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How should commercial law firms measure success?

The industry itself has settled on the “PEP number” — annual profit-per-equity-partner. But this measure is irrelevant to the buyers of legal services, who want long-term, big picture thinking from their lawyers. In fact, a focus on PEP tends to result in the opposite approach.

“The legal profession has a fundamental problem with short-termism,” says Simon Levine, global co-chief executive of DLA Piper. Partners’ reluctance to divert their annual earnings towards experimental long-term investments means normal business activities — such as innovation or research and development — are too often negligible.

However, two big law firms seem to have worked out how to sidestep this short-termism and the constraints of the partnership model, in ways that clearly show how the legal business is metamorphosing.

One of them is Levine’s firm. DLA Piper has set up Aldersgate Holding, a wholly owned subsidiary, to invest in new technology and allied activities, such as blockchain and litigation funding. Although funded by the partners, it has the autonomy to be far nimbler than law firm management teams.

“I genuinely don’t think people will achieve true innovation unless they can reinvest into longer-term projects,” says Levine. As a former media lawyer whose clients included The Beatles, he says his experiences inspired him “to think more broadly and creatively. I’ve applied that not just to legal problems but also to broader challenges”.

The other firm, Allen & Overy, set up the Markets Innovation Group (MIG) in 2018 to encourage a more “start-up” culture and to invest in long-term projects. Unlike DLA Piper’s venture, it sits inside the firm but MIG is treated like a client. Lawyers’ time spent on MIG projects can be recorded as billable hours, thanks to a system specially developed by the MIG and A&O’s finance team.

Now a multidisciplinary 30-strong team, MIG has £5m this year to invest in firm-wide projects. “It has transformed an unstructured approach to research and development into a structured approach, allowing us to scale up our R&D while scaling down individual risk,” says David Wakeling, the partner leading MIG.

Both Allen & Overy and DLA Piper have a history of investing in business lines alongside traditional legal practice. Aosphere, Allen & Overy’s online risk management business, has been operating for 20 years. DLA Piper, under Levine, has set up a “change council” to drive radical change. Lawyers are assessed partly on their contribution to the change agenda, and most have been trained in design-thinking.

With its emphasis on experimentation and the end user, design thinking has been adopted by many leading European law firms as a way to help change mindsets. Even smaller continental firms, such as Gómez-Acebo & Pombo, have set up design centres that streamline the way lawyers draft contracts and use tech.

Similarly, blending legal services with other offerings is becoming the norm in many firms. Some, such as listed law firm DWF, are putting integrated services at their core. Others, such as Dentons and Norton Rose Fulbright, offer integrated services to selected clients. The John Lewis Partnership, the UK retailer, recently used Dentons’ Helix mix of different services for a fixed fee.

That leading firms want to transform how lawyers approach their work is particularly evident in the proliferation of environmental, social and governance (ESG) groups.

For many, these provide a way to get over internal silos and reflect how giving legal advice can no longer be a passive service. Lawyers must consider not only commercial context, but issues such as climate change and social impact. Osborne Clarke is formalising this approach in its “3D” client service model, in which lawyers consider transformational trends when giving advice.

Lasting effects of the pandemic

The pandemic accelerated many changes, not least digitalisation and working from home. Sharing knowledge is one of the hardest challenges for law firms, so Spain’s Garrigues has introduced a single digital platform where it carries out all its work and can capture, analyse and use its institutional expertise.

Mixing up office and homeworking is now in favour. Such a shift would have been unthinkable before the pandemic, yet legal firms are now borrowing ideas, such as agile working, from tech and engineering. Pinsent Masons has rolled out lean working principles — in one case cutting a due diligence process down from 12 months to eight weeks.

Transformation is under way but the word itself “can put people off,” warns Alastair Morrison, the partner in charge of driving change at Pinsent Masons. “This is more about the legal business regenerating — what you are looking for is the outcome,” he says. “You want people to look at the firm in three years’ time and say, the firm has regenerated itself.”

Most innovative law firms in Europe 2021
RankLaw firmSubmissions scoreUse of data & tech scoreTotal scoreHQ
1Winner:* DLA Piper13845183UK/US
2Allen & Overy13250182UK
3Freshfields Bruckhaus Deringer13346179UK
4Pinsent Masons13345178UK
5Addleshaw Goddard13145176UK
6Hogan Lovells13045175UK/US
7White & Case13141172US
9Herbert Smith Freehills12941170UK/Australia
9Simmons & Simmons13040170UK
12Travers Smith12937166UK
13Baker McKenzie11448162Global
15Taylor Wessing12139160UK
17Winner:** Gide Loyrette Nouel12629155France
20Norton Rose Fulbright11138149UK/US
20Paul Hastings11336149US
22Womble Bond Dickinson11333146UK/US
23Vieira de Almeida11627143Portugal
29McCann FitzGerald9729126Ireland
30Gómez-Acebo & Pombo10220122Spain
*Winner of the FT Innovative Lawyers 2021 award for ‘Most innovative law firm in Europe’
**Winner of the FT Innovative Lawyers 2021 award for ‘Most innovative law firm headquartered in Europe (outside the UK)’
Awards based on RSGi scores for the firm’s six highest scoring submissions (maximum possible 180 points) and a score based on a survey of the firm’

Case studies in best practice

Researched, compiled and ranked by RSGi. ‘Winner’ indicates the organisation won an FT Innovative Lawyers Europe 2021 award

Law firm transformation

Law firms are starting side businesses, exploring new sources of investment and rolling out digital initiatives.

