Globalization of the Legal Profession
Indiana University
School of Law/Bloomington
Thursday, April 6, 2006: 8:30am—5:00 pm
As
noted, I attended this conference this past week, and I wanted to
summarize a few of the highlights of the presentations.
Chris McKenna of the Clifford Chance Center for the Management
of Professional Service Firms, Said College of Business, Oxford University
reviewed the globalization of the profession from 1950 to 2000, and
noted that the "internationalization" of law firms means,
at this point, New York and London.
As an interesting historic
footnote, Chris reminded us that from the 19th Century into
the 20th, Paris and London vied for power as the financial capital
of the world. (Both Coudert and Cleary-Gottlieb, international
pioneers, first set up overseas in Paris, not London.) And as
recently as the 1960’s and 1970’s, New York firms looking overseas
first opened in Paris, only later in London.
Why did Paris lose out to London and New York?
It
now seems obvious to say it’s because Paris fell behind in the race
to be a pre-eminent financial center, but Chris posited the reason
for that failure was the Civil Law—as opposed to the common law—tradition.
Common law permits lawyers (and businespeople) to be far more
creative, designing innovative business structures and financial instruments
never contemplated by cookie-cutter statutes and legislative mandates.
Chris also presented an interesting empirical finding:
The financial performance of law firms that go overseas is an inverted
U-curve: It takes a fair amount of investment to go overseas to begin
with, so it’s not very profitable to begin with (cf. experience of
US firms in China so far); likewise, if you overextend (think Coudert),
you can spread yourself too thin and run into difficulties with too-disparate
profitability between international offices.
Giles Pugh, Professional Services Consulting,
London, chimed in that the dominant form of "international" business
law today is New York law, conducted in English, and asked whether
the European or the US model for global law firms will succeed in the
longer run, and described a world of three primary business models
for international firms:
Three models:
- Premium US Law: Davis Polk, Simpson Thacher, Sullivan & Cromwell
- single profit pool, high billable hours, low leverage,
higher proportion of senior staff
- single profit pool, high billable hours, low leverage,
- "Best of Friends" alliances: Slaughter & May, Herbert
Smith, Cravath- strength in corporate law in the local jurisdiction, smaller
finance practice, independent profit pools (local only)
- strength in corporate law in the local jurisdiction, smaller
- Multijurisdictional Integrated Firms: Clifford Chance, A&O,
Freshfields, Linklaters- single profit pool, lower billable hours, higher hourly
rates, high partner leverage
- single profit pool, lower billable hours, higher hourly
But there’s a problem with each of these: The premium US law
firms lack a strong international capability; the "Best of Friends"
alliances lack integration; and the UK’s "global quartet" lack a
serious US-law capability/credential.
Patrick McKenna, of
Edge International, discussed "The
Quest for Seamless Client Service," and offered Starbucks as an example
of a globally consistent brand.
Part of "seamless client service" is simply practice customs:
consistency in communications, invoicing, responsiveness. Another
aspect is to analyze each "touch point" during a transaction:
from
- instructions
- transaction
- deliverable
- billing
- assessment.
Amusingly, Patrick presented a
series of firm mission statements specifically and literally identifying
"seamless service" as a critical goal, and then recounted tales of
clients’ actual experience. Let it suffice to say that
the rubber is not exactly hitting the road.
Why not ? With
the vast majority of law firms, managing partners
will tell you it’s the job of the practice group leaders. Really?
Then ask whether those practice group leaders have a real job description,
and whether there are firm expectations about how much time they’ll
actually spend in non-billable management time.
During the ensuing discussion, one commenter suggested there might
be room in the firmament of global law firms for a firm to occupy
the "Lexus" marketing positioning—neither the unsurpassed
high-end performance of BMW (Cravath), nor the luxurious quality
of Mercedes (Davis Polk), but the rock-steady, 100% reliable, turn-the-key-and-it-starts
reliability and consistency of Lexus (_______???).
All in all, a fascinating gathering of some people who have truly
thought hard about the future of our profession; I told Bill Henderson
he should take this show on the road.
