Dealing with a part of the world that has two-thirds of the world’s population means encountering some extremely able , highly educated, very ambitious multilingual people, saying “we can do this work”—maybe not today or next week, but in the near future as technology and knowledge transfer goes on. Moreover, governments are encouraging and supporting the development of the local legal profession. Major Indian, Japanese, Malaysian, Korean law firms are becoming regional players, and consequently another source of competition for the global incumbents or firm aspiring to become global.
As the macroeconomic phenomena of nation-building, development, urbanization, and infrastructure growth continues, people are moving upmarket into law, medicine, engineering, manufacturing, and so on. Joe has met with lawyers from all around the region, and the forces of globalization, technology, and other demographic forces are all driving the growth and ambitions of local law firms. Clients also drive demand. This won’t happen overnight, but it will happen.
“Western” law firms’ role
All these phenomena play into Joe’s telling top law firms coming into AsiaPac to be very specific and focused about what they’re doing in the region.
Absolute law firm size matters only in terms of global investigations—LIBOR, FX, other matters with a global component—in these contexts you have to deal with people, systems, jurisdictions, and material that could be anywhere in the world. So a law firm with a geographic footprint to match really does matter. There are so many people to be interviewed, so much data to be collected, and decision makers are scattered all over the world.
In some other contexts, highly complex, bespoke work often requires expertise found only in the larger firms because they have the ability to support it.
For other matters, you care about individual expertise and in many countries, while local firms may be quite small—5-10 partners, the expertise required for particular transactions or matters can be found there. From a client perspective, the local expertise is what matters if that is what is required to achieve the best result.
Bruce: So do you hire the lawyer or the law firm? I’m asking, frankly, about lateral partner movement
Individuals matter when you’re talking about the “sliver” work; that has to be the case almost by definition. There are some issues or matters or kinds of work where you can fairly say that in that market there are four or five, maybe seven or eight, “go to” people.
In those situations if those teams start moving around to another firm, you’ll follow them. Deutsche Bank has done this, in Hong Kong and elsewhere, because we had a lot of confidence in that team and those partners.
But it’s more nuanced because Deutsche Bank would also be close to the firm they left and remain close to that firm; depending on how agile and nimble the firm is they can build a fresh team and recover. So yes, it’s true that work can follow a team around but it’s a very competitive, agile, innovative market. The firm that lost a team can recover its share of our legal spend leveraging an existing and likely long standing institutional relationship.
What’s my take on all this? A few points in particular struck me as particularly salient and worth keeping in mind as we all—law firm partners, corporate GC’s, and our business-side clients—navigate the post-GFC world.
- GDP is not correlated with legal spending, the density of the legal infrastructure, or, needless to say, the rule of law itself and the role of lawyers in the economy. Too often, those of us in the US and the UK—and countries such as Canada, Australia, and many more that are part of the great British Empire diaspora—tend to ignore or forget this. Just because our environment is different doesn’t mean it’s the only environment.
- As fast-moving as our world is (how many times did Joe use words like “agile,” “nimble,” “dynamic,” and so on?), law firms and clients are in this together and we need to cooperate on ways to increase productivity and efficiency together.
- That said, the hard business reality is that law firms need to deliver compelling value as determined by the client; the days of tailoring engagements to suit the preferences and strengths of the law firm, sometimes by digging more deeply into the client’s wallet, are ancient history.
Above all, did you notice how Joe approaches the world from the perspective of business and not of law? I didn’t ask him about this but in reflecting on our conversation it struck me. As far as Joe is concerned, Deutsche Bank doesn’t have legal problems; it has business problems.
Law firms talk a good game about understanding their clients’ businesses. It seems to me most have barely scratched the surface.
