Most readers are familiar with our habit of writing a “letter from…” when we have spent some time in a particular market. We spent last week in Toronto among other things delivering the keynote and moderating breakout sessions at the annual meeting of Interlex, an international law firm network’, celebrating the third regional book launch event for Tomorrowland (graciously hosted by Gowlings WLG) after events in London and New York, and, of course, meeting with a wide array of firms at their offices.
A few observations:
For historic reasons (isn’t it ever thus?), until shockingly recently many Canada-headquartered firms were organized first and foremost by metropolitan area or province (the “city-state” era, as some jocularly call it) rather than by practice area or industry focus, I can remember tearing my hair out trying to find the bio of a particular partner at such a firm not that long ago but he was nowhere to be found and I had just met him so I knew he existed. Only when I stumbled over the website’s weird architectural design choice–you had to first pick the right office and then and only then could you find the fellow–did I realize how deep this has run.
At the very least, firms have migrated to a two-dimensional matrix organization of offices and practice areas, and all seem on their way to the externally-focused and fundamentally rational and correct orientation of practice groups being primary. Several firms volunteered that they had moved in this direction and no one seemed stuck in the status quo ante.
Regular readers also know that I’m a card-carrying optimist, and that crowd may not be surprised about another observation we made.
We met with ten firms during our trip and five had just finished or were on the brink of a gut office renovation. The new spaces were obviously all quite distinctive but they shared a light openness, were anything but stuffy or formal, with designs that had not been over-thought or that self-consciously strained to impress. Some were also moving in the direction of private offices migrating more to the interior and away from monopolizing the window walls, and smaller/more standardized arrangements.
These all constitute tangible and short-term irreversible investments in the future, which is why we choose to view them as signs of optimism. Now, anyone who’s been to Toronto lately can tell you the skyline is a sea of construction cranes, presumably reflecting macroeconomic strength and growth, but the law firm sector, as we’ve learned to our rue during the past decade, doesn’t necessarily march in lockstep with GDP.
A data point.
Now, for what’s less specific to Canada and what expresses national incarnations of global phenomena.
- The local, regional, and national implications of globalization are perhaps the top-of-mind unanswered question for most for most of these firms. To be sure, Canada has been “discovered” by the world (as has, for example, the United States’ Pacific Northwest region or certain Latin American and Central/Eastern European countries), but the conviction is firm that the end-game has not yet been played out. More than once we were asked about the Australian legal market, with people clearly grasping for an analogy or an instructive precedent, but then again, at least as many people who brought it up dismissed Australia as distinguishable as those who thought it might portend Canada Law’s future.
Our view is that large national markets tend to march to their own drummers and while both Australia and Canada have experienced resource-driven boom and bust recently, history, geography, and cultural assumptions make Australia a tangential lesson for Canada.
- Remaining unanswered for many (by no means all!) Canadian firms is the existential question of whether (1) to remain independent as far as the eye can see, being selective or promiscuous “best friends” around the world; (2) to selectively place small, primarily defensive brick & mortar outposts in key capital markets centers outside Canada (most obviously, New York and/or London); or (3) to be open to being courted or even dating or more. Our view is that this self-questioning and fortunately external-facing dynamic is not the type of question that can be resolved definitively so long as one is independent–except for the most extraordinary of firms. (See below.)
- Further on the same theme, the verein structure continues its polarizing march across the consciousness of law firm leaders as it has practically since it rose to visibility and people agreed on how to pronounce it. They’re innovative, flexible, ingenious, and logical, vs. they’re expedient, inherently unstable, and manifestly ill-suited to Law Land. (I exaggerate by not much.)
Our view is that the jury is still out on vereins. Nobody has tried this on the scale it’s now happening in Law Land, and it may end up where electric cars ended up a century ago (nowhere) or where they seem to be headed today (with, at the very least, a substantial and enviable market share). It’s just too soon to say.
- Canada’s GDP in 2016 (in US$ for consistency) was $1.53 trillion or just over $50,000 per capita. California’s 2016 GDP was about $2.46 trillion or nearly $59,000 per capita and Texas was at $1.46 trillion and $53,000 per capita. This gives you a notional indication of wealth and market sizing.
As I’ve said before and will surely have occasion to say again, my training was in economics and not psychology but for reasons you can speculate on at home it struck us that there’s one deeply unattractive trait we often see in the US which is, refreshingly, nowhere to be found in Canada.. The missing emotional marker? A self-satisfied sense of entitlement.
When I say that charmless attitude was missing, what do I really mean? The leaders of Canadian law firms that we met with are realistic about matters such as the fact that their firms are for-profit businesses and need to be run as such; that powerful competitors are everywhere; that the GC/law firm partner dynamic has changed dramatically over the last decade or so (largely and understandably not to the benefit of the law firm); and that they must lead their firms, not just manage them. No special snowflakes in sight.
- Finally, we’ve discussed each of the following issues elsewhere at length, but a quick rundown of some other topics Canadian firms seem to find every bit as thorny as their fellows around the globe:
- Compensation, which seems ever to be seeking equilibrium and never quite attaining it;
- Succession planning (both of firm management and of key client relationships);
- And talent management: Recruitment, retention, gentle and humane, but constant, culling of those who don’t belong.
I’ll conclude with our decision to write a future column whose timeliness and importance were cemented by this trip, although it’s a theory we’ve been exploring for quite some time now. It will describe the emerging reality that a handful of BigLaw firms are in a very different business than the rest. This means something more and different than I described and laid out in A New Taxonomy. Its repercussions, I believe, will be profound and will play out over the remainder of many careers.