Build competitiveness by being proactive, not reactionary

By Robert Sawhney, Managing Director, SRC Associates

Legal markets in Asia continue to progressively open up. South Korea currently prohibits foreign law firms from practising local law or hiring local lawyers, but '¨will gradually open its legal market in stages over a number of years. India is now allowing foreign law firms to work with clients on a fly-in-and-out basis.

Singapore’s government recently announced that '¨it intends to offer more qualified foreign law practice '¨licences and allow greater integration between foreign '¨and local legal services. There will be potential for foreign firms to offer both foreign and local law services (something that has been allowed in Hong Kong for some time).

It is wise for local firms in closed markets to be '¨proactive about change and building competitiveness. Unfortunately, within the Asian legal market, firms tend to be reactionary rather than proactive. Hong Kong is a good example: as the market moved toward full liberalisation, the majority of local firms (particularly the mid-sized and smaller firms) continued as if nothing was going to change, while gradually losing talent and business to foreign firms.

Reticent partners who resist alternative ways of thinking and working are the norm in many Asian firms; this has cost them dearly in many cases. Whether the firms that have done well had some clear strategy in place is not really the key issue; the important thing is that they had some degree of change readiness or capability within the firm that allowed them to learn and adjust as the market changed.

Research has found that professional service firms '¨that are proactive in their strategy are more successful '¨than those that are less so.
In the legal world, where intellectual capital is the key source of competitive advantage, it is wise for local firms in opening markets to be more vigilant in their talent retention programmes. This will include all aspects of remuneration, firm structuring, incentives, leadership and client relationship management, as well as the type of work the firm is doing and plans to do in future.

Although not completely successful, PRC law firm Shanghai Diligence is one of the few that has tried to move away from the eat-what-you-kill culture prevalent in China '¨and to look at how a more thorough remuneration system can help to retain talent and increase job satisfaction.

Leader attitudes

The biggest problem with law firms in Asia is their leaders. There is a degree of dogmatism in this sector not seen in other professional service sectors. Senior lawyers still '¨seem to think that they have all the answers and, if they '¨do ask for additional information, it is only to confirm '¨what they already think.

For any firm to become truly competitive, the mindsets of leaders must change or nothing will happen. Allen & Gledhill’s failed merger talks with Allen & Overy and the coming together of King & Wood and Mallesons show '¨that Asian firm leaders are starting to think about the '¨future, but this is not consistently true.

The managing partner at one of the largest local firms in Hong Kong recently wanted to test a certain strategy proposition but was steadfastly against evaluating the perceptions of people inside the firm (he was only just '¨about willing to concede that client views would be useful).

When asked about strategy execution and what '¨would happen when the firm’s professionals were asked '¨to deliver on it, he said he knew what was best for the '¨firm and that people will do what he tells them to. '¨However, I have never found that to be the case.

Strategy is implemented and initiated by people and, since the product of a law firm essentially resides in the heads of the lawyers who work in the firm, it is imperative that law firm leaders are ready to tackle their own cognitive biases and not assume that they know everything. Those '¨that can will already be on the road to pro-activeness that their competitors can only dream about.

bob@srchk.com