budget is key. You need a good, plausible business case. It was easier to secure approval by making the proposed technology spend part of a wider cost-cutting initiative.’

‘Having a separate team focus on technology in legal operations is good because the legal counsel team is not dragged away from the day-to-day tasks.’
Jackson Liu, Neota Logic

Liberty’s Marple comments: ‘Technology providers claim to save you money on x, y, and z, and they probably will, but unfortunately we may not have a clear understanding of the possible savings. You do all the research and analysis you can up front, but sometimes you just have to hold your breath and jump in, and hopefully it works out.’

There is also a sense much legal tech offers solutions to non-existent problems and does not easily connect to existing tech infrastructure. ‘A lot of the solutions out there are looking for a problem. All legal departments are different and the tech all seems to be a bit one-size-fits-all,’ Spire GC and group company secretary Dan Toner comments. ‘The tech needs to come from the demand side. The cost of it is dropping rapidly, but it’s working out how much it works with our tech, and it’s getting the time and the head space to put work into it.’

Adds Anglo American’s Thompson: ‘The impression I get is people are just struggling with the number of products out there and it’s not clear that there’s a market leader or someone with longevity, or that there’s even a need for the niche tech.’ This is where the increasing prevalence of operations professionals within legal teams comes in. Only 33% of those surveyed have a legal operations role within their team, but many of those achieving tangible results with tech have done so through legal ops. Guardian Media Group GC and company secretary Stephen Godsell comments: ‘The great value of operations is that it gives somebody the task of driving change in a way that it’s their day-to-day job. Lawyers are very busy and there’s not a lot of space to investigate how we can do things differently.’

Neota, a no-code AI automation platform targeting professional services companies, is just about to launch a web-based tool called Canvas, which allows subject-matter experts, such as lawyers, to prototype apps for automating legal services. Vice president, markets and growth, Jackson Liu, says demand from in-house legal teams for technology has increased, led by the larger North American market, but with EMEA and Asia-Pacific growing quickly. Legal operations teams – which have featured in the US market for longer – led process improvements, with many now looking to add technology to those.

‘They’re now looking for a platform, an off-the-shelf solution, to look at how they can implement automation capabilities on top of those new processes. Having a separate team focus on the process and technology side in legal operations is good because it separates that from the legal counsel team, which means they’re not dragged away from the day-to-day tasks.’

GCs are also leaning on their law firm advisers to use technology to provide more efficient, and cheaper, services. There is a transparency issue on that side as well, however, with GCs unclear on what law firms offer, despite the bevvy of press releases each pushes regarding their innovation credentials. Anglo American group GC Richard Price comments: ‘They’re all talking about it and they’re all looking at it, and they’re talking to us about how they might be able to use tech in a way to optimise the service that they provide to us, but we’re yet to see significant applications of that.’

‘Everyone assumes that they’re far behind and everyone else is much further ahead. It’s helpful to talk to our peers to understand we’re all just trying to get our arms around it.’
Richard Price, Anglo American

Others are more optimistic. UBS talks to the firms that run innovation and tech incubators, to keep an eye on developments. Croxford sees the growth of managed service and contracting teams at some firms as an important development too. ‘It’s not just the sourcing of legal advice but how we run our departments as well. That’s the next evolution of relationships between banks and external law firms.’

Demonstrating value

The GC100 group, made up of more than 125 GCs and company secretaries primarily from the FTSE 100, has put tech growth and adoption onto its agenda. Everybody is keen to share and get a grip on the market. ‘Everyone assumes that they’re far behind and everyone else is much further ahead, and it’s helpful to talk to our peers to understand we’re all just trying to get our arms around it,’ Price comments.

There is undoubted appetite, and need, for in-house legal departments to adopt tech. There are multiple examples of early success in automating volume work, while many teams are now tracking data on their use of internal and external resource. That resulting data is where many GCs see the next wave of advancement. Analytics and then true AI and machine learning – despite the prevalent scepticism – will be used by GCs to understand their workflow and allow it to be optimised. More AI solutions aimed at interpreting and creating legal documents and contracts are expected to pop up as well.

But GCs are keen to pull the conversation away from a focus on pure technology, and back to a broader emphasis on how that fits in with people and teams. They are analysing whether they have the right people in the right locations, the right levels of seniority, and then whether they are doing the right work. ‘To run a truly successful and efficient department, technology helps you get there, but it’s not the be-all and end-all,’ Croxford comments.

Adds de Bie: ‘I’m a big fan of data. Business colleagues are used to presenting data and level of risk, and I don’t see any reason why we as a legal team cannot do the same. I’ve really seen the value of collecting data to demonstrate value.’

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Management

Hired help – bringing new skills to legal teams

Time and cash-poor GCs are turning to non-lawyer professionals to help manage costs and staffing. Legal Business teamed up with Reed Smith to survey 300 senior counsel on the evolution of legal operations

Innovation

The innovation illusion

There is much talk of legal services innovation both in-house and in private practice, but how can GCs separate myth from reality? Legal Business pierces the veil

Procurement

The discerning customer – smarter procurement

In-house teams are using new techniques and recruiting specialists to take a more sophisticated approach to procuring legal services

Legal ops

Journey into the unknown – upgrading operations and tech

Legal ops may be flavour of the month but for GCs, the challenge is using these new skills effectively while losing some control of their empires

The post The New GC Toolkit: New game, new rules, new players appeared first on Legal Business.

‘A good general counsel (GC) should do three things,’ says National Grid’s Alison Kay: ‘Manage the legal requirements of the business, manage their people and manage their budget.’ But as managing the legal requirements of a large business becomes more time consuming, GCs are increasingly finding it difficult to pay adequate attention to costs and staff.

‘In-house is fighting constantly for staffing and budget against compliance, enterprise risk and other areas, and teams are stretched thin just responding to demand,’ says Leigh Dance, founder and president of ELD International. ‘The GC’s time is taken by dealing with board-level issues and often there is no second tier of in-house professionals with the time or experience to implement new technology or make the case for legal operations support.’

As a result, a growing number of GCs are delegating everything from the implementation of technology projects to management of law firms to senior legal managers. Mo Ajaz, chief counsel and group head of legal operational excellence for National Grid, was brought in by Kay in 2015 to help run the legal function like a business. It was, he says, a sign of how the in-house world needs to change.

‘Being a GC is becoming so difficult that having others take on the non-board-facing parts of the role has become increasingly important. Not only has the regulatory and board-level complexity GCs are facing grown exponentially, but the nature and complexity of things like legal technology has grown at such a speed that you can’t just dabble in it. It is becoming a full-time job to attend pitches and understand how the different offerings can support the function. Increasingly, GCs are realising there are large parts of the role that require specialist skillsets to handle.’

