Introduction: Uneven picture throws up surprises across Europe
ByReena SenGupta and Michael Peel
Published: July 6 2007 01:20 | Last updated: July 6 2007 01:20
Innovation and lawyers never used to be comfortable bedfellows, but there is growing evidence of radical change in the legal market. No longer is it unusual for law firms to talk of diversity, for in-house lawyers to be thinking of creating economic value for their companies or for UK barristers to focus on putting their clients first. In every branch of the profession, across Europe, lawyers are driving change and being creative for their clients, their colleagues and often the wider community.
This striking development is one reason why the 2007 FT Innovative Lawyers report is a very different one to our inaugural report last year. The 2006 report covered only UK lawyers working in private practice. This year the scope has been broadened to cover mainland European law firms, in-house lawyers working in European companies, lawyers in the UK’s public sector, the UK Bar, US law firms operating in Europe and individual legal innovators. In addition, we looked at the UK judiciary to see if there are any judges changing the mould or standing out for their innovative work.
The results reflect five months of work by the research team at RSG Consulting, which interviewed nearly 1,000 lawyers and other professionals across Europe. It is a unique picture of innovation in the European legal industry. However, innovation is not evenly spread across the continent. It is no accident that UK law firms dominate the FT Law 50 rankings, which are published for the first time today (click here to see the ranking). The UK legal profession is more advanced than its mainland European counterparts: law firms are moving from being professional organisations to legal businesses. This sometimes controversial shift has been going on for more than a decade in the UK, but it is still in its infancy in mainland Europe.
Yet there are some notable signs of innovation from mainland Europe. There are seven continental European firms in the FT Law 50 – and two of these are from Romania and Greece. Tuca Zbârcea, a Romanian law firm with 10 partners, made several submissions for the report. Although its entries were not ranked in the various categories, overall they revealed a young, quality firm wedded to doing law differently in the Romanian market and one that has adopted the best practices of more established firms.
The Greek law firm Elias Paraskevas is a family firm established in 1933, but with a former Greek secretary of privatisation as its managing partner, it manages to broker deals for clients involved in mergers and acquisitions. This is a role that many clients want their lawyers to perform, but which few do.
The research for the FT Innovative Lawyers report also showed the cultural differences between US and UK law firms. In general, US law firms tend to be more lightly managed than their UK counterparts. Typically they are more akin to traditional models of law firm partnership, and they are largely organised as a group of individual partners running their own practices. Along with UK firms such as Slaughter and May, these US firms tend to focus their energies more on legal innovation than on the way in which they do business.
There are five US law firms in the FT Law 50. Of these, Latham and Watkins and White & Case most closely resemble the most innovative UK law firms. These two firms also feature highly in the “US Law firms in Europe” section in the report. Here we discuss those US firms that were considered to be showing innovation in their expansion strategies in Europe.
Overall, the FT Law 50 will appear to the seasoned observer of the law business to be an unusual index. But any ranking of law firms or lawyers based on innovation is bound to throw up some controversial results. Innovation, as the ranking shows, is not directly connected to the standard measure of law firm success – namely, profitability. In fact, some of the firms doing the most innovative work for their clients, their staff and the community are not the usual suspects seen at the top of traditional league tables.
The FT tables turn accepted notions of lawyer quality on their head. Suddenly there are national law firms such as Eversheds and Wragge & Co sitting alongside traditional “magic circle” firms – the UK’s five top-earning corporate law firms – such as Linklaters and Clifford Chance. At the Bar, there is Blackstone Chambers, a large well-respected commercial and public law set, sitting with Cloth Fair, a new crime “super-set” consisting only of QCs. In the table of in-house lawyers, there is the legal team at Dyson, the company of British inventor James Dyson, ranked with the legal team at De Post-La Poste, the partly privatised Belgian postal company.
The number one firm in the FT Law 50 this year, and winner of the FT’s most innovative law firm award, is Allen & Overy. A UK magic circle firm with an international presence, it has consistently shown innovation through a number of firsts. More importantly, innovation appears to be spread throughout the organisation. The firm sets aside £2m a year to explore new ideas and systems to incubate innovation. A high performer in last year’s report, it has received the highest score for entries submitted this year.
This consistent level of performance has enabled it to beat off strong competition from Clifford Chance, Linklaters – whose consistent quality of entry netted it six “stand-out” entries – and Eversheds, which wins two category awards.
In the Individual Innovators section, expanded this year, 10 individuals emerged from the research as lawyers who in some cases have transcended the narrow definitions of their roles and used their profession to create social change. Jim Rice at Linklaters, for example, could claim to have indirectly brought real benefit to millions - through leading the team that worked out the financial structures that enabled the GAVI fund to provide life-saving vaccines to millions of children in underdeveloped countries.
Another individual innovator, Glen James of Slaughter and May, says: “Being a good lawyer is about contributing to, and creating, your instructions.” Unfortunately, too many lawyers passively accept instructions – which marks Mr James out as an innovator to his clients.
One of the surprises in the report came in the in-house lawyer section. For many years, an in-house legal career has been considered the easy option for a lawyer. This preconception was found to be seriously outdated. Some company legal teams have developed way beyond “embeddedness” – the buzz term for working in alignment with the business and giving commercial “can-do” legal advice. Now the goal is to be creators of economic value for the overall benefit of their business.
Many of the “stand-out” legal teams, such as the one at Reuters, the information services company, and Dyson in domestic appliances, do this as a matter of course. For example, Martin Bowen, head of the legal team at Dyson, says his team acts as the liaison between research and development and marketing. Dyson lawyers have an active design role in creating the comparative adverts for the company, ensuring from the outset that they are as bold as they possibly can be within legal limits.
In-house lawyers are also leading the charge on corporate social responsibility (CSR) issues. One of the in-house counsel featured in the report, Mark Harding at Barclays, and the team at Goldman Sachs have done much to push diversity up the agenda of private practice law firms.
This intersection between lawyers and the world of CSR was a strong theme in the submissions received this year from law firms. The CSR category was one of the most strongly subscribed and showed law firms entering into innovative partnerships with a variety of other organisations – both commercial and charitable – to effect long-term change.
Less developed or credible was their approach to diversity. Law firms still have a long way to go to catch up with their corporate counterparts on this issue. Many of the submissions on diversity were really statements about being an equal opportunities employer or merely trumpeted the appointment of a diversity manager.
The fact remains that law firms are still predominantly white, male-dominated workplaces. At Freshfields Bruckhaus Deringer, one of the magic circle firms in the UK, 86 per cent of its worldwide partnership is male. But there is one innovation, at least – the firm is willing to share the statistic openly on its website.
Another facet of the legal world that still shows no sign of radical change is the way in which law firms bill their clients. As in last year’s report, Billing & Fees was the least subscribed category. The hegemony of the hourly rate remains – although there were some notable exceptions of firms willing to share risk with their clients, or – as in the case of Norton Rose – to introduce third party funding to foot litigation bills.
Lawyers in every branch of the profession are beginning to look forward and outward. Even the UK Bar, often described as “Dickensian”, is showing signs of a willingness to change traditional ways of working. Commonplace now are transparent bills, marketing and an ethos of client service.
Overall, today’s report shows that, for professional services firms, innovation is not necessarily about the Eureka moment, but about processes, gradual change – and a huge amount of commitment.
Copyright The Financial Times Limited 2007