Full text of my opinion piece first published in the Australian Financial Review on 12 December 2020.
Ranking law firms by size implies in some way that second position is better than 22nd. But is it?
As with many things in the legal business world, the answer is not straightforward.
Gilbert + Tobin is a wonderful case study of a relatively small firm – only 16th in The Australian Financial Review Law Partnership Survey – competing very successfully in every market it chooses to focus on.
The firm is widely recognised as a powerhouse in corporate, banking and dispute resolution and is one of the most profitable commercial firms in the country.
In the US, Wachtell Lipton Rosen & Katz has only 260 attorneys but is No. 2 on the Vault table of best places to work for graduates, first for mergers and acquisitions work and generates in excess of $US6.5 million ($9.5 million) per equity partner per annum.

AFR print edition
Russell McVeagh is regularly ranked as one of the top firms in New Zealand. Their website lists only 36 partners which makes it the smallest firm among its peer group by a significant margin.
Despite these compelling examples, there are four areas where it appears bigger is better.
Lower-cost operators
Australia’s largest partnership, HWL Ebsworth, offers partner rates at 30 per cent – 40 per cent discount to comparable firms. It is able to sustain these rates by having a low-overhead operating platform, maximising the utilisation of it, and consistently increasing the number of partners sharing its cost. Size does yield economies of scale to HWL Ebsworth and others that have adopted this model.
The general insurance market in Australia has converged significantly over the past decade with four major companies now enjoying market dominance. The flow-on from this trend has meant that law firms specialising in insurance have had to get bigger to match the buying power of their key clients. Size helps these firms meet the unrelenting client demands for lower cost legal services and still make a buck, just.
Large matters
Clients do seriously consider the size, or “bench strength”, of the legal teams that compete for large-scale transactions, major projects, investigations or litigation work. Clients want the assurance that there are ample resources in place to manage large workloads without a hitch. They also seek to limit the risk of being reliant on just one or two key individuals; they want the B-team to be just as good as the A-team.
A large practice team also helps firms cope with the volatility of demand. A larger team can smooth out the peaks and troughs over a wider base of work. A smaller team runs a bigger risk of boom-bust actually meaning bust.
Innovation
Many of the new legal technology products that are emerging are based on cutting-edge cognitive technologies. The rough rule of thumb is that 70 per cent – 90 per cent of new products fail. Firms need to be of sufficient size with sufficiently deep pockets to be innovators and wear the cost of failure.
One of the key success factors in legal product innovation is effective distribution. Large firms with a wide reach will clearly have a market access advantage relative to say a smaller firm or a start-up offering a similar application.
Firm size also helps in taking a few more risks when it comes to lateral hire or practice acquisition. Recruiting a cultural terrorist in a small firm can be an existential problem. Larger firms tend to have more options and a bit more resilience to bad hire decisions.
Client panels
Many large corporate and government buyers of legal services have reduced the number of business law firms on their legal service panels.
A byproduct of this trend is that firms of scale, range and reach are often preferred to specialist boutiques. To target this market segment, law firms need to grow to ensure their full-service value proposition remains credible.
In conclusion
So, is bigger better?
Larger firms will generally point to their strengths in critical mass and coverage. Smaller firms will make the most of their focus and agility.
It appears they are both right.
business, business development, change management, client relationships, growth, innovation, marketing, planning, professional service firms, strategy management
Does your law firm really need a barista?
In Articles, Commentary on 11 June 2020 at 2:14 pmFull text of my opinion piece first published in the Australian Financial Review on 4 June 2020.
For the past three months, many law firms have been in crisis management mode.
The focus has been on ensuring staff safety, staying close to clients, sustaining productivity and shoring up financial reserves. The mindset has been mainly about conservation and survival.
It’s time now time to look up and to look ahead – to work out what’s needed to succeed in the next normal.
Here are four things to think about in creating your future.
#1 Organise for a hybrid workforce
Most law firms will seek to capitalise on the success of remote working and will adopt a model in which people work two or three days a week in the office and the balance at home. While this offers benefits in terms of staff flexibility, reduced commute times and lower occupancy costs, the rhythms of office life will be very different from life before coronavirus.
Firms will need to help their staff create boundaries and new work habits. This includes setting clear ‘office hours’; finding new ways to socialise that replace the serendipitous corridor bump; ensuring consistent supervision of graduates and clerks; and providing regular and balanced performance feedback.
#2 Speed up decision-making and execution
During the ten days from March 16-26, most law firms discovered that if push comes to shove, they can execute big decisions very quickly.
My advice: keep going!
The short-term public health crisis helped concentrate decision-making power. And it appears that in the main those vested with that power acted promptly and professionally.
Firms should build on this experience and streamline decision-making processes for times when things are back to normal. It could mean less consultation on trivial matters, fewer meetings, better communication and greater respect and appreciation for leadership roles.
Most law firms are designed as network organisations with self-managed practice teams as nodes and a small central bureaucracy. In theory, this should make them agile and responsive, but the reality is often quite different. Firms should harness their structural strength to move earlier and faster.
#3 Plan and budget with less inertia
The coronavirus crisis has given firms the opportunity to assess the merits of every revenue and expense item. Recent McKinsey analysis shows most organisations only reallocate 2 to 3 per cent of their budgets year to year. But those that do more—in the order of 8 to 10 per cent—create more value.
While starting each year’s budget with a blank sheet might be overkill, reviewing each item on a two- or three-year rotating cycle should ensure smarter allocation of resources.
Revenue targets might set with an honest assessment of market potential and how your team stacks up against key competitors. Expense items can be set with a clear-headed view on value creation.
#4 Personalise the client experience with scale
The client experience pre-coronavirus included numerous face-to-face meetings; document preparation shared via email; and multi-touch file handling.
The evidence from the past few months is that productive client meetings can still be held without a barista on call; documents can be prepared collaboratively in real-time and remotely; and that most aspects of file management can be automated.
In designing the firm of the future, think about creating a client experience that is personalised, streamlined and scalable.
This is the time to start imagining your firm as it should be. If you stay in conserve mode too long, you will land up being two or three steps behind those that are determined to create their own future.
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