©2004 Ernst & Young LLP. All rights reserved.This material is proprietary, confidential, and for internal use only.Unauthorized distribution or reproduction of this program or its contents violates firm policy and copyright laws.

©2004 Ashish Nanda. All rights reserved.This material is proprietary and confidential.Unauthorized distribution or reproduction of this program or its contents violates copyright laws.

Leadership in Law FirmsHarvard Law School

UNDERSTANDING AND DELIVERING “VALUE” IN THE GLOBAL AGE OF MORE FOR LESS:

The Challenge for Nigerian Lawyers

UNDERSTANDING AND DELIVERING “VALUE” IN THE GLOBAL AGE OF MORE FOR LESS:

The Challenge for Nigerian Lawyers

NBA Commercial Law Section

David Wilkins

June 2015

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Business as Usual or Brave New WorldBusiness as Usual or Brave New World

Big debate about whether we are witnessing a paradigm shift or just a correction

The truth is that it is too early to tell – but it is unlikely to be either

Instead, we are seeing the accentuation of macro forces that began before the recent crash

Collectively these forces are fundamentally reshaping the global market for legal services

Lawyers and law firms around the world must adapt to this new reality

At the heart of this transformation is the need to be able to credibly define, articulate, and measure value – and to price accordingly

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Structural ChangesStructural Changes

Globalization of economic activity

Rise of Information technology

Blurring of traditional categories of knowledge and organization

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Consequences for the EconomyConsequences for the Economy

• Reduction of information asymmetry between buyers and sellers – Unbundling and repackaging of services along

global supply chains

• Competition moves from reputation and credentials to value as measured by metrics

• Unit of analysis moves from firms to networks

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Consequences for Law FirmsConsequences for Law Firms

• Increasingly sophisticated clients with more access to information – and who are demanding more transparency from firms – Forcing efficient unbundling and repackaging of services

and a move toward “value” billing• Producing new competitors, from LPOs to

multidisciplinary PSFs offering integrated services at the intersection of law, finance, strategy, and project management

• All of this puts pressures on historic law firm business model

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The New NormalThe New Normal

• Two traditional drivers of revenue growth – rate increases and leverage – are likely to become far less important in the coming years

• Clients are likely to reduce their demand for the same breadth of traditional “bespoke” legal services

• But clients will need more help in understanding how globalization affects both their domestic and cross-border business – and will find ways to get it regardless of what the regulation provides

• Successful law firms will have to find ways to provide this help – either internally or by partnering with other providers – while at the same time sourcing business from other “markets” (both geographic and substantive) in order to get revenue growth

• To do this, firms must understand how clients value their services

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Empirical Evidence to DateEmpirical Evidence to Date

• Corporate Purchasing Project

– Focus groups and case studies

– Interviews with 60% of GCs in investment banking, commercial banking, petroleum, and pharmaceuticals

– Survey of S&P 500 – GLEE: preliminary interviews with over 150 GCs in India,

Brazil and China. Moving the project to Africa – particularly Nigeria

– Leadership in Law Firms and Corporate Counsel

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Alignment: Lawyers are from Mars and Clients from VenusAlignment: Lawyers are from Mars and Clients from Venus• Excellence or Overbilling? (BTI Consulting)

– 37% of GC’s say “client focus” is the key to quality service

– Virtually all firms say that this is what they provide– 21% of GC’s say “client focus” means “understanding

the client’s business”– Only 10% of outside lawyers viewed it that way– 21% of firms said “client focus” means “doing what’s

best for the client”– Only 3% of GC’s viewed it that way

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Multiple meanings of “Understanding our Business”Multiple meanings of “Understanding our Business”• Responsiveness

So level of service means responsiveness, attentiveness, if we call you at 4 o’clock, you call us back at 5.

• Following DirectionsThey were very unresponsive about consulting with us, and taking directions from our in-house lawyers. ..We just felt that they didn’t draw on our expertise the way they should. We felt that they wasted money as a result, in terms of the tasks that they shouldn’t have done. We felt that they missed opportunities to be more efficient and do better work. Why would you hire a firm that thinks that some of that is beneath them

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• Business StrategyThey must understand our business and be able to work well with our business people. I generally select people that the business people trust. We might try different firms on different projects and the one that becomes the most trusted advisor is the one that I will use on an ongoing basis.

• Legal StrategyI want a law firm that’s very focused from the beginning on how the case is ultimately going to be resolved. Whether it’s a strategy, ultimately, for a trial, or to produce a good settlement, or to win the case; as opposed to a lawyer or a law firm where the case kind of runs on automatic pilot, and where there’s no true evaluation of the case until very late in the game

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What Clients Say they Don’t WantWhat Clients Say they Don’t Want

• Marketing I don’t care at all about their brochures; I don’t read

them. When I meet with a law firm and they try to give me one of their fancy brochures I tell them I won’t read it. So, that’s the thing I think that they do worst. They waste a lot of time and money.

• Cross SellingIt can be a great firm in the United States and have offices outside that might or might not be good. I primarily leave it to the local experts.

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What Clients Say they Don’t WantWhat Clients Say they Don’t Want

• Pay for TrainingWe finally told all our firms that we would not pay for first year associates

• ConflictsWe used [another firm] because [our main firm] had a conflict. We were pissed. We’d expect from our major providers that when taking on a matter if its crystal clear we’re going to need help too that they don’t take the matter. . . hopefully someone from our law firms would call us and tell us and ask us if we want to engage them before they accept with a competitor.

