Login
View from the top: Lawyers Weekly Managing Partner Survey 2013
Lawyers Weekly presents the results and analysis of our inaugural Managing Partner Survey (MP Survey) of the legal profession in Australia.
Lawyers Weekly presents the results and analysis of our inaugural Managing Partner Survey (MP Survey) of the legal profession in Australia.
The independent, first-of-its-kind MP Survey canvassed the opinions of managing partners at a cross section of the country’s top law firms about business conditions within the legal sector, to get an insight into what is likely to happen in 2013.
The survey, which interviewed 20 managing partners across global, national and regional firms, enjoyed a 100 per cent response rate.
The data and trends squeezed from the survey provide a fascinating insight into the year to come for the legal sector.
A significant amount of data was collected covering the major issues currently at the top of the legal agenda, including: firm fees; redundancies; peak body performance; merger mania; diversity, depression and political leanings.
The Lawyers Weekly team has scrutinised the data to bring you an independent analysis of what the power players in Australian law are thinking about the uncertain months ahead for the profession.
JOBS IN JEAPORDY
The MP Survey revealed that almost one third of managing partners in Australia expect to roll out redundancies this year.
The survey found that 28 per cent think they will make redundancies this year; 50 per cent said they will not; 16 per cent said they probably won’t, while six per cent said they most probably will.
Notably, not one of the 20 managing partners surveyed said: ‘definitely not, we plan to boost lawyer numbers’.
Elvira Naiman, managing director at Naiman Clarke Legal, describes the result as “a scary concept for the market”.
“The fact that zero per cent said that they’re definitely not going to make redundancies speaks volumes in relation to market sentiment right now,” says Naiman.
Tim Fogarty, a partner at legal heavyweight Taylor Root, says that redundancies are a “far more present occurrence” than 12 months ago.
Fogarty believes several of the top 10 or so firms in Australia have already engaged in redundancies and have been involved in the process for a while, saying that numbers are not expected to be significant.
“There are certainly a lot of very senior lawyers, at special counsel and senior associate level, as well as very junior lawyers, whose positions have not been maintained,” says Fogarty, who adds that the legal recruitment market is currently in a state of flux and could really go either way this year.
The survey shows that 38 per cent of managing partners believe corporate and banking practices will be hardest hit by redundancies in 2013; a distance clear of second and third placed property (8%) and energy & resources (8%).
Managing numbers
Chris Freeland, Baker & McKenzie’s national managing partner, says it’s a challenging time for the corporate sector and that several top firms have some tough decisions to make now after previously pursuing an aggressive recruitment strategy.
“We’ve [Bakers] been fortunate that we’ve been able to manage our numbers, so we haven’t needed to initiate a redundancy program,” says Freeland.
“If firms continued to hire at aggressive rates, and I can think of a few in the market that have, while the corporate market continued to be challenged, I think there are some firms, unfortunately for them, who will need to be looking at ways to reduce their headcount,” he adds.
Naiman says legal recruiters are now explaining to top-tier and international senior corporate and banking candidates that there are practically no roles out there.
“It’s a concept a lot of them are having trouble understanding,” she says.
“The idea of having a lot of disenfranchised, well-trained and experienced candidates with no options, where their skill-set is diminishing, is problematic.
“When the market does turn, these people are close to impossible to replace.”
DEPRESSION DUTIES
Not a single managing partner in the MP Survey believes abolishing billable hours is the key to reducing the high rate of depression among lawyers.
The overwhelming majority (89%) of respondents to the survey claimed more education and awareness at all levels is needed to tackle depression within the legal profession.
The other 11 per cent nominated better work-life balance arrangements as the answer.
Marie Jepson, founder of the Tristan Jepson Memorial Foundation (TJMF), a not-for-profit depression initiative aimed at lawyers, says she agrees greater awareness is necessary to reduce the stigma associated with mental illness.
But, she adds, the more critical issue is workplace culture, which requires “fundamental changes”.
Jepson identifies the 13 psychosocial factors assessed by GuardingMinds@work – a guide to workplace psychological health and safety – as being essential to meaningful cultural change within firms.
These include ensuring workload management allows tasks and responsibilities to be accomplished successfully within the time available, and recognising the need for balance between the demands of work, family and personal life.
“An environment where these 13 factors are an essential part of the organisation’s leadership policy and measurable review can lead to a major change in the psychological health and safety of the workplace,” she says.
Jepson adds that initiatives aimed at improving workplace culture should focus on ongoing improvement and best practices across the profession and beyond, “not blame and shame”.
“The benefits of such an approach have been shown to create a positive risk management for organisations, increase productivity and profitability, improve staff retention and promote excellence,” she says.
Herbert Smith Freehills senior partner Peter Butler, who is also a director of TJMF, says firms are genuinely trying to tackle the problem of depression.
“Are we there yet? No, but huge efforts are being made to do better in this space,” he says.