However, our survey of more than 300 senior counsel globally shows that change will be difficult. While 30% of GCs have already brought a head of legal operations into their legal teams and a further 13% are currently looking to do so, nearly half (46%) of all respondents said it was either quite difficult or very difficult to get investment from the business to recruit senior non-lawyers.

But, says Nassib Abou-Khalil, global head of legal and compliance for Nokia’s customer division, the pressure on legal teams to adapt will only grow stronger. ‘For a global business like Nokia that sees itself as truly borderless, it makes no sense to have a single person sitting in headquarters making all the legal decisions. Maria [Varsellona, president and chief legal officer of Nokia] deals with the board-reporting aspects while managing all the business divisions from a legal perspective, but that leaves a lot of areas open. For example, driving innovation across the legal team, looking at effective ways of outsourcing, joining staff together across borders and introducing new technologies will all be hugely important to the legal function in the coming months. You need a roadmap and the right staff to deliver on these types of projects or the function will not be able to serve the needs of the business in future.’

This type of radical restructuring may be better suited to global legal team with hundreds of lawyers, but, says Alex Smith, manager of Reed Smith’s Innovation Hub, the principles behind innovation are becoming increasingly important in-house. ‘If GCs talk about agile project management approaches it is not because they are reading management theory books but because they are sitting down with their internal innovation teams and looking at how they can work around cultural issues for the benefit of the organisation. For GCs, delegating some of the problem-solving aspects of the role is a useful way of bringing fresh views and better ideas to the table. If you have people within the team who have that curiosity and creativity then embrace them and make sure their ideas count.’

Does this mean the days of the GC as sole manager of the legal function are over? And how can GCs create a roadmap to future-proof their teams? We teamed up with Reed Smith to ask leading GCs and heads of legal operations what legal teams need to do to meet the future needs of business. LB

james.wood@legalease.co.uk

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‘There’s a palpable sense of innovation in the legal industry,’ says Casey Flaherty, founder of legal technology consultancy Procertas. ‘But then,’ he adds, ‘there always has been.’

While heads of innovation are now an established part of the law firm landscape – among the better-known names in this rapidly expanding sub-profession of business development are Derek Southall of Gowling WLG, Bas Boris Visser of Clifford Chance, Kathryn DeBord of Bryan Cave Leighton Paisner and Knut-Magnar Aanestad of Norwegian firm Kluge – their impact on the practice of law is more muted.

The problem, says Flaherty, is not a lack of creativity in the profession, but a lack of creativity at scale. ‘A lot of law firms will take isolated instances of innovation and try to weave a story. They are employing heads of innovation with a supposedly global remit, but after a couple of drinks most of them will admit that it’s not operating at a firm-wide level.’

On the in-house side there has also been a steady rise in the number of legal staff with an innovation mandate and a slowly-forming community of chief legal innovation officers (CLIOs) is now competing with legal operations for the attention of suppliers. Among the standout figures is Rochael Adranly, partner and GC of Palo Alto-based international design company Ideo, who recently established a legal innovation consultancy within the company. Running as part of the legal function, this revenue-generating consultancy applies Ideo’s ‘design thinking’ to a range of issues faced by its clients in the legal sector. However, more traditional businesses are also taking legal innovation seriously. Global professional services firm Marsh & McLennan hired Farrah Pepper as its chief legal innovation counsel in early 2018; Maurus Schreyvogel became Novartis’ CLIO and a member of its legal leadership team in late 2017; and a number of other companies are adding ‘transformation’ to the remit of their senior counsel.

Just as with law firms, there is a danger of seeing more fresh thinking than really exists. ‘There is a widespread discourse of increasing maturity and sophistication among in-house teams and GCs themselves are particularly prone to repeat it uncritically,’ says Flaherty. ‘We need to guard against creating an innovation illusion – if we talk about it so much people think it’s happening all over the place, but when you dig into it you often find a legal function has done one thing well and is treading water everywhere else.’

But disappointing is different to non-existent. The extent and speed of change may be overstated, its language may be nebulous, but it is underpinned by real concerns. ‘Many companies are going through huge transformational projects, often while redesigning their entire approach to markets and customers,’ comments Alex Smith, Innovation Hub manager at Reed Smith. ‘A lot of the pressure to change is coming from businesses leaning on their legal teams to find ways to support this type of rapid transformation.’

‘Innovation in the legal industry is not rocket science – it is establishing how incremental change can deliver a better service.’
Stéphanie Hamon, Barclays

This, says Novartis’ Schreyvogel, was behind the creation of his role. ‘It is important to make sure legal innovation does not simply become a rebranded legal operations role. We need to focus on the part of the legal function that operations is not currently focusing on, which is the future of legal services. We are working to bring people from all over the company together for specific initiatives that will be important to our future business models and product lines. A lot of the work I do is concerned with designing the type of legal function that will need to exist in five years’ time, rather than making existing operations more effective.’

A technology and IP lawyer by training, Schreyvogel made an unusual lateral move into Novartis’ finance and auditing function before returning to legal. It was, he says, an experience that changed his understanding of how legal functions operate. ‘A chief financial officer can tell you what will happen within their team on a specific date in four years’ time. The function is so clearly operationalised that the areas where the subject matter is an art are very narrow. When we tried to apply the same auditing techniques to legal, it became clear that the understanding of process was so subjective that we did not have any basis to audit against.’

Matthias Meckert, head of legal for Germany at PGIM Real Estate, believes no-one will be immune to this pressure. ‘We are all monitoring the market and discussing internally what to do in terms of our innovation strategy. I work in a very traditional sector, but even here we can see things like proptech will tilt the balance of market forces, which makes a degree of future-thinking essential if the legal function is to continue to serve the business.’

‘Being able to put together a presentation that sounds convincing in theory isn’t the same thing as being able to change the working habits of a large organisation.’
Mo Ajaz, National Grid

The danger for many GCs, says Stéphanie Hamon, head of external engagement for legal at Barclays, is that innovation can be easily confused with technology. ‘A trap that GCs and law firms often fall into is thinking they need to invest a certain sum into new software. They make a major investment in a particular platform and then find out that their clients don’t want it. As a result, when it comes to a request for investment in something else they meet with resistance from stakeholders. Innovation in the legal industry is not rocket science – it is looking at existing working practices and establishing how incremental change can deliver a better service. The only way to do this is to understand what your clients actually want.’

It is a lesson Mo Ajaz, group head of legal operational excellence for National Grid, believes is critical to running a successful legal function. ‘The first question any GC needs to ask themselves is “what is expected of me by my business?” It’s all a journey and you need to know where you’re heading to be able to get there.’ Once they have answered that question, GCs immediately run into another problem – most are not good at doing the work that will get them there. Some may decide to delegate it to a non-legal professional, but finding the right person is not so easy. ‘There are a lot of people who are great on the speaking circuit but internally they’re not so hot. Being able to put together a presentation that sounds convincing in theory isn’t the same thing as being able to change the working habits of a large organisation with embedded practices,’ adds Ajaz.

