Navigating a Brave New World

David B. Wilkins, the faculty director of the Harvard Law School Center on the Legal Profession, and Maria Jose Esteban, a lecturer at ESADE-Universitat Ramon Llull, argue in the lead story of this issue of The Practice, “The Reemergence of the Big Four in Law,” that the accounting firms are aggressively moving into legal services as part of their wider efforts to offer clients so-called integrated business solutions, particularly in Europe and the emerging economies. This trend is accompanied by more-general disruptions in the legal profession. Increasingly sophisticated clients are demanding much more from their law firms for much less, including problem solving that straddles across disciplinary lines, such as law and business, technology, and strategy (see “A Global Age of More for Less”). Regulatory changes have also opened the door to alternative business structures and unconventional modes of operation (see “Disruptive Innovation in the Market for Legal Services”). Moreover, the increasing reliance on quality metrics and other output-based performance measures are upending traditional ways of measuring work. And globalization has created not only new markets to do business but also new players that are increasingly challenging established ones on their home turf. As a result of all these changes and challenges, law firms are faced with the urgent question of how to adapt to a legal marketplace in the midst of disruption and reinvention.

Below we review some of the innovations that are occurring in light of the shifting legal marketplace by highlighting initiatives being undertaken by the U.K.-based law firm Eversheds—a firm that the Financial Times’ 2015 Innovation Report ranks as one of the top 10 game changers of the past decade.

Old—and new

On the surface, Eversheds looks very much like a traditional law firm. Formed in 1988 through a four-way merger, the London-based firm employs nearly 1,200 lawyers spread over 55 offices around the world. It has partners and associates. It has close to £400 million in revenue. It offers a traditional set of legal services, ranging from M&A work to real estate transactions to IP litigation to corporate law. As the firm says on its website, “We regularly advise on billion-dollar deals and high-profile cases on behalf of the world’s most powerful corporations and financial institutions.”

However, through a series of pioneering projects, Eversheds is attempting to move beyond traditional conceptions of what a law firm is and what a law firm does. In a recent interview with The Practice, Graham Richardson, the head of Eversheds Consulting, one of the firm’s most innovative initiatives, explains, “Eversheds is big law—a traditional big law firm. But at the same time, we’re trying to show that we can deliver new law solutions, because we found that is what our clients want.”

One of the chief ways the firm is innovating is through the development of a consulting practice, which offers diversified services that go beyond straight technical legal work. Richardson says that Eversheds Consulting was formed to answer a basic question: “How do we broaden the range of services that we provide to general counsel and their companies in ways that will deliver the services that they really want and need?” Describing the formation of the consulting arm, which was officially launched in 2010, Richardson says:

The genesis of Eversheds Consulting goes back to the global financial crisis. Post-2008, the profession was going through a lot of turmoil. Growing top-line revenue was hard as there were too many lawyers chasing not enough work. Bryan Hughes, the chief executive, and I were discussing this, and we thought we needed to broaden the range of services we provided. We thought this would help us deliver clients what they really needed. It would also help us grow revenue, differentiate ourselves, and hopefully equip us to grow.

Eversheds Consulting offers a number of tools, all of which seek to move the firm beyond the traditional practice of law by providing a suite of consulting services. Consulting services are offered across four main sectors: strategy, process, and technology; corporate risk and compliance; human resources; and financial services regulatory compliance. In describing both what these services entail as well as why they have been so popular with clients, Richardson explains that general counsel is required to deal with a host of issues, but they frequently don’t have the in-built training or deep knowledge base to address them in holistic ways. He gives the example of how to best utilize technology in the operation of an in-house legal department. “If you ask general counsel what problems keep them awake at night that they didn’t get trained for at law school, many will say technology. We help them with things they were not trained for because we bring in people who have different skills than lawyers—management consultants, process people, technology people—but with the common thread that they all work in the legal space.” In this sense, Eversheds Consulting is attempting to move beyond straight legal offerings while doing so in the context of the firm’s deep legal background. For Eversheds, it seems to be paying off: Eversheds Consulting counts major companies, including Tyco, DuPont, Lloyds Banking Group, Qatar Foundation, and Walt Disney, as clients.

