How to make a law firm float

I wasn’t sure what to expect at the head office in Melbourne of Slater & Gordon Limited, the world’s first publicly traded law firm. Bear in mind that the CBA Legal Futures Initiative and law societies across Canada are now actively studying what impact, if any, non-lawyer investment would have on Canadian law firms. The UK allowed non-lawyer investment in 2011, while Australia has permitted outside investment in law firms since 2001. Since 2007, Slaters has been listed on the Australian Stock Exchange.

The office had a segregated and enclosed reception area off to the side of the main lobby of a 30ish-storey office tower. No fussing about searching for the firm on a tenant directory board. It wasn’t until I was vetted by the very pleasant receptionists that I was issued a security pass and directed to the appropriate floor for my meetings.

Most clients, however, will start their Slaters experience with a phone call. And this is where the firm begins to stand apart from its Canadian cousins. Typically Slaters will receive 70,000 to 80,000 enquiries each year related to 30 areas of law, including family law, real estate, employment law, personal injury, criminal law and dispute resolution; all handled initially by specially-trained call centre staff. 

Many law students begin their legal careers in the Slaters call centre with the hope they’ll be hired as lawyers after admission.  Some law graduates choose a career path that begins in the call centre and moves upward through that part of the business, never practising law. Whatever the career decision, the call centre provides an excellent training ground for asking the right questions to quickly triage the client, understand the issues and determine whether the client is appropriate for Slaters.

And make no mistake, Slaters is quite particular about the type of client it acts for — a significant proportion of these inquiries are screened out. Because the firm is so relentlessly focused on attracting the right client, like many other consumer-facing businesses, Slaters takes data analytics very seriously, mining and then using that data in a structured and emerging way. Clients and potential clients are segmented by many different factors such as age, employment, or area of residence. Understanding client needs at different life stages, for example, allows for better cross-selling of legal products.

Better use of data also creates the ability to better fix fees. Slaters charges fixed fees for a large portion of the legal services it delivers, so it’s important to not only select its clients wisely, but also to get its pricing right.

Reminiscent of retail business strategies employed by many Canadian companies, the firm’s IT integrates with its business processes. “We focus first on creating the best business process and workflow,” Jonathan Pangrazio, Group Head of IT told me. “Then we build IT around that process. Our goal is to be the most technically enabled legal services business in the world.” How many Canadian law firms say that?

Slaters’ Melbourne firm is progressively moving toward the open concept, though lawyers still sit in closed offices for now.  As I was wheeled around the premises, I was struck by the distinct lack of discussion about hard-core law. In a Canadian firm, I would’ve been shown the corporate department and regaled with all the important deals that group had been a part of, then shown the litigators and their trophy clients, the famous partners in their corner offices, etc. At Slaters the focus is on making the business of law run better. There’s an implicit understanding that quality legal service is a given — and expected.

That’s not to say that lawyers are an afterthought at Slaters. But gone are the days when you could bill insane hours to guarantee partnership — because there’s no partnership to be a part of. Lawyers are advanced, and rewarded, using a “balanced scorecard” approach that’s a combination of financial performance (the firm’s and the lawyer’s), contributions to brand and marketability, contributions to nurturing and developing others within the firm, and contributions to the intellectual capacity of the firm (read: KM contributions).

Career paths within Slaters are variable depending on the desires and skills of the lawyers. As managing director Andrew Grech said, “We don’t churn through lawyers. We prefer to elongate the careers of lawyers we’ve invested in.” At many law firms, he continued, “lots of talent gets lost along the way, so we have a number of different roles within Slaters. In essence, we addressed what we didn’t like in traditional law firms.”

What also makes Slaters stand apart is how it manages its business — it doesn’t believe in hierarchy when it comes to good ideas. “We run with ideas based on merit,” Grech says, “not who came up with them, and our external board of directors brings a refreshing dimension to our decision-making and strategy.” Fear of failure doesn’t seem to be part of the Slaters culture. “If you’re not constantly trying lots of different ways to do business,” Grech says, “then you’re not trying hard enough.”

The firm’s executive team also understands that investors prefer to minimize risk and maximize gain. As a result, Slaters is built around two simple principles that are alien to a traditional law practice. “We have no rock stars here who can hold you over a barrel,” Grech says. Nor is the firm beholden to one or a small number of clients. “As a result, we have little key client risk and little key lawyer risk.”

And investors certainly like the returns they’ve seen from Slaters so far. The firm was listed in May 2007 with an initial share price of AUSD$1.00, which quickly jumped to AUSD$1.32 on opening day. By mid-December 2013 it was trading around AUSD$4.30.    

How to make a law firm float?

As I rode the tram back to my hotel, it seemed to me that the key takeaways from my Slater & Gordon experience were that firms interested in attracting outside investment need to:

1. Focus on process
2. Invest in IT that supports that process
3. Elongate and provide variable careers for people the firm has invested in
4. Remove key client risk
5. Remove key lawyer risk
6. Create a unique client experience
7. Adopt a culture of continuous improvement

All of this is counter-intuitive to most Canadian lawyers who continue to believe that a successful legal practice can rely solely upon providing quality legal services.

Can the same approach be adopted by firms not interested in attracting investment?

Why not?