Butler highlights Resilience@law, a collaboration of Allens, Ashurst, Clayton Utz, Herbert Smith Freehills, King & Wood Mallesons and The College of Law, to raise awareness of the causes and impact of stress, depression and anxiety across the legal profession.
“Firms are working collectively ... there is no competitive advantage in this space and firms want to share everything [they’re] doing,” he says. “If we approach depression as a collective issue we’re much more likely to get traction and move forward in the right way.”
DIVERISTY DILEMMA
A majority of managing partners believe partnership quotas are less effective than aspirational targets for achieving diversity.
Some 53 per cent of managing partners said aspirational gender diversity targets are ‘more effective than enforced targets’; 47 per cent said partnership quotas are ‘ineffective’, and not one said they are ‘highly effective’ for achieving diversity in the profession.
The president of Australian Women Lawyers, Kate Ashmor, is a vocal opponent of gender diversity quotas. She labels them a tokenistic, lazy, quick fix; the antithesis of appointment on merit.
“If the firm chooses to go down the quotas’ path good luck to them; I think they’ll need luck because they will face the inevitable question of quota appointees being possibly tainted,” Ashmor says, adding that she is not surprised by the poll results.
Quotas naturally don’t sit well with lawyers, she says, especially because they’ve been subject to a competitive process since high school where rewards and promotions have been based on doing the “hard yards”.
However, others see quotas as a means to speeding up the sluggish pace at which gender equity at senior leadership levels is being achieved.
Caroline Counsel, a past-president of the Law Institute of Victoria, says other methods have so far failed to address gender inequalities and create lasting change.
“It’s just taking too damn long,” she said at the Lawyers Weekly Women in Law Awards last October.
Women account for only around 20 per cent of partners in Australian law firms, despite the fact they make up more than half of all law graduates in the country.
Fair dinkum
Sally Macindoe, the Norton Rose partner who helped the firm double the number of women it had working flexibly and at partnership level, says aspirational targets can genuinely encourage diversity.
“Targets can be token or they can be real and … at Norton Rose the setting of targets each year in every area of the business and having that reported right up to board level has been an incredibly effective way forward,” she says.
Ashmor says law firms can back up aspirational targets with real results “by being fair dinkum” with staff: by taking practical steps to give them a fair chance at achieving partnership or a senior management position.
“Flexible work practices are the best example,” she says.
“I’ve had many women say to me they’ll gladly hand back their paid maternity leave if they can get the flexible hours and quality work after they come back.”
The survey also reveals that all the law firms surveyed had a return-to-work rate of more than 50 per cent after maternity leave.
Baker & MacKenzie employment partner Bryony Binns is one of those who did return to her law firm, twice, after maternity leave.
She took two periods of maternity leave, the second round after having twins, and says that feeling supported by her colleagues was crucial to her coping.
“I was made partner whilst pregnant with my twins. I became a partner and then went on maternity leave after that,” explains Binns.
“We have programs that are really targeted around making sure that we’re not losing people, and one of the most important things, anecdotally, is making sure that you’ve got good support systems in place and both male and female mentors.”
MERGER MANIA
The majority of law firm managing partners foresee further global tie-ups in the Australian legal market.
Respondents to the MP Survey believe globalisation of the legal market will spur domestic firms to look to merge with international firms.
Professional services consultant Ted Dwyer shares this view. He says that large domestic firms are under threat, with recently-merged global firms more likely to snap up premium work from big corporates.
“Large domestic firms run the risk of losing income because they’re no longer as attractive to international companies as the global firms,” says Dwyer.
He claims the large local firms missing out on high-end international work also face being priced out of the domestic market by competitive mid tiers. He urges all domestic firms to at least consider their options for a global tie-up.
“Closing your door to the possibility of an international merger doesn’t make sense to me,” he says, in reference to the finding that a third of respondents would not consider merging with a global firm.
Most managing partners whose firm isn’t already merged with a global are heeding Dwyer’s warning, claiming a merger is either already part of their long-term strategy (22%), or that it is a consideration, but they aren’t actively looking (33%).
The survey also found that 21 per cent of managing partners believe some mid tiers will fold as a result of the globalising legal market. Dwyer admits that there could be victims of intensified competition among the mid tiers.
“The proliferation of mid tiers will give domestic clients a lot of choice,” he says.
“Mid tiers will have to compete across all practice areas for work that is essentially dropping in price, and it will become tough to do business.”
Dwyer singles out insurance and litigation as two practice areas that will become increasingly price sensitive.
He clarifies, however, that mid tiers that fold will do so because they are not running efficiently or because they take on too much low-priced work without adjusting their work practices.
PEAK PROBLEMS
Many Australian managing partners are not impressed with the performance of the Law Council of Australia.
Managing partners were asked to rate the general performance of the LCA: five per cent said it’s doing a great job; 47 per cent said it’s doing an okay job; 16 per cent said it could be doing more, while 32 per cent said it’s not doing nearly enough to help the profession.
LCA president Joseph Catanzariti welcomes the feedback from the profession and highlights that the majority of those surveyed thought the LCA was doing an okay-to-great job.