Lawyer consultants—or consultant lawyers?

How is Eversheds able to accomplish this and move beyond technical legal work? For one, it creates unique teams of lawyers and specialty consultants. By pairing lawyers and specialty consultants together, Eversheds is able to leverage its deep knowledge of law with adjacent needs. Indeed, it does not take a large leap of imagination to see that Eversheds Consulting is very much approximating what Wilkins and Esteban noted as a main goal of the Big Four in upping their legal functions—offering globally integrated business solutions that span law, business, finance, tax, technology, strategy, and other core areas of concern. Unlike the Big Four, however, by bringing subject-matter expert consultants directly into a law firm context and teaming them up with the firm’s experienced lawyers, Richardson explains that the firm can “deliver new solutions within a big law environment.”

Second, the firm actively recruits and employs nonlawyer professionals to sit alongside and work with lawyers. Take Jonathan Townend, a consulting director. Although he is not a trained lawyer, having come to Eversheds from IT consultancy work, he has deep experience in technology and how to integrate it with company goals. Or consider Leigh Smith, a management consultant. Like Townend, Smith is not a trained lawyer; however, she held senior-level positions in consulting and business practices for more than a decade before joining Eversheds Consulting. By bringing talent in from places other than law, there is a recognition that client demands often bleed across traditional disciplinary boundaries—and, to the extent that they do, solutions will likely require diverse perspectives.

It should be made clear that while nonlawyer consultants at Eversheds are internally considered on the same level as traditional law partners, they do not carry the partner title or have equity in the firm (likely due to regulatory restrictions). While in the United States and other fully closed legal markets there are currently few formal avenues to building true multidisciplinary practices (see “Speaker’s Corner”), it remains to be seen whether law firms will use alternative business structures (ABSs) in the United Kingdom and regulatory openings in other countries as they expand their professional offerings. As of this writing, neither Eversheds nor any of the United Kingdom’s Magic Circle firms have thus far applied for ABS.

Growing competition

As emblematic of this growing competition between the accounting firms and the law firms, there is an increasing war over talent. The Big Four may have many advantages (see “Life in the Big Four”), but law firms are fighting back. As a case in point, Eversheds Consulting recently hired away a former Ernst & Young partner and a former KPMG partner to head up its new financial services regulatory compliance team—a move that generated significant attention in the legal press. The team is geared toward working on a range of governance and risk issues. Paul Worth, the head of Eversheds’ financial institution group, explains in a statement announcing the hires:

The true differentiator here is that we will have lawyers and consultants under the same roof. The growth of the financial services regulatory consulting practice has already seen the firm winning work which otherwise would have gone to the “Big Four” accountants or risk consultants. This is a natural evolution of our financial services regulatory practice and provides us with the unique ability in the market to be a “one-stop shop” for regulatory advice and assistance to our clients. Where appropriate, it will also enable the client to rely on legal professional privilege, which is something the accountants and risk consultants cannot provide.

It is an open question as to whether clients will prefer the integrated solutions offered by the Big Four or those increasingly being offered by innovative firms such as Eversheds. What this move does seem to reflect is that both sides recognize that insofar as clients are seeking integrated solutions, there is an urgent need to incorporate and integrate more adjacent services and functions to their core businesses. And that means finding talent, wherever it is and in whatever form it comes.

Special services—Eversheds Agile and Ignite

In addition to Eversheds Consulting’s onsulting work, the arm has spearheaded the launch of two specialized products: Eversheds Agile and Eversheds Ignite. Begun in 2011, Eversheds Agile provides interim legal consultants to in-house legal teams on a flexible basis, building its base of lawyers from Eversheds alum. Recognizing the importance of the emerging economies, in June 2015 the firm announced Agile would be rolled out in Hong Kong and Singapore with an initial pool of 20 to 30 lawyers.