Klaas Evelein, who took on the role of global legal operations director at consumer goods giant Unilever last year, thinks in-house teams need to be more honest about the scale of the challenge they are facing. ‘A lot of law firms have big teams looking at technology – sometimes 40 or 50 people. I have two IT people, but that is it. We need to realise we sometimes cannot be at the front. We need to look outside.’ What today are questions for heads of operations or chief legal innovation officers will soon be a pressing matter for all GCs, thinks The Royal Bank of Scotland GC Michael Shaw. ‘One of the things we have been thinking about is: what will the legal function look like in five or 10 years? Will we even have a legal function? My prognosis is that it will not look like it does today. Collaboration and agility [will mean] lawyers will not just be lawyers anymore. They will be risk professionals or other things, and a lot more tech savvy than they are today.’ LB

james.wood@legalease.co.uk

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In-house teams are using new techniques and recruiting specialists to take a more sophisticated approach to procuring legal services

In April last year, US-based tech services provider DXC Technology was formed following the merger of The Hewlett-Packard Company’s enterprise division with Computer Sciences Corporation. It was the ideal opportunity for general counsel (GC) Bill Deckelman (pictured) to sit down with senior management and establish what the legal function should look like.

‘To put things simply, it’s too hard for a GC to focus on the administrative side of things while also doing all the strategic stuff,’ says Deckelman. ‘Both the administrative and strategic pieces of the puzzle are becoming more complex and more labour-intensive, and GCs desperately need to think themselves out of the legacy models they have inherited, which were designed to serve completely different business and legal challenges.’

As one of the founding members of AdvanceLaw, a GC-only forum that allows members to share reviews and advice on law firm appointments, Deckelman was interested in taking a new approach to procurement. ‘I realised that the considerations you need to make when appointing counsel have become so complicated that it would be necessary to bring in a full-time person to run the tendering process. The big change in how we are working is that once a panel is selected we will interact with the firms throughout the year, giving them constant feedback on their performance and our expectations.’

A similar approach has been developed by Barclays, says Stéphanie Hamon, head of external engagement for legal. ‘Like any relationship, the client-law firm one can only work on trust and dialogue. You have to set out what you want and give feedback to make sure the other side understands if they are not delivering on it. We should treat our law firms as we do our employees. They’ve got a capability framework that they need to deliver against and to do that we need to give them regular feedback.’

As a result, Barclays’ current panel review process will be its last. In its place, the bank will look to make a continuous assessment of its law firms.

While Barclays’ buying power is atypical, Hamon hopes the approach can be replicated by others. ‘The more we as a profession approach this in a standardised way, the more quickly the industry is likely to change.’ It is clear, however, that panels remain a popular means of assessing external firms. Nearly two thirds (63%) of those surveyed had a formal panel in place, while a further 9% were planning to appoint one in the near future. It is also apparent that regular assessment of law firm performance remains a rarity. Nearly half (46%) of respondents said they evaluate outside counsel on an annual basis, while over a third (38%) evaluate performance only at the end of a particular matter. Just 14% said they conducted assessments every six months or more frequently.

‘GCs desperately need to think themselves out of the models they have inherited, which were designed to serve different business and legal challenges.’
Bill Deckelman, DXC

Alongside the push for more frequent evaluation of law firms, larger and more sophisticated legal teams are increasingly willing to enter into a more mature conversation about how matters are priced. ‘I have seen a lot more GCs lately abandoning the demand that firms should be more efficient, which is really just a veneer for demanding deeper discounts,’ comments Casey Flaherty, founder of legal technology consultancy Procertas. ‘If that’s all you’re doing, then legal becomes a mindless procurement function. Strategic sourcing does have a role to play, but it can’t just be about beating people up on price. There are not many tricks in that particular bag. Ultimately, pushing down on costs will erode law firm relationships and also erode the value of the legal team.’

Hamon agrees: ‘Everyone is cost conscious, but getting the cheapest price is not a useful way to procure sophisticated services. We need our law firms to be profitable so they can hire the best lawyers. It’s not about squeezing their margins but working with them to address how they can deliver services in a way that covers gaps in our own offering and adds value to the business.’

National Grid’s Mo Ajaz says clients need to get their own affairs in order before criticising advisers. ‘Poor selling practices are prevalent, but we can’t just look at what the firms are doing and blame them without taking any responsibility for the poor buying behaviour that is equally prevalent among legal teams. Law firms are willing to change the way they work and to put effort into making things better, but we need to be clear about what we want. If you outline the steps you want a firm to take or state with clarity what you want to achieve, they will help you. What’s really interesting is that the firms themselves are now looking to build up their own legal ops offering and provide training to their clients on which parts of the legal process can be done by alternative providers.’

‘In the US, more lawyers are employed by commercial organisations than the 200 largest law firms. We need to ask if there are smarter ways of bending the cost curve.’
Casey Flaherty, Procertas

Deckelman, who recently introduced a legal operations group run by finance professionals to DXC, has seen a similar change in the US. ‘Law firms are beginning to step up by bringing in their own internal budgeting people, often with a finance and accounting rather than a legal background. This trend has come a long way in the last year and will get stronger as law firms figure out that clients are not necessarily demanding lower costs but more rigorous methodologies when it comes to budgeting.’

The trend toward measuring law firm performance will also help legal teams reflect on their own work, says Michael Shaw, GC of The Royal Bank of Scotland: ‘In-house lawyers do not normally speak the same language as our business colleagues. They do not necessarily appreciate what great work we do, because we have not been able to communicate that well. Having metrics and processes, driving efficiency, being able to show what we are doing to others has been a real sea change that has professionalised the function.’

And, as Flaherty adds, it may be that the in-house wave is about to break. ‘The growth of in-house has been a prominent feature of the legal industry over the past decade or so, but it can’t continue. In the US, more lawyers are employed by commercial organisations than across the 200 largest law firms. We are now looking at huge payrolls for corporate legal teams and we need to ask whether there might be smarter ways of bending the cost curve.’

Maurus Schreyvogel, chief legal innovation officer at Novartis, believes a symbiotic relationship between law firms, in-house teams and alternative providers will become the norm. ‘Even a company the size of Novartis will need law firms to control big events in M&A and litigation, because it is not cost efficient to have a lot of subject-matter expertise as regular members of the team. However, the same is likely to be true of the more commoditised legal work we handle. We have had good experience with alternative providers who use technology to resource legal work and I believe the market is finally mature enough for this to become the norm. That means the capability of law firms to deploy technology or work alongside outsourcers will become the key decision criteria when we come to assess their ability to provide legal advice.’ LB

james.wood@legalease.co.uk

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When using alternative fee arrangements, which models do you use?