Law& is a DLA Piper brand launched last year as part of the “radical change” strategy under way at the global firm. Already, Law& has been involved in projects including Aldersgate Funding, a litigation fund, Toko, a digital asset platform that uses blockchain, and Aiscension, an AI tool for mass document review. Law& has prompted projects that are improving internal efficiency, including use of data to inform corporate partners’ pricing decisions. By creating subsidiaries and using DLAb Virtual, its own crowdsourcing platform, DLA Piper has speeded up project launches.

Pinsent Masons
Adam Marsland heads the Pinsent Masons team applying Lean Six Sigma management principles to finance and projects groups at the firm. The aim is to improve efficiency and remove waste through better project management. So far, this has reduced clients’ costs by up to 60 per cent with improvements such as cutting the time taken for document reviews by 75 per cent. Marsland leads the training of lawyers in agile principles, working across the firm and in Vario, its consulting arm.

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Allen & Overy
The Markets Innovation Group led by David Wakeling set up an internal investment fund to raise capital for research and development. The aim is to centralise innovation investment rather than seek funds for individual projects on an ad hoc basis. The MIG is treated as a client and other parts of Allen & Overy are credited with income for hours they contribute. The group raised £5m in 2020 and has been used to test 14 ideas, of which three are set to come to market.

The firm launched Helix, pitched as a cross between a traditional legal practice and managed legal services. Helix specialises in commercial, employment and real-estate law and works closely with clients to provide data insights, legal advice and project management. Services are charged on a fixed-fee basis. Clients report up to 20 per cent savings on previous panel expenditure.

Mileway, Europe’s biggest last-mile logistics company, faced increasing demand and needed to simplify its real estate portfolio. DWF called on Mindcrest, its legal managed-services business, and Connected Services, its consulting division, to deliver an integrated technology, process and legal advisory solution.

Among other benefits, Mileway was able to collaborate seamlessly with DWF’s lawyers, leading to faster turnrounds, notably a streamlined tenancy verification procedure.

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Freshfields Bruckhaus Deringer
The pandemic led Freshfields to reconfigure its digital transformation strategy. Moves included creating a machine-learning team, launching a new regulatory management platform, and upgrading tools such as its due diligence platform. Some 900 Freshfields lawyers and business services professionals were appointed as digital advocates to share best practice and efficiencies.

Osborne Clarke
The firm’s new “3D client strategy” blends legal skills and services with sector specialisms and three “transformation drivers”: sustainability, digital transformation and urban dynamics (covering topics such as how cities are changing). The transformation drivers cut across practice areas and the firm will report revenue against them. Osborne Clarke is also building a software engineering team to create its own legal tech solutions.

A global platform called GarriguesNet was unveiled last year to manage client matters and handle internal communications. The platform gives a single point of access to the firm’s apps and data, which are accessible via search and chatbots. Garrigues says GarriguesNet has increased digital literacy across the firm, and improved productivity and the ability to cross-sell.

Gómez-Acebo & Pombo
The firm has launched a centre of excellence to support contract drafting, which includes people skilled in word processing, design and contract templates. The system allows lawyers to focus on speedy drafting, while leaving the presentation and design to experts, which cuts the time required overall.

Norton Rose Fulbright
The firm has set up a legal operations consulting arm within NRF Transform, its global change and innovation programme. It offers a “health check” tool for in-house legal teams to use to assess operational maturity and to offer tech vendor-agnostic advice. The team includes people trained in law, management consulting, video-game design and neuroscience. Revenues for the team quadrupled in 2020.

Research methodology: Europe 2021

FT Innovative Lawyers Europe 2021 is a ranking, report and awards scheme for lawyers based in the region. The Financial Times and its research partner, RSGi, have devised a unique methodology to rank lawyers on innovation. Law firms and in-house legal teams were invited to make submissions.

The categories focus on different areas of legal practice, business and operational management, inclusion and ESG issues. The categories and examples featured in the report are drawn from submissions and nominations from law firms and in-house legal teams. Each submission is researched and scored out of 10 for originality, leadership and impact, giving a maximum score of 30 (scores for each individual entry are not shown in the report). In addition, law firms were asked to complete a questionnaire on use of data and technology. Each of the 12 questions was scored out of five and benchmarked against peers in the region.

Top-ranked submissions in each category are featured as mini case studies and shortlisted for the FT Innovative Lawyers Europe 2021 awards. Some 493 submissions and nominations were received from 111 law firms and 71 in-house legal teams. RSGi researchers assessed them and interviewed clients, senior lawyers, executives, and experts between July and September 2021.

Most innovative law firms in Europe 2021: The ranking showing the “most innovative law firm in Europe” and “most innovative law firm in Europe (non-UK)” is based on each firm’s aggregated scores for its top six submissions plus the score for the firm’s use of data and technology. Firms could make up to seven submissions. Awards were given for the top-ranked firm in Europe and the top-ranked firm headquartered in Europe outside the UK.

Most innovative in-house legal teams in Europe 2021: Research focused on four areas of a corporate legal department: strategic and risk advice; legal operations; people and skills; and sustainability and ESG. The list of five outstanding in-house legal teams is a selection based on each team’s performance in the report and is based on the sum of scores for all submissions ranked in the report.

RSGi: Formerly RSG Consulting, RSGi has a record of devising ranking methodologies for professional services firms. RSGi researchers on this report were: Reena SenGupta, Yasmin Lambert, Mary Ormerod, Tom Saunders, Esther Osibodu, Andrew Popov and Anne-Marie Grigorescu.

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