Impact of market segmentation on leadership and recruiting in law firms

Kevin, is Eversheds still growing?

Yes, we have just released figures showing growth of around 3% last year. This means that we have grown in every year after the worldwide dip in 2008. Clearly the market is much tougher now, so achieving growth is very satisfying.

Big law firms seem to have difficulties with keeping up the growth rates they used to report during the 15 years before the financial crisis hit. How did Eversheds manage to generate growth despite the market trend where “flat is the new growth” as one of your partners recently pointed out?

Let me first say some fundamental things! For my students at Harvard I draw a simple picture of the market for legal services. In this picture there are three layers of work types: (1) On the top layer you will find “rocket-science”-work. Clients look for extreme expertise and track record when they have most complex matters because the risks connected to the case are extremely high. Often the lawyers in these cases talk directly to the management board or the board of directors of the company. (2) The second layer of work I call “Relationship Advice” – it’s important but not life threatening. Here the work may well come from the in-house legal department. The lawyers doing Relationship Advice with clients will be in contact with them on a regular basis – this is the zone of the “Trusted Advisor” as described by David Maister. This is the largest type of legal work. (3) Finally, the third layer is the market segment for routine work like trade mark management or keeping the company’s incorporation documents up-to-date. In this field of work fixed fees are common.

Law firms will typically be involved in at least two of these types of work. Like many Global law Firms, Eversheds works in all 3 areas – the core of work being Relationship Advice and then with lesser amounts of Rocket Science and Routine Work. Now, I will come to your point: If you build your business model strongly on relationships with your clients then you will have to understand and fulfill your clients’ needs better than your competitors. In a nutshell these needs are “service” and “cost certainty”. Eversheds has worked very hard to differentiate themselves in these two aspects. We ask our clients on a regular basis if they are happy with our work and services. We do this by using an outside firm to carry out the survey and in some cases an independent partner in an extended interview. If we find out that client satisfaction fails to match with our own expectations, we act. Clients really appreciate if you take time and effort to test the quality of your service and react fast if there are any issues. With respect to “cost certainty” we have set up two processes, one for transactional work, the other one for litigation. These processes ensure that we can reliably meet the budget goals mutually agreed upon between lawyer and client within the first few days of the project. In the “new world” we found that cost certainty is absolutely crucial. These are tough market conditions for many of our clients and they need lawyers who can deliver to budget.

If you are engaged in all three layers of the market as you picture it you must face enormous leadership challenges. I reckon the people working in these different fields of activities must have entirely different skill sets.

Not only are the skill sets different! More important the personalities of the lawyers in these three areas are clearly distinct. While “rocket-science-lawyers” are totally focused on their legal expertise and are definitely dedicated to absolute perfection, this means that they may not have time to build a relationship with the client – so it is important that clients have a dedicated “Client Partner” who has those skills and the time to spend with the client. Our best Rocket Scientist partners may not have time to spend on this. The partners doing running Routine Work must be able to manage large teams of lawyers and non-lawyers, and therefore be good leaders with great know-how on top in setting up and improving standardized processes in a challenging IT environment. Finally, the lawyers working in the “relationship-segment” of our activities should be able to deliver their advice on the highest service level possible. Partners who excel in this area are great at empathy, and spending time so that they really understand the clients’ businesses – they may also have a specific Sector based expertise. I have to admit, bringing all these types of personalities together for the benefit of the firm may be easier in a merit based compensation model as it is implemented at Eversheds than in a simple lock step environment.

Has this business model of focusing on “relationship-lawyering” while also to an extent doing both high-end and routine work, an impact on your recruiting policy?

It indeed has. We are deeply convinced that aiming to hire the best talents is not enough. As our Head of Recruiting puts it: We need to attract young people who are really passionate about their goal to become lawyers – those with a very high drive and need for achievement. That is what we try to find out during our assessments for new colleagues. When then years later some of these young people are on their way to be promoted partners we emphasize the importance of sector knowledge. Lawyers who want to build their career on strong relationships with their clients will have to thoroughly understand their businesses. In our legal world where differentiation has become such a challenge being a legal and a business “expert” may be one of few keys to success.

02/2014