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For general counsel (GCs) struggling to manage the administrative and regulatory burdens of the role, a head of operations has become the must-have accessory. In the US, the growth of legal ops is demonstrated by statistics. A recent Association of Corporate Counsel survey suggests that nearly half of all GCs in the US have appointed a legal ops professional to drive transformation, while the Corporate Legal Operations Consortium (CLOC) is targeting a membership of 50% of the Fortune 500 by mid-2019. Our global survey shows these numbers are less representative of trends outside the US, but only slightly. Just under a third (30%) of GCs globally currently have a head of legal operations, while a further 13% are looking to recruit one in the near future.

Aine Lyons was one of the first to take on a truly global legal ops role when, in 2010, she became head of worldwide legal operations at cloud infrastructure provider VMware. She continues to act as VMware’s global head of legal ops in addition to serving as chief of staff to GC Amy Fliegelman Olli. In November 2015 she became part of CLOC’s global leadership team and now leads its European chapter.

‘Chief executives are increasingly focusing on operational efficiencies within the legal department and the chief of staff role is becoming far more common, particularly in larger legal teams, but we should not let this growing interest cause us to lose sight of the purpose of legal ops,’ she says. ‘There is a lot of talk about people, process and technology – I clung to that mantra for a long time too – but the most important thing is having a mentality of wanting to change the department. You can license all the best tools and re-engineer your processes, but if people don’t want to go on the journey, the likelihood of transforming your legal department into something more innovative is slim to none.’

Legal ops may be flavour of the month, but there is a danger it will become a substitute for substantive change, says Jack Diggle, head of Elevate’s global legal consulting practice: ‘There have been some great initiatives here, but appointing a head of legal ops should not be mistaken for the end itself. If you don’t empower that person to make real change, they are just an administrator and will only maintain current systems, not change them.’

On this point he has the sympathy of the ops community. ‘To have a true legal ops role, it needs to report in to the global GC,’ says Lyons. ‘We are acutely aware that this may limit its applicability to companies based outside the US, where the global GC role is far less common. Even so, there are a lot of people out there doing hybrid roles, combining their day job with operations.’

Just as important, says Novartis chief legal innovation officer Maurus Schreyvogel, is the willingness of GCs to simply let go. ‘As with any job, you need the best person for the role. Sometimes the GC is not the best person. A GC might know they need to bring in tech but not know anything about that technology. If they don’t step aside and let somebody else in the organisation take the project on, then it is not going to move forward. We all know of cases where people have bought tech and it hasn’t worked because they haven’t had the right person running the project and haven’t invested in training staff to use the technology. They complain afterwards, but it’s kind of their fault.’

‘A lot of the time legal wants to stay in the background, but now is the time to come to the fore.’
Aine Lyons, VMware

Casey Flaherty, founder of legal technology consultancy Procertas, is more pointed: ‘GCs are given licence to spend obscene sums of money on getting legal advice but will often have to jump through hoops to make an investment in technology. Besides which, if they are successful in reducing their legal spend with tech, they will likely see next year’s budget shrink, which is something no GC wants to deal with.’

Securing the investment for legal technology was clearly a challenge for those we surveyed. While many GCs (42%) said the ability to find additional investment for technology would depend on the specific project or piece of software they wanted, an equal number said it would be quite hard or very hard to secure investment (25% and 17% respectively).

When it comes to financing new tech, PGIM Real Estate’s head of legal for Germany, Matthias Meckert, thinks enterprise-wide systems will always serve as a barrier. ‘As a legal department, you cannot just say: “We want to run our own show in respect of IT.” No company will change its systems for the legal team, although a lot of legal technology vendors do not seem to understand this. We can investigate all their offerings, but if you build outside the enterprise framework, you will eventually have to put the bolts on and make sure it is interoperable with the software in place across the organisation.’

DXC Technology’s Bill Deckelman agrees: ‘Real technology-driven transformation takes a lot of hard work. You have to understand your processes and take them apart before you can figure out what kind of tech will help you automate or change the ways you do things. That inherent difficulty is often compounded by the struggle to get approval for new systems or technology. Generally speaking, the legal functions of big companies are way down on the list when it comes to prioritising investment to develop technology.’

But, says Lyons, GCs can push harder: ‘A lot of the time legal wants to stay in the background, but now is the time to come to the fore. In
legal we have introduced new tech that the business has taken on and we are not alone. My advice to GCs would be speak to others who have been instrumental in getting the business to use tools and technology across the organisation, and use them as case studies internally to change how people think about new systems. It doesn’t have to be top-down or driven at an enterprise level – most of the really successful applications of technology will be driven out of a specific function.’

More generally, the GCs polled showed a surprising degree of confidence when it came to technology. While only 20% felt their legal team was using technology very effectively to improve the quality of internal legal service delivery, the bulk (70%) felt that technology was being used somewhat effectively. Further, although only 15% of those surveyed had extensive experience in undertaking legal technology projects, 90% of GCs felt either quite or very confident that they would be able to implement a major technology project in addition to managing their general workload.

From legal ops to technology and process redesign, GCs like to describe the evolution of their function as ‘a journey’. But a journey to where?

‘The end state of all of this is a world where GCs manage the board while a head of legal ops or a chief operations officer manages the function,’ says Mo Ajaz, group head of legal operational excellence for National Grid. ‘GCs don’t really need to manage the legal spend, the relationships with firms or the technology that gets used in-house. Some will love delegating that type of stuff because it frees them up to work more closely with the board, others will hate it, but it will be the way most large functions are run.’

Of course, no single approach will work for all teams, and GCs who seek to import processes or technologies that worked for others will likely do more harm than good. However, says Lyons, the journey GCs now find themselves on is the beginning of a lasting transformation. ‘In-house functions have grown significantly but we need to realise trends do not continue forever. If I were a junior GC or even a young lawyer considering a career in-house, I would start to educate myself and open my mind to a new way of looking at legal services. Read case studies, speak to others, and think as much as possible about how the legal function can drive enterprise projects and have an impact beyond addressing legal questions. That is the destination we are almost certainly heading to.’ LB

james.wood@legalease.co.uk

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Analysis

All restless souls – City firms braced as partnership goes Millennial

As Millennials start colonising the top ranks of City firms, we assess the changing face of partnership. Can law firms change fast enough to keep the model relevant for a new generation?

Data and analysis

Crunching the data – Trends and tribulations

Perspectives

Jonathan Kewley, Clifford Chance

Tara Waters, Ashurst

Peter Banks, Allen & Overy

Dan Saunders, Watson Farley & Williams

Valerie Kenyon, Hogan Lovells

The Last Word – Generation Next

The post The Path to Partnership: A Special Report appeared first on Legal Business.