“In 2013, I have made it a priority of my tenure as Law Council president to see the organisation work harder to demonstrate its relevance to all legal practitioners, irrespective of where they practise or the type of practice in which they operate,” says Catanzariti.
Catanzariti urges members of the profession to understand how the role of the LCA differs from that of the state and territory law societies and Bar associations.
“The LCA exists to represent the legal profession at the national level, to speak on behalf of its constituent bodies on national issues, and to promote the administration of justice, access to justice and general improvement of the law,” he says, adding that the LCA advises governments, courts and federal agencies on ways in which the law and the justice system can be improved for the benefit of the community.
“In 2012 alone the Law Council produced 198 submissions to government and regulatory bodies across a wide range of national legal areas and law reform matters.”
Catanzariti lists some programs and initiatives that the LCA is developing with the aim of improving the profession in Australia.
Among them is the National Attrition and Re-engagement Study (NARS), which will launch this year with the aim of producing a report outlining practical measures to re-engage female lawyers who have left the profession.
“The Law Council of Australia welcomes feedback from all members of the legal profession. Our consistent aim is to … represent these members on a national level,” says Catanzariti.
MONEY MONEY MONEY
Almost half of Australian firms plan to charge higher fees this year.
Of the 20 managing partners interviewed for the MP Survey, 47 per cent said they would increase their rates in 2013.
Melbourne-based consultant John Chisholm says he was surprised by the result, believing that it is an inopportune time for a fee hike given the sluggish state of the legal market.
“I’m surprised given the decline in legal work; increasing competition; huge discounts on rack rates; clients complaining about legal fees and doing all they can to reduce their legal spend, more fixed and capped fees etc...” he says.
Chisholm speculates that these firms may have based their decision on the ability of lawyers who have moved up the ranks (e.g. from senior associate to partner) to charge more but, he warns, this reasoning may not cut it with clients.
“Most sophisticated clients ... do not automatically accept [the] same,” he says. “Most firms will need to get used to operating with lesser fees and working harder and smarter to increase the margins they get from the lesser fees.”
Chisholm also singles out firms that have recently implemented new pricing structures as likely candidates to increase fees. He claims these firms may have realised they were undervaluing their services or can now prove they provide better value to clients.
True AFAs
The survey also found that 60 per cent of managing partners plan to introduce alternative fee arrangements (AFA) in the coming year. Chisholm is sceptical, however, that the firms in question plan to introduce what he describes as “true AFAs”, which are not based on time, such as value-based billing.
“Many firms purport to offer AFAs and include in their definition things like capped fees, blended hourly rates and the like, which to me are not AFAs but merely time-based fees in drag,” he says.
“True AFAs ... are being used by very few firms to date and only the more innovative ones.”
Even though Chisholm predicts the demise of the billable hour in the not-too-distant future, most managing partners still see its value, with 70 per cent of respondents claiming that between five and seven hours is the most effective number of billable hours per lawyer.
None of the managing partners surveyed believed billable hours should be less than five hours, while 15 per cent claimed between seven and nine hours was preferable.
Chisholm maintains that there “are much better ways to measure someone’s performance than how many billable hours they recorded per day”.
BEST IN TOWN
King & Wood Mallesons (KWM) says being voted the most impressive law firm in Australia by its rivals is “probably one of the best endorsements a firm can get”.
Of the 20 managing partners surveyed in the MP Survey, half of them counted KWM as one of their top three firms in the country.
“We’re humbled, to be honest,” KWM’s Australia managing partner Tony O’Malley says. “We’re in extremely good company in a highly competitive market, so to get the attention of others in the market, in this way, is a tremendous honour.”
KWM finished a way clear in the final tally, with 50 per cent of O’Malley’s peers giving the firm a nod in their top three, followed by Freehills (30%), Allens (25%), Gilbert +Tobin (25%) and Henry Davis York (25%).
O’Malley speculates that the firm’s tie-up with China’s King & Wood last year was the chief reason behind the endorsement by its rivals.
“I think the combination with King & Wood surprised the market,” says O’Malley, who adds the firm has a little way to travel in terms of its integration and that it was a massive undertaking but “one which we have no regrets about pursuing”.
“It was seen as an audacious but strategically powerful move. It has certainly allowed us to do things differently for our clients – bringing new capabilities and acting on matters that we wouldn’t have had in the past,” he says.
“So, the integrated regional offer is certainly something that makes us stand out.”
One man in agreement is Danny Gilbert, managing partner at Gilbert + Tobin, whose own firm fared well in the voting, and who says he’s an admirer of O’Malley’s firm.
“I think what KWM has done is pretty incredible,” says Gilbert. “I’d say people [managing partners] think that their move with the Chinese firm was fairly audacious, and seen as a pretty brave one.
“So people will admire them for that, plus the overall quality of their practice.”
When asked what the firm is doing right, O’Malley says that it’s totally focused on getting the relationships with its clients right.
