Steve Wardlaw has moved back to head up Baker Bott's London office after eight years in Moscow. A number of challenges await him.
It is a daunting task moving to a different country to practise law. But in some ways, it is almost more daunting to move back to your home turf after a spell away. What you expect to be the same has usually changed in some subtle way - and as a native you are expected to absorb those changes immediately, like jurisprudential osmosis.
The return of the native
At the end of last year, I returned to head up the Baker Botts’ London office, having run the firm’s Moscow office since 2005. My mandate is a simple one in theory – grow the office, keep the quality as high as it has ever been, meet client needs and, most importantly, maintain the culture of our Texas firm. In effect, there are a series of incompatible aims, yet achieving these is often quoted as the Holy Grail of law firm growth. So, how in the name of Denning are they achievable?
Two side points here:
• Apologies to my friends and colleagues in Moscow. It is not the wilderness. Far from it. But the editor decided that a title “Eight years in an interesting but sometimes challenging environment that is evolving towards a recognisable and predictable European capital, albeit with some setbacks” was not punchy enough. I ask you.
• I spend a lot of time explaining to clients and laterals that we are not a ‘US firm’. We are a ‘Texas firm’. We have noticed, particularly when recruiting, that the phrase ‘US firm’ is almost pejorative. Especially when talking to lawyers that have only practiced in UK firms, the phrase conjours up images of a place where you get a huge bonus for working 2501 chargable hours, but get sacked for working 2499, where partners battle other partners for existing clients, and refuse to help others if they do not get a credit that can be exchanged for equity points at year-end,. In short, where life is not much fun. A Texas firm is different – I started out at Slaughter and May and the Baker Botts’ culture and environment is very similar in my opinion. So remember, we are not a US firm; we are a Texas firm. Lastly on this point, it is not mandatory to own a Stetson.
Returning to the main theme of the blog today, it is clear that things have changed in 2005. All markets evolve, and it is surprising how many senior, intelligent lawyers that I know seem willfully to ignore that fact. Clearly, what clients expect from us has changed. In the sellers’ market pre-crisis, we could almost dictate our terms. However clients, like elephants, have long memories. Now creativity in fee structures is the order of the day, and we need to think harder about how to keep our margins at an acceptable level.
But there are other layers of change as well. The types of law that we practise has changed – as certain practices have become less novel and more commoditised, so the level of fees that firms can charge for that work has lowered. This means one of three things – either leverage is increased and the more stardardised elements of the work are pushed down to more junior lawyers, or the work is still done but as a loss leader to achieve a bigger strategic aim, or we pull out of the work altogether. Since 2005, we have noticed a mix of all three.
The flip side to that is the development of new areas of work – for example, LNG finance work, aircraft finance work, cross-border arbitration and emerging markets energy work have all been strong areas for us in that period.
Defining your position in the market
More importantly, the financial crisis should have forced firms to think harder about their position in the cut-throat competitive legal market. This is the biggest challenge that law firms face. Actually, more than that – this is the biggest threat that law firms face to their continued existence. If firms have not thought about this, or if firms have decided wrongly about their position in the market, no matter how much ‘investment’ they make (through lateral hires), they will struggle to survive, or at least to maintain the position that they hoped for.
Let’s be clear – the legal market is a big market, and there is plenty of work, and plenty of profit (of differing levels) for all. However, for a firm to maximize those profits, it needs to understand where it is in the market and how far it can move. Three years ago, Baker Botts spent a lot of time on this, and retained a number of consultants in order to tease out common threads. We now see ourselves as (to use the jargon) a ‘multi-niche’ firm, specialising in our existing industry strengths of energy, technology and life sciences.
The exercise was an interesting one. As the Strategy Committee, we discussed several different law firm models, but the multi-niche model should allow is to continue to do high-end work, and some of the most challenging in the market. It should also allow us to continue the growth of the firm in all of its offices outside the US with a simpler, clearer message for laterals, and it is the lateral partner market that I want to focus on in the next blog.