‘It was so long ago,’ reflects Malcolm Sweeting, Clifford Chance’s (CC) senior partner, of his promotion to partner in 1990. ‘My only involvement in the process was playing football in Hackney one winter when a junior partner sidled up. “It’s all looking good,” he cryptically confided, before sidling away. Later, the senior partner rang me to say congratulations.’

Nearly 30 years from that night, the once obtuse path to partnership has been replaced with an excess of procedure, meaning the latest generation of partners has gone through a very different tournament to their colleagues currently nearing retirement.

That shift has been as much forced upon leading law firms by less deferential attitudes of young associates (not to mention society as a whole) as a proactive move from law firms. In Legal Business’ first in-depth look at the modern realities of partnership for five years, we conducted dozens of interviews with new partners, and their older counterparts.

In a post-banking crisis environment in which leading City firms have maintained a decade-long squeeze on partner promotions, it remains hugely challenging to make partner (see full breakdown and analysis). The UK’s ten largest practices by revenue on average promoted fewer than seven new partners in their home market in 2018. Even with ten new UK partners at Linklaters, the entire Magic Circle made up just 28 in the UK this year, out of a global round of 89. Back in the boom year of 2008, the same group created 137 partners globally.

Yet the legal environment has materially changed since the collapse of Lehman Brothers. In-house teams have expanded dramatically in scope, there are more promotion opportunities at the local arms of US law firms and flexible working as a freelancer or within law firms has become a mainstream option. Moreover, the newer ranks of associates and young partners, who have matured during a period of economic turbulence, are more comfortable with the notion of quitting law to work in other fields.

Notes Allen & Overy (A&O) managing partner Andrew Ballheimer: ‘It’s now a more fluid market and [junior lawyers] are more sophisticated in understanding options open to them. In my day, we turned up with no idea in terms of career. You just worked; got your head down.’

Slaughter and May senior partner Steve Cooke puts the shift in even starker terms: ‘I come from a generation which joined a firm and tended to think about options less. I was hilariously ill-prepared. I didn’t look far ahead. Then you find it’s what you want. There are different options now.’

Can the profession change partnership enough to keep it relevant for a new generation?

The agony of choice

‘Partnership wasn’t my dream as a little girl,’ notes Clare Connellan, a partner in White & Case’s arbitration practice since 2016. Quite. One thing that hasn’t much changed is the motivation for going into law in the first place. The draw of a well-paid, ‘respectable’ career still carries much initial weight, even with younger lawyers.

Where associate attitudes have diverged is how they feel about partnership and the law once inside the industry. Generation X partners recall quickly wanting to join the club – and wondering how that magic happened: ‘asking about your chances of becoming partner was the kiss of death in the 1980s’, says Ballheimer. ‘Too pushy.’ By contrast, the current generation is more likely to see the law as a stepping stone, rather than focus on partnership as the ultimate goal.

One senior associate at a Magic Circle firm being lined up for partnership concedes: ‘Partnership still holds a certain kudos, especially among clients. But it is a longer and more uncertain path. Partnership isn’t an automatic choice anymore.’

‘Asking about your chances of becoming partner was the kiss of death. Too pushy.’
Andrew Ballheimer, Allen & Overy

Stephenson Harwood senior partner Roland Foord notes that more mid-level associates are ambivalent about partnership. ‘There have been cases with three different associates who have said: “I’m not sure what I want to do, can I have three or four months out to make up my mind?” That would never happen 20 years ago. It’s part of the modern mindset.’

These comments illustrate a switch since Legal Business’ last in-depth analysis in 2013, ‘Few are chosen.’ Then the clear feeling was that firms held all the cards in determining promotion rounds. Now veteran lawyers believe the balance has moved, with more of the most-talented young lawyers opting out of the track of their own volition.

Cooke, who was made up in 1991, says bluntly: ‘The pool of people who wish to become a partner has shrunk. You lose people you would like to stay more frequently. Start-ups and law tech are quite popular. A lot of people join law firms to gain experience and move on. That is a modern phenomenon.’

‘I’m not sure partnership is the end goal anymore,’ says Baker McKenzie partner Kate Corby. ‘The people who are already senior associates, most of them still aspire to it, but there’s been a loss of a universal aspiration at the more junior end.’

Yet even for the most hard-bitten veteran rainmakers, the view of young lawyers is one of near-universal admiration for their work ethic and ambition, far from the caricature of flaky Millennials (the term is generally taken as defining those born from the early 1980s to the late 1990s). ‘The young lawyers are intellectually very talented,’ notes Cooke. ‘Low-level work doesn’t play to their strengths.’

If there is a negative it is the unease that this group has grown more privileged. ‘Social mobility has got worse,’ says one Magic Circle partner, who notes recent falls in state-educated trainees at all elite London law firms. ‘We are thinking about what we should do about that. People from harder backgrounds can have more grit.’

Connellan, who studied English and French law, joined White & Case as an associate in 2008 having trained at Lovells. She describes her attitude to making partner: ‘At every stage of my career I’ve thought of the options, questioned whether it was the right move and taken stock. I didn’t feel I was on an escalator and couldn’t get off.’

David Martin, a Linklaters trainee who became a partner in 2012, reflects: ‘I remember thinking, do people get made up here? I looked around at alternatives, in-house, US firms. I didn’t want to turn around in seven years’ time and think: “I’m not going to make partner!” Fortunately for me, at the right time, a senior partner said: “You’re in our thoughts.”’

Jay Dharan, a director at private bank Coutts, has plenty of chances to observe the new breed. She notes: ‘The newly-made up partners I’ve taken on this year have really good interpersonal skills. They’re down to earth.’

Her colleague, Coutts’ head of professionals Alex Liddle, picks up the theme and challenge for new partners seeking to balance technological and personal fluency. ‘The interconnection is interesting but it’s what you do with that. The current recruitment drive is all about finding people with the right skillset who understand how to strike the best balance between technology and human interconnection.’

The conversation

Jonathan Kewley’s route to CC partnership couldn’t be further removed from Sweeting’s experience on that frosty football pitch. Kewley, who was made up in 2017 and is co-head of the firm’s tech group, is positive about the system.

‘The process is exceptionally transparent. There is a partnership council. You have to give a ten-minute speech on why you should be considered. The fact that it’s a difficult process speaks to the quality of the partnership. It instils confidence.’

Tara Waters became a corporate partner at Ashurst having retrained as a lawyer after working in the New York tech industry for several years. ‘Getting to partnership is an intensive process. You need the right approval from the admissions committee. You need to show you are going to contribute and bring in work, but also that you understand what it takes to be a partner. You get assessed as a leader, the business case and how you understand the financial management of the firm.’

