Much has been written about the growth of American law firms in London and the number of overworked and overpaid young lawyers (“Junior lawyers count high cost of long hours”). Great readingJanuary 4) and (Opinionn, 5 January).
It’s a good thing that a little sunlight is shining on a sector that has historically largely lived in the shadows. But there are broader strategic issues at stake.
The underlying reason for the growth of American firms is the strength of their local market, the US’s position as the world’s largest provider of private capital and the willingness of its regulators to pursue evildoers around the world. It is these deep structural factors that give American firms such a strong advantage.
As a result, the average pay for partners at top US firms is almost double that of UK firms. The resulting market pressure has indeed led to changes in the lockstep compensation model. But changing the way you cut the cake is culturally challenging and turns the focus inward. This rarely makes the cake bigger.
Despite years of effort, the top UK firms could not grow strong US businesses, either organically or through mergers. And it is this failure that has enabled American firms to dominate in London in much the same way that has happened in other areas of financial services such as investment banking. The few British firms that ran an American merger are certainly stronger than they would otherwise have been.
The issue of burnout for younger attorneys is separate, but is inevitably driven by intense competitive pressure. It reveals a failure to address certain basic inefficiencies in how law firms manage their teams and how they deliver their services.
Even on the most complex projects, there are large amounts of basic administrative, process and meticulous work that can be done cheaper and more efficiently outside London. Some firms have started moving this work to places like Belfast, Glasgow and Manchester, but there is still a long way to go. And the sector was as slow to invest in technology as it was to embrace modern people-management practices.
Top law firms are by any standard highly successful businesses. The challenge, of course, is to persuade skeptical partners who are paid large sums of money that their business model needs significant change.
Former Senior Partner, Ashurst
London SW17, United Kingdom