Far horizons: Creating a client-focused and client-led strategy

“Better make the horizon
your goal: it will always
be ahead of you”
– William Makepeace Thackeray

The list of alternative business structures approved in the UK since early 2012 is already long and the more progressive among them are undoubtedly changing the traditional rules of engagement for a profession previously hallmarked by risk aversion and a relative lack of innovation. While the impact to date has been most pronounced in consumer services, it would be colossally naive to imagine that the ambitions of these new players will rest there.

The most profound driver for change has been a fundamental shift in the supply and demand equation. As an over-lawyered sector scrabbled for a share of a much reduced flow of work through the worst of the recession, control over how, and at what cost, legal services are provided has shifted significantly in favour of the purchaser. And clients, particularly general counsel – an increasing number of whom were formerly partners in the firms they now instruct – are both more sophisticated and more savvy than was uniformly the case ten years ago.

Long gone are the days when clients were persuaded to value all legal outputs equivalently. Pricing awareness, not only in respect of quantum but also in terms of the demand for certainty and transparency of costs, is higher now than at any time pre-recession. Predictably, clients have used their newfound leverage to their advantage in other respects, so that the principle of ‘more for less’ – free secondments, seminars, training and the rest – is now firmly established in many law firm-client relationships.

The legal services market is consequently segmenting and challenging the relevance of ‘full service’ in their client pitches. Gone are the days when firms in the mid-tier could be all things to all people. Now, firms are being compelled to decide where their true strengths lie and to find ways of playing to those strengths. For many, that sort of prioritisation inevitably entails a concomitant measure of de-prioritisation, which can be a real source of tension, even in the most commercially-aware partnerships.

Firms at almost every level of the sector are rushing for scale in the belief that it will provide some degree of sanctuary in the storm. There is a saying in modern rugby that “a good big ’un will always beat a good little ’un”. ‘Good’ (i.e. strategically-aligned and well-managed scale) can certainly bring benefits in terms of investment flexibility and firepower. But, just as size has not always made modern rugby a more edifying spectacle, in a legal context, scale for scale’s sake – without a clear strategic plan and the necessary mechanisms and determination to deliver it – is an answer to nothing. If anything, is more likely to hasten the frosty morning than defend against it.

As recent manoeuvres such as the SJ Berwin/King & Wood Mallesons merger demonstrate, consolidation is not a UK-wide, let alone a mid-tier, phenomenon. We can be sure that the ripple effects of these mega-deals will extend well beyond the global elite and the magic circle.

Continuing downward pressure on pricing, coupled with hardening client attitudes towards commoditisation, demand that firms not only find but also demonstrate to their clients that they
have applied more efficient and cost-effective ways of delivering their services. Near-shoring, of which the recent
Ashurst incursion into Scotland is a particularly pertinent example, is just
one such expedience.

And, just to add additional spice
to the mix, law firms can no longer promote their growth plans on the
premise that they are somehow exempt from the scrutiny their lenders would habitually apply to customers in other industries. We have seen several recent examples of the consequences of losing sight of that reality. No net debt is now
a significant differentiator.

Against that background, it has been illuminating to observe how law firms across the UK have responded. Some have successfully embraced the change agenda and are building stronger market positions on the back of that. Others – arguably the majority – recognise that change is happening but continue to apply very traditional responses to the completely novel set of challenges presented by this new normal. Another group seems reluctant to acknowledge the change agenda at all, presumably comfortable in the belief that the commercial relevance of ‘keep calm and carry on’ somehow extends beyond mugs and t-shirts.

So, how has all of this manifested itself at Maclay Murray & Spens?

Strategic review

As with most aspects of life, there is no such thing as a one-size-fits-all solution. What may be good for one law firm may not be right even for its nearest neighbours in the top 100 rankings.

At Maclay Murray & Spens, we recognised early on that the scale and pace of change in the legal sector were destined to be much greater than many commentators had been predicting. We had grown exponentially, in turnover and headcount, from the late ’90s through to the start of the recession. We acknowledged that we had not always applied the ‘sustainably profitable’ test as rigorously as we ought to have to some of our new revenue streams. In that regard, I suspect that we were not unlike many of our UK mid-tier competitors.

We therefore subjected ourselves to a root and branch strategic review – codenamed ‘project horizon’ – where no preconceptual stone was left unturned. In going through that process of self-redefinition and articulating our vision for the future – “to be renowned as a UK-national law firm whose people are of the highest quality and deliver consistently high quality work for quality clients operating both in the UK and globally” – we sought at all times to define ourselves by reference to the nature of our clients and their requirements. As we now move through the implementation phase of the review, our actions are informed by the two essential tenets – UK-national/ international outlook and quality – which underpin that vision statement.

Faced with the recent market turbulence, it would be easy to overlook the fact that one aspect of the lawyer’s role has not changed, i.e. the need to be able to support one’s clients in the realisation of their ambitions and strategic objectives. The polarisation of the geographic market focus of the top-tier Scottish-headquartered firms which we have seen in recent years has put that principle firmly in the spotlight for our firm.

A convenient misconception has been promoted that if you are a Scottish-headquartered law firm with a London office you have somehow turned your back on the Scottish market and that,
by extension, the Scotland-only firms stand alone in paying attention to the needs of Scottish-based clients.
From our perspective, that is a patent nonsense. Our commitment to Scotland remains as strong as ever – in the past two years, we have appointed 13 new partners within our Scottish offices –
but that is not really the issue.

We are very fortunate in the quality and dynamism of our clients, many of which are Scotland headquartered. But they are ambitious and they certainly do not see the limit of their ambition restricted to operating within Scotland. London remains a key UK and international location for Scottish businesses and that will continue to
be the case, regardless of the
outcome of the 2014 referendum
on Scotland’s independence.

As corporate Scotland continues to push successfully beyond its traditional domestic heartland, many of our clients will have a growing presence on the
global stage and will be increasingly attracted to the higher growth rates on offer in emerging markets. As our clients seek to develop their national and international presence, we need to be there with them. Our strategic objectives and ambitions as a firm are tied to the requirements of our clients and, for many of our clients, including our Scottish clients, that requires us to have not only a significant presence in London but also the ability (through our exclusive UK membership of law firm association Lex Mundi) to meet our clients’ international requirements.

From the most fundamental operational perspective, then, we need a London presence and we need to have global reach simply to service our clients effectively. It has the added advantage that, on a daily basis we are testing ourselves against some of the best lawyers in the world in the most competitive marketplaces, which in turn translates into a higher quality of service across all of our offices.

Crossing borders

There is no such thing as a universal strategy and much will depend on the nature of the clients your firm seeks to attract. But, turning the misconception on its head, it is not clear how a law firm with an ambitious, outward-looking client base of the sort we have could possibly serve the interests of those clients properly by pursuing a Scotland-only focus.

This is of course by no means a peculiarly Scottish issue – law firms headquartered in the English regions equally cannot afford to limit their clients’ aspirations to a narrow regional market segment. There is a fine line between focus on the one hand and insularity and parochialism on the other. Law firms need to put their clients’ interests first if they are to stay on the right side of that line.

In short then, abandoning clients at the border is not an option. Ask yourself whether you set your focus by reference to your clients or because it is the easy option. Be proud of your roots by all means – as we are immensely proud of our Scottish origins, which have served us well for over 140 years now – but retain the confidence to support your clients wherever their business may take them. Because, if you don’t, you can be sure someone else will.

Chris Smylie is CEO of UK law firm Maclay Murray & Spens
(www.mms.co.uk)