She says Ashurst’s increasing focus on technology clients and her specialist background helped her carve out her niche. ‘Coming from a non-traditional background helped me differentiate myself. I had unique skills.’

Comparing Cooke’s experience of partnership with that of Victoria MacDuff, who became a Slaughters partner in 2016, highlights how the process has changed.

‘It used to be opaque. You worked with a load of people outside of your group who you knew were looking down the microscope at you. You knew you were in the frame and you worried about the partners’ meeting that would decide your fate. That was about it,’ recalls Cooke.

MacDuff notes that aspiring partners working across practice groups has remained – befitting Slaughters’ prized generalism. But that is where the similarity ends. She says she was encouraged to focus on making partner by the ability to talk openly about her prospects in a way unheard of in the 1990s. ‘The head of my group had an honest and transparent conversation, which was essential for my personality type. A good friend, Sally Wokes, was made up the year before me. It was useful to have someone I could talk to about the challenges. We are the same generation and could relate more readily. You do have to work incredibly hard. It helps to know someone else who has reached the same goal. It spurred me on.’

Unusually, Slaughters still does not require associates to put forward their own business case. Says MacDuff: ‘For a number of years before becoming a partner, you work on high-profile, technically-challenging deals to demonstrate your skillset. That’s the test of your ability to become a partner.’

She argues the model prepares lawyers for the new challenges the younger generation has to face. ‘It leads to a cross-fertilisation of ideas and thinking about things in a new way. Say you use a certain type of legal tech on one deal, you might be able to use that in a different context. You challenge the norm and become more rounded.’

Peter Banks, corporate partner at Allen & Overy since 2017, cites partners Stephen Lloyd, Gordon Milne and Karan Dinamani as drivers for his decision to go for partnership. ‘We build things up and pitch together as a team. That sort of mentor is very important. That flipped a switch in me. I saw them and thought: “I want to do that!”’

He extols the benefits of a rigorous process. ‘You put a lot of pressure on yourself but there is a huge amount of support. When you’re in it you think the sole purpose is to assess whether you are suitable to be a partner, but a huge part is to prepare you for what comes next.’

Oliver Brettle, partner at White & Case, says of modern partnership: ‘There is much more of a business focus and the firm is open about the criteria it uses to evaluate its partner candidates. What we are trying to avoid is surprises.’ Connellan observes: ‘Your own personal business case has to fit with the firm’s business case. For me, international arbitration made sense because what I and the firm wanted were aligned.’

The White & Case system includes an internal dossier where those who have worked with the candidate contribute about their experiences. The associate puts together the business case with the regional sector head and presents to the new partners committee.

‘I love being a partner. You use a wide range of skillsets every day.’
Victoria MacDuff, Slaughter and May

For all its stress, a structured path to promotion suits young lawyers and allows for earlier decisions by mid-level associates about their careers. On the transition to partner, MacDuff says variety and autonomy are the biggest attractions. ‘I love being a partner. As a partner you are managing transactions, fostering client relationships and mentoring talent internally. You use a wide range of skillsets every day. As an associate, there is less diversity.’

Banks speaks for many of his contemporaries when he flags the increased management as one of the main changes to the working life. ‘Managing people wasn’t a cliff-edge step change but you are more formally responsible to the team. You end up spending less time on billable work and more on client development.’

Martin agrees. ‘HR stuff takes a lot of time. If you only knew how long it takes to do appraisals. But it’s our business and we have to run it.’

Even for hard-bitten veteran rainmakers, the view of young lawyers is one of near-universal admiration for their work ethic and ambition, far from the caricature of flaky Millennials.

Apart from the oft-cited advantage of increased client contact, younger partners unanimously agree they feel more in control of their time and like the ownership of the business. If there is one common thread between the Generation X partners and their Millennial counterparts, it is the pursuit of self-determination.

‘The main features of partnership are building the practice, relationships and the network rather than just doing the deals. That hasn’t changed a huge amount,’ says Cooke.

Technology and mobile working have, of course, changed, but at least newly-minted partners accept that Faustian pact of the always-on partner having known no alternative. Says Banks: ‘On one hand you are always contactable, on the other, you are very mobile. With technology, you can harness the benefits of working while exercising a degree of discipline so that it doesn’t dominate your world.’

A young person’s game

As attitudes to partnership change, the question inevitably arises as to how enduring the model will remain for attracting, retaining and motivating the lawyers of the future. The model – based on delayed gratification – has served the legal industry extremely well but has been tested by more transactional and mobile attitudes to work across society and lawyers young and old.

The good news is that there is widespread agreement that the role retains much of its pulling power, in large part because clients still strongly value it. Rich rewards, of course, speak to a more materialistic age, and a sense of ownership has become an even stronger attraction for a generation that has reached adulthood amid economic turbulence and with the expectation that they would have to relentlessly compete rather than fit into a defined career role for life.

‘People are still very attracted to partnership as a model, but it has to have meaning,’ concludes Ballheimer. ‘It has to mean you are entrepreneurial as the owner of the business. If you’re a glorified associate, it doesn’t have the same meaning. There is an emphasis here on ensuring this is a real partnership, not just a hierarchical thing.’

The prized autonomy of partners, which was confidently predicted a decade ago to be fading as law firms became corporatised in governance, has if anything reasserted itself in recent years. And even the most jaded of industry observers would concede that law firms have hugely upped their efforts in terms of detailed feedback for their potential partners.

Linklaters senior partner Charlie Jacobs concludes: ‘I still think partnership is an important part of our culture. It makes us take a long-term view of the business. Partners are simply custodians. You need to make sure the partnership is in better shape for the next generation.’

Coutts executive director Dennis Howard strikes a similar note: ‘Partnership still carries a lot of gravitas and status, and for a lot of new partners that brings more opportunity as well as responsibility.’

These realities alone will probably not be enough to stop leading law firms facing a situation in which they struggle to find enough top-quality talent willing to stick it out for partnership. The dramatic expansion of the in-house profession in the UK has opened up an attractive career alternative, which is drawing out huge numbers of mid-level associates. Anecdotal claims and hard data illustrate that large numbers of talented women lawyers are still selecting themselves out of the partnership race at top firms (see box).

Ballheimer notes: ‘There is a perception among some, especially female associates, that the partnership process is slightly harrowing. It is not as harrowing as people think. Female candidates often do much better in the interview process than men.’ The message certainly doesn’t appear to have got through to A&O associates: just 15% of the partners the Magic Circle firm has promoted over the last three years have been female.

‘At every stage of my career I’ve taken stock. I didn’t feel I couldn’t get off the escalator.’
Clare Connellan, White & Case

There will be increasing pressure on law firms to start making partnership decisions earlier to engage their associates, even if overall levels do not change. While only a handful of US firms have deployed this approach, prolific promoters like Kirkland & Ellis and White & Case and, to a lesser extent, Latham & Watkins are some of the most influential players in the City market now.