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What Factors Influence Corporate Legal Purchasing Decisions?What Factors Influence Corporate Legal Purchasing Decisions?

www.worldle.net

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What Factors Influence Hiring?What Factors Influence Hiring?

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External Focus of Assessing Law Firms in Hiring DecisionExternal Focus of Assessing Law Firms in Hiring Decision

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Increased Sophistication due to External FocusIncreased Sophistication due to External Focus

External sources of information combined withinternal knowledge increases sophistication.

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Implications for the Attorney/Client RelationshipImplications for the Attorney/Client Relationship• A new breed of GCs who are much more metric

driven • Developing a new logic with outside firms

– From “agents” to “partners” – Share risks and benefits– Trust – but verify! (data, metrics, structures,

expectations)• These GCs are much more likely to look inside

the “black box” to see how a firm operates and demand that it deliver quality services

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Greater Emphasis on Quality Control

More than 50% of GC’s who have experienced no terminations rate “Quality Control Systems” as unimportant.

Almost two-thirds of GC’s withfrequent terminations rate“Quality Control Systems” asimportant

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Three types of legal adviceThree types of legal advice

Respected

Relationship Advice

Routine Work

Less of it + disaggregation. Not price sensitive.

Mainstream legal advice usually on hourly charges.Increasingly price sensitive.

Flat fees. Legal and non legal competitors.Very price sensitive.

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The 5 Ps of Services PricingThe 5 Ps of Services Pricing

Purchasing Criteria What are the most important factors for the client when deciding which lawyer or law firm to instruct?

Proposal What information should the law firm provide to enhance its success rate?

Pricing What methods of pricing are most effective?

Promotion What are the most effective methods for marketing?

Procurement What is the impact of professional buyers and procurement techniques?

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The MatrixThe MatrixRespected Relationship Advice Routine Work

Purchasing Criteria

Track record of the individual expert (best match).

Personal chemistry, track record of the team, price.

Price, track record of the firm, performance data.

Proposal Facts of individual performance. Demonstrate best fit between experience + current issue.

Demonstrate team track record and meet the team. Innovation in price.

Facts, performance, similar clients.

Pricing Confident budget given – actual fee linked to outcome (value).

Hourly, project based fees, value billing uplifts or discounts, annual retainers, caps with share of savings, innovation.

Flat fees. Can link final fee to specified performance data to give uplift or reduction in a mechanical way.

Promotion Books, articles, conferences. Network at C level and in the firm.

Network with primary buyer, peer group referrals, profile of firm.

Networking with business units and procurement.

Procurement No. Yes but only a part of the decision. Rely on relationship.

Procurement may lead. Decision may be data driven.

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The Best of Times – Worst of Times The Best of Times – Worst of Times

Nigeria and much of the rest of Africa is booming – companies are hungry for sophisticated legal advice about how to compete

But as a result, these markets have attracted significant competition – and more is coming Lack of growth in US and Europe Development of several strong local competitors Contest over regulatory barriers to full foreign entry Language, history, and culture as competitive tools

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Living in “Interesting Times”Living in “Interesting Times”

The good news– Markets are coming back, particularly in emerging

economies– Companies need advice at all levels to help navigate

this complexity

Continuing challenges– Corporate legal budgets tight– Increasing competition – “Unbundling” of legal work by clients– More consolidation is coming – driven by desire for an

“Africa strategy”

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Triple Squeeze for Nigerian FirmsTriple Squeeze for Nigerian Firms

Squeezed vertically by increasingly sophisticated and price conscious clients demanding “more-for-less”

Squeezed horizontally by multiple competitors seeking to take pieces of your business Global firms competing on “quality” and “geographic

reach” for high end New providers competing on “price” and “efficiency” for

low end (and to hollow out high end)Squeezed internally by the “war for talent” for

associates and partners in high demand

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Managing the Squeeze – Clients Managing the Squeeze – Clients

“Premium work for premium clients” (Linklaters) Small percentage of top clients produced very large share of

total revenues – and an even larger share of profits Greater willingness by both sides to invest in the relationship

But very few firms can only have premium clients Greater instability when clients leave, merge – or fail Smaller clients can also be strategic

Develop into larger onesPromote associate and partner developmentVisibility and stature in the community

Key is to determine which ones to serve – and be vigilant about measuring costs and benefits

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Managing the Squeeze – Competitors Managing the Squeeze – Competitors

Be clear about your strategy – and stick to it Strategy defines how an enterprise will occupy a unique

place in the market to achieve sustainable success (Porter) Strategy is about hard choices – what you will NOT do

(Wachtell) Strategy is about providing clear notice and direction to

clients, professionals – and competitors But strategy is ultimately secondary to alignment

Better to have a B level strategy and A level alignment than vice versa

But alignment is harder to achieve across multiple business units and geographies – particularly in a dynamic world

“Soft S’s” – skill, style, shared values – particularly key

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Managing the Squeeze – Partners and Associates Managing the Squeeze – Partners and Associates Understanding and articulating your internal value

proposition Cannot rely on traditional ideas about prestige, training, or

public ideals But cannot abandon these traditions either – because

someone else can always pay more money! Associates must believe that they will benefit no

matter how long they stay with the firm Talk to them about leaving from the day they arrive

Partners must believe that they are valued Compensation system must value all contributions Pay attention to non-financial rewards

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Strategy for the New Age of More for LessStrategy for the New Age of More for Less• Articulate a clear global strategy – even if that

strategy is to be the best national or regional firm

• Ensure that clients are truly at the center of your vision – but in the way that clients understand their needs

• Be willing to acknowledge change – and to practice it, even when it is uncomfortable

• Be positive – because the future is coming to Africa!