Welcome back to the Fides Weekly Update – a round-up of the week’s key news and developments in legal and compliance.
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1) A tipping point for Talent Strategy?
Law firms must prepare effectively now to ensure that they are not left behind at the end of the decade, or so argued a report published this week from Deloitte Developing legal talent: Stepping into the future law firm.
According to the report, increasing client expectations combined with external factors such as rapid technological advancement and the shifting of workforce demographics and expectations, will lead to a ‘tipping point’ for individual firms in 2020 which will impact the competitive landscape within the sector and the role of talent within law firms.
Although the employment of solicitors into top corporate firms has increased by a fifth over the past decade, the report identified a bigger shift in skills and expectations by law firms, who have already identified a mismatch in the skills being developed through education and those required in the workplace. “We believe that the most successful law firms will be those agile enough to flex resources to meet client’s needs at an efficient price” the report stated. “They will need access to lawyers who have a broader skill set and are not just technically competent lawyers.”
Further technological advances and continued client demand for a better value of service mean that future skill requirements at law firms will change over the next decade. With the growth of automation opportunities through robotics, algorithms and Artificial Intelligence, lower skilled jobs will be replaced with the highly skilled roles created to develop and manage this new technology. To an extent this change has already started with increasing demand for legal knowledge engineers, legal technologists and legal process analysts. As clients drive to keep costs low, law firms have turned to the hiring ‘non-traditional and transient employees’ – such as project managers, sales executives and dealmakers – to ensure efficiency, value for money and the availability of low cost options for clients. This led The American Lawyer to herald the move of the four-person Legal Project Management team from Berwin Leighton Paisner to Herbert Smith Freehills to be its most prized lateral hire of 2015.
Beyond considering individual business needs, and what sort for leaders law firms need to develop to strive in the future (Through the consideration of diversity initiatives, succession planning and alternative skillsets), law firms also need to meet the individual expectations of their employees regarding opportunities and responsibilities within their role, as well as personal development and the firm’s alignment to social values. With 71% of UK millennials surveyed expected to leave their current employer in the next five years, this becomes especially pertinent within the legal sector given the large demographic of partners expected to retire by 2020, as well as alternative career options in-house and increasing competition from ABS and ‘new law’ firms.
As such, talent strategies will be will be key to dealing with future challenges as concludes the report. By considering the number and type of people needed in the future, and how to attract, retain and change skills within individual organisations, there is a clear opportunity for UK law firms who evaluate how they cultivate talent now to make competitive business gains in the future.
2) Fried Frank conquer the City
Fried Frank’s record-breaking 2015 financials were released this week, highlighting the successful execution of their 2014 ‘realignment’ strategy, which involved the firm focusing on its core practice areas and locations.
The firm’s total revenue increased by 9.7 per cent in 2015 to $504m, whilst profit per equity partner reached a new high of $2.2m, 21 per cent higher than 2014. Net profit also rose by 18 per cent to $228.5m.
It can be assumed this growth is attributed to the rigorous assessment carried out by the firm in 2014 when former Goldman Sachs deputy general counsel David Greenwald was appointed new chairman. The new strategy placed greater emphasis on costs and efficiency, cutting loose any areas operating at a loss. Their assessment concluded that the firm’s most profitable operations existed in US and Europe, leading to their decision to close offices in Hong Kong and Shanghai.
Greenwald took a risk in making such bold decisions and eliminating any resources that didn’t justify the costs. He has managed to change firm culture and his experience working in-house enabled him to create initiatives that would maximise efficiency and productivity at all levels of firm structure. New initiatives included a partner self-assessment process and a timekeeping policy that fines partners $100 per day if they are late to record their weekly billable hours.
In particular, London has been a remarkable area of growth and is also where the firm have made their most high-profile lateral hires in the last 12 months. This is a result of the impressive restructuring Fried Frank’s London office has been carrying out since 2014. To enable greater efficiency, the firm cut headcount significantly, dropping their London team to below 20. They have subsequently expanded to a 45 lawyer office, exceeding the previous headcount and are likely to continue to grow. Their lateral hires have been particularly strategic, only taking on high-class talent in their core practice areas.
Private equity and restructuring & insolvency have been the most active hiring spaces for the firm as Kirkland & Ellis’ Graham White joined the firm in October 2014 to head up their European private equity practice and London office, followed by a team of three funds partners also from Kirkland. Additionally, Ashley Katz joined the firm more recently from Mayer Brown, where he co-led their restructuring, banking and insolvency practice.
Fried Frank have given themselves a strong footing in the market and built a solid foundation for further growth. After the announcement of their upcoming office move to 41 Lothbury, which is double the size of their current City office, alongside their claim to be “understaffed” in a number of practice areas, including real estate, private equity, M&A and asset management, it is likely to see a continuation of significant lateral hiring from the New York-based firm.
Movers & Shakers of the week
The transatlantic merger plans between Berwin Leighton Paisner and Greenberg Traurig have been called off due to differences in individual pay models, firm culture and other factors. Creating a mammoth real estate and infrastructure practice, with a revenue in excess of $1bn, was an exciting prospect; however, the lack of ‘common ground’ was too considerable a factor to progress any further.
Corporate finance head Charles Penney has been appointed new senior partner at Addleshaw Goddard
Frances McLehman was appointed head of legal for ring-fencing at Lloyds Banking Group, after having been previously seconded to the bank as interim head of corporate and M&A legal in 2014 from Berwin Leighton Paisner.
Capital markets partner Stephen Edelmann will replace Domenico Gullo as managing partner of Ashurst in Italy.
Alastair Mordaunt has joined Freshfields Bruckhaus Deringer as a partner in their Hong Kong office, moving from Clifford Chance in London. He will become the firm’s new head of competition in Hong Kong.
Microsoft general counsel and corporate vice president Horacio Gutierrez is to become general counsel at Spotify
Partner and former head of pensions at Squire Patton Boggs Charmian Johnson will join Eversheds along with two associates in their Manchester office
Former Shearman & Sterling partner Hadrien Servais joins White & Case’s Global Banking Practice, based in Brussels
Ursula O’Dwyer has been hired into the Brussels office of Heuking Kühn Lüer Wojtek. She previously worked at Philip Lee and founded their Brussels office.
International arbitration specialist Patricia Nacimiento will become a partner at Herbert Smith Freehills in Frankfurt, joining from Norton Rose Fulbright
King & Wood Mallesons partner Matthew Showler has joined Dentons partnership, based in their Dubai dispute resolution practice
Jones Day have appointed Rebecca Swindells as head of the non-patents IP litigation practice. She joins from Fieldfisher
Addleshaw Goddard partner Sonia Campbell has exited the firm to join Mischon de Reya, specialising in insurance litigation
Corporate partner Tom Briggs has joined Ince & Co’s Dubai office after having spent three as head of corporate/commercial team in Bahrain at Charles Russell Speechlys.
Office Openings and Closings
Fasken Martineau close office in Hanover Square and relocate their reduced 10-lawyer team to Old Broad St
Until next week,