Kirkland, which has made up 268 partners over the last three years, including 97 this year, with 13 in the UK, makes a disruptive virtue of its model of promoting large numbers of lawyers to its non-equity ranks at an early stage, before giving them a crack at equity.

Finance partner Neel Sachdev argues this approach has been key to engaging young lawyers: ‘Today, there are lots of different career options: start-ups, Google, banking… At Kirkland, we look to find young graduates who want to become partners. It’s always been an accelerated and transparent career path, but it’s now more transparent. Private equity is a young person’s game, and with our model you get young, energised, entrepreneurial lawyers.’

Weil, Gotshal & Manges has just announced changes to accelerate its track, so partners are typically made up seven-and-a-half years after qualification. Announcing the change, executive partner Barry Wolf said: ‘The current generation of lawyers doesn’t want to wait nine years for a promotion decision.’

Neither are such shifts merely a US phenomenon. Slaughters and Linklaters, for example, have been proactive on this front, with both firms respectively appointing 29% and 26% of their current partnerships in the last five years. Notes Cooke: ‘We are all restless souls here. Added to that, this is our youngest partnership ever. There is a young weighting with new ideas.’

It seems an astute move because if there is one thing partners young and old agree on it is that there will be more pressure on law firms to sell the notion of partnership to the best associates, rather than expect deference and institutional mystique to do it for them.

The prize is engaging the best-educated and most commercially aware generation the industry has ever seen. Judging the industry in recent years, it turns out the tournament of partnership is as dominant as ever in law. But these days, it is increasingly hard to work out which side – law firm or prospective partner – is calling the result. Long may it continue. LB

nathalie.tidman@legalease.co.uk
tom.baker@legalease.co.uk

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The Partnership Scoreboard – Trends and tribulations

As part of our analysis of the modern realities of partnership, Legal Business collected data on partnership rounds for the last three years across three groups: the top ten UK law firms by revenue, the ten US-based law firms with the largest organically-built London branches and a select group of mid-tier City players.

The most obvious observation is that there has been – barring a few exceptions – little easing up of the post-banking crisis clampdown on making up partners. One City head of a major US firm notes: ‘It’s harder to become a partner. All the firms are focused on profitability, the motivations are a lot more financial. Firms will always question the business case.’

Such a dynamic is apparent among the Magic Circle, which is still as a group post-Lehman promoting barely enough to sustain partnership sizes. No exception is Freshfields Bruckhaus Deringer, which has in recent years been slow to make up new partners, a trend which has apparently intensified through 2016-18. The 392-partner firm promoted 46 partners across its last three rounds, a lower percentage than its Magic Circle peers and a rate that if sustained would lead to a continual shrinking of its partnership.

More expansive were Linklaters, Clifford Chance and Allen & Overy, which respectively made up 78, 74 and 65 partners over the last three rounds. Such rates modestly exceed levels seen from the trio in a three-year analysis Legal Business conducted of partnership rounds for the years 2011-13. The most generous was Linklaters, which has averaged 26 new partners annually during 2016-18 – a robust level for a 473-partner firm.

Yet the most obvious changing of the guard is at Slaughter and May, which made up ten in 2016, seven in 2017 and four in 2018, a total of 21. This is not only a rebound on the subdued levels seen during 2011-13, when the firm made up just nine partners, but shows a decisive tilt towards new blood for an institution with just 112 partners. On a five-year view, Slaughters has created 32 partners, nearly 30% of its current partnership.

As a group the Magic Circle this year promoted 89 partners, though only 28 in the UK. This compares to 99 in 2017 and 96 in 2016. These levels are modestly up on the 2011-13 period but remain a far cry from the 137 seen in the boom year of 2008.

The picture varies at other top ten UK practices. DLA Piper, for example, has promoted 156 partners over the last three rounds, a considerable number even for a firm with more than 1,200 partners.

Hogan Lovells and Ashurst also saw increases in promotions. The pair promoted 84 and 55 partners respectively over the last three rounds, both sustaining active levels of promotions. The top ten as a whole promoted 223 in 2018, though only 58 in the UK. These numbers do not account for Norton Rose Fulbright (NRF), which has just shifted its promotions round to move to a new financial year. On previous form, NRF would add around 40 to that total.

There is an interesting comparison at leading US firms with major City offices. The group splits between those promoting aggressively, including Kirkland & Ellis, Baker McKenzie, White & Case and Latham & Watkins. Sitting in the middle camp are Shearman & Sterling, Debevoise & Plimpton and Weil, Gotshal & Manges, while those with a very tight grip on promotions include Cleary Gottlieb Steen & Hamilton, Sidley Austin and Skadden, Arps, Slate, Meagher & Flom.

While there has been considerable growth in the overall UK partnership promotions at US firms, the group as a whole managed a modest 34 in the 2018 round and 20 of those rest on just two firms: Kirkland and White & Case. Of the top ten largest US offices in London, no less than three firms – Sidley, Skadden and Weil – went through 2018 without making up a single partner.

Numbers at the largest US firms have not trended up in recent years across the group – these firms created 27 partners in 2017 and 36 in 2016, meaning they have in recent years promoted roughly half as many UK-based partners annually as the largest ten UK law firms.

As in so many things, Kirkland is the ultimate outlier, making up 268 partners over the last three years, reflecting both its aggressive expansion track but also its model of making up large numbers of non-equity partners at an early stage before giving them a shot at its closely-held equity ranks. In 2018, it promoted 97 partners, one of the largest rounds ever seen in the legal industry, including 13 in the UK.

Judging the mid-level firms, Fieldfisher has led the way for the mid-tier pack, reflecting dramatic growth at the top 50 UK firm, with 24 promotions over the last three rounds. Proportionately, however, there were more active promotion levels at Stephenson Harwood, Macfarlanes and Watson Farley & Williams compared to the size of their partnerships. These five created 36 new partners in 2018, including 23 in the UK.

The research indicates that levels of trainees making it through to partnership remain comparable with five years ago for elite firms, with over half of the partnership promotions at the Magic Circle and Herbert Smith Freehills being lawyers who had qualified with their firms. This proportion notably drops for mid-tier players.

* Norton Rose Fulbright’s partner promotions date for 2018 has been moved to align with its new financial calendar year. The partners made up in 2018 and total number of female partners promoted figures exclude 2018 EMEA promotions as they are yet to take place.

** Baker McKenzie’s promotions to be announced after press time. Responses are based on 2017 promotions. Combined female partner promotions figure is based on 2017, 2016 and 2015. *** Expected size of UK promotion round, to be confirmed.

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‘The Dickensian management role of closed doors is a thing of the past.’

Jonathan Kewley, partner and co-head of Clifford Chance’s tech group. Made up in 2017

What attracted you to partnership?