In addition to Eversheds Agile, in 2015 the firm launched Eversheds Ignite. According to the firm, Ignite is geared toward providing in-house legal teams a means to outsource high-volume, low-risk work, including states of work, nondisclosure agreements, renewals and extensions, short form agreements, and lower-value supplier contracts, in a managed way, led by Eversheds lawyers and consultants. Late last year, the firm signed a deal with Communisis, a communication company, to transfer its in-house legal team to Ignite.

Creating culture

While developing a consulting practice within a law firm may make business sense, it is not without its challenges. “One of the major challenges in delivering new law offerings within a traditional law firm structure,” Richardson says, “is making sure that there aren’t too many clashes.” He notes that when the firm was first setting up the consulting arm, “one lawyer said to me, ‘Isn’t going into consulting just dumbing down?’ Only a lawyer would say something like that!” Wilkins echoes this sentiment, quipping, “Only lawyers divide the world into lawyers and nonlawyers. And there are a lot more of them than there are of us!”

As a result, Richardson knew that to be successful, the firm would need to get the buy-in of the mainstream Eversheds lawyers. “One of the firm’s key strategies was to achieve buy-in,” he explains, “and, to help the process along, bring key law partners into the consulting arm.” To do this, Richardson recruited a banking lawyer and a litigator from the firm—both of whom were senior players and at the top of their games—to the consulting practice. He tells a story of how a law partner had the opportunity to do some compliance consulting work but didn’t know many of the new people—particularly the nonlawyers—on the consulting team. He did, however, know the litigating partner as they had worked together for 10 years. This provided the wider consulting team the context and trust necessary to do the work (see “Teamwork and Collaboration”). Richardson explains that getting buy-in from senior lawyers and transitioning with them to consulting was critical in forming the link between the lawyers and the consultants and bridging any potential cultural or trust gaps.

If you’ve got a compliance consultant and you put them next to a financial services regulatory lawyer, and lo and behold, they do work with each other and share opportunities.

Graham Richardson, head of Eversheds consulting

More-direct culture integration was also important to fostering collaboration and building trust between lawyers and nonlawyers. On the one hand, it would have been easy to segregate the new initiative and the nonlawyer consultants off into some corner office. On the other hand, that risked ghettoizing Eversheds Consulting in ways that risked defeating the very purpose of it before it was off and running. If the purpose was to offer extended services to clients, it was critical to get lawyers and consultants working together. “To get the integration going,” Richardson says, “it was quite helpful to have people in the same building. We made a physical effort to integrate consultants by placing them near relevant lawyers. If you’ve got a compliance consultant, you put them next to a financial services regulatory lawyer, and lo and behold, they do work with each other and share opportunities.”

What’s next?

What should one make of all this? While the Big Four may be moving into spaces traditionally occupied by law firms, law firms are not going silently into the night. To diversify their services and increase top-line revenues, as well as to respond to clients demanding more-integrated problem solving, innovative firms like Eversheds are leading the way toward combining deep legal expertise with nonlegal offerings. Others are following suit. For instance, in 2014, Mayer Brown launched a consulting arm in Asia, hiring an international trade advisory team. Similarly, in 2015, DLA Piper announced the formation of a new corporate advisory arm, dubbed “Noble Street,” which will focus on financing, corporate, and M&A activities within the media, entertainment, technology, and sports industries. Other firms will most likely follow in their footsteps. Through all these initiatives, however, critical questions remain, including the extent to which law firms will be able to deeply integrate nonlegal products into their traditional business cores, whether due to regulations or internal cultural norms. Nevertheless, it is clear that change has come to the legal services market, and the successes or failures of law firms going forward may well be defined by how well they grow and adapt—and by how well they can respond to client needs and demands.