I’m working in tech, a space that didn’t exist 30 years ago. There are challenges facing clients that didn’t exist five years ago. The tech environment fits with the character traits of partnership. You have to be entrepreneurial, and it’s more exciting to be that way. It maintains interest.

What were your experiences of making partner?

The process at CC is built on a military model. It’s very gruelling. You get tested on marketing and speaking to clients, and having a global view on that. You get a role in the strategy of the firm straight away.

Is partnership harder for Millennials?

Millennials want more information and control of their careers. The Dickensian management role of closed doors and not asking the opinion of junior partners is a thing of the past.

I think about what it must have been like for partners who grew up without owning a BlackBerry, the world of fax machines and typewriters. You could think about that longingly. On the other hand, it is a dynamic job and technology offers greater flexibility. Clients don’t care where people work, especially in the tech business. Clients are changing and we are too.

What are the challenges?

There are problems with diversity in tech, questions as to why more women aren’t going into it. There needs to be more men advocating female partners – it’s a role for us too. I’m determined to make a big difference there.

‘I had to be passionate about what I did. Partnership was a consequence of that.’

Tara Waters, corporate partner at Ashurst. Made up in 2018

How did you get into law?

I graduated in 2000, studied design and electronic art in New York. I taught myself to code. Those skills were in high demand, it was the height of the dot-com boom.

A friend left to go to law school and convinced me my skills would translate into law. I found I could train in the US and work in other countries. That sounded awesome. I chose London because I’m a city girl and I’m hugely into music, art and the tech scene, obviously.

How does law compare with your previous career?

In New York in the tech industry I worked with a lot of other women. It was unusual to have meetings where it’s almost always men in the room. But I’ve never let it be a problem because I’ve never questioned my value as a woman. I like being able to show clients that I am the person in the room who knows their business fully.

Why did you want to be a partner?

Becoming a partner wasn’t a be-all and end-all goal, but I didn’t question my ability to function as a partner. I had to be passionate about what I did and tried to create that. Partnership was a consequence of that ambition, rather than the goal in itself.

How is being a partner different?

There is a lot more strategic thinking, building client relationships and winning business. I’ve made a conscious effort to build a team so that I can do those things. Before I was doing networking in my personal time. Now I have the luxury to spend the working day doing that.

How has your background impacted your career?

Ashurst refocused on the growth areas of tech. I had unique skills. I was able to raise my hand and differentiate myself. My tech background meant I was used to rolling up my sleeves. I have been very active in the local ecosystem. It’s so important to build your network.

‘There is much more emphasis on taking charge of your career.’

Peter Banks, corporate partner at Allen & Overy. Made up in 2017

Why did you want to be a lawyer?

I studied law at university but didn’t necessarily think I would become a lawyer. I’m interested in businesses; I like economics and understanding what companies do and how they work. Corporate law was a good fit for that.

Did you always want to be a partner?

I liked being a senior associate. I looked at the role of partner and asked myself whether I wanted it. I could see the parts of my job as a senior associate that I found most fulfilling getting bigger, especially developing client relationships and building the team. I enjoy interacting with people. I did weigh up other options. I wouldn’t have carried on if I didn’t enjoy it.

Does partnership still have the same prestige?

Yes. It is my proudest professional moment. It is a very enabling status. It shows you’ve reached a stage in your career and clients respect it.

How have attitudes to partnership changed?

There is still a perception that if you don’t want to be a partner it shows a lack of ambition, but that’s changing. People are much more vocal about their careers and there is increasing openness if partnership is not what you want.
People are much more aware of other avenues.

At A&O, some join alternative delivery businesses Peerpoint or aosphere. You can progress in the organisation without being a partner. There is much more emphasis on taking charge of your career. It’s a conscious decision, not just floating into something.

How has life changed now you’re a partner?

What is surprising is how much you immediately feel the ownership of the business. I have more visibility and more of a view on the pinch points but there is less of a sense of finishing a deal and going quiet for a while. Now you’re always straight onto the next thing.

‘There are massive benefits to people saying: “This is what I want with my career.”’

Dan Saunders, corporate partner at Watson Farley & Williams. Made up in 2017

What is your career history?

As you can tell I’m a Kiwi! I moved to Singapore with my wife and got a job with WFW in 2007. About six years ago I moved to London. I have been working here ever since.

What have been the biggest changes you’ve noticed since becoming a partner?

There’s more involvement in overall strategy and the hiring and pastoral care of associates – the latter being something I’m passionate about. There’s also a lot more admin. That’s not a gripe, just a fact of life.

You don’t really become the guy in charge, you become the bottom of a bigger pile. We have lovely associates but also lovely partners. I thought there would be a bit of a bedding-in period because I’m a fair bit younger than everyone else. From day one I was treated as an equal around the table.

How would you describe the typical ‘Millennial’ lawyer?

I went to my first partner meeting this year and I did a session called ‘how to treat Millennials’. I was born in 1985, and was surprised when told: ‘We count Millennials as anyone born after 1980.’

Millennials question people. There are massive benefits to people saying ‘This is what I want with my career’; it’s someone who knows where they are going. It takes a lot of thought to think about how to benefit from the different traits Millennials have but it’s worth it.

‘It’s different to 15 years ago when old white men would invite friends to the golf course.’

Valerie Kenyon, litigation partner at Hogan Lovells. Made up in 2018

What’s your career history?

I went to Oxford, and was the first person in my family to go to university. Having been impressed by the vacation scheme at Lovells I applied for a trainee scheme then qualified in February 2010. My first day at the firm was the day the firm became Hogan Lovells!

Have you always wanted to be a partner?

I remember looking at what the partners were doing and thinking it included so much travel and looked so complicated. Clients were calling them without even knowing who they are.

Have you noticed any changes since becoming a partner?

I started getting invited to conferences and people start noticing who you are. There’s an imposter-feeling at first.

What do you enjoy about your job?

I’ve always loved being part of the clients’ trusted team. Whether I’m talking to a client’s legal, engineering, marketing or design team it’s an easy conversation if you keep in mind that a great deal of what we do is about building trust and relationships. It’s a given that lawyers at top law firms in the City excel at providing legal advice: there’s got to be more to it than that to build a team and a strong and exciting client base. It’s different to 15 years ago when old white men would invite their friends to the golf course. If you recognise the business world has changed and what was successful 15 years ago is unlikely to be today, you’ll pick up more client relationships.

Do you identify as a Millennial?

I identify very much not as fuddy-duddy middle class. I was the sort of person who at university thought ‘I’m going to come up with loads of cool business ideas!’ but none of them came to fruition.

Was it difficult to transition from an associate social group to a partner one?

You become part of management and you have to be respectful of your senior associates having space to let off steam! You want them to look after each other and feel like colleagues.

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