A fresh approach helps a top 30 UK law firm increase PEP by 30%
Our client was a top 30 UK law firm with 100+ partners turning over more than £100 million. The client had a few international offices and was also a member of an international alliance. Following a change at the top, net profits were starting to become reasonable, but profit per equity partner (PEP), though improving, was still significantly lower than its pre-downturn peak.
In common with many other law firms, the client had tried to deal with the economic downturn primarily by focusing on cost reduction through headcount cuts – which it achieved via several rounds of redundancies – and looking at merger opportunities.
Although there was also much talk about new revenue generation, most of the benefit had come from the cost reduction measures. There were very limited changes to the way business was conducted. One TCii team member summed up the situation thus: “The market has changed fundamentally, but the way the client runs the business has not … The cost cutting has helped, but in reality has just given them breathing space … Now is the time to address the real issues that are vital for sustainable, profitable growth.”
What we did
Our first action was to ensure that the equity partners understood that a new market situation demanded a change in the way the business was run, and that progress was dependent on them accepting and supporting this.
Next, we looked at the firm’s strategy. While key priorities had been identified, the implementation had been slow and did not have the full support of key staff. One example was some early-stage discussions that had taken place regarding a potential merger with a firm whose key strengths all lay in highly competitive areas that had been shrinking.
When we examined the rationale for those discussions, it became clear that the only benefit of the merger would have been in the area of cost reduction. The deal would have left the basic issues in the business largely unaddressed, so it was no bad thing that the merger plans were shelved. However, if the merger had potentially been a good move, it would likely have failed due to a lack of support from key staff.
In parallel, we set up a project to isolate the critical success factors for future progression. This included the possibility of mergers. This time, however, we developed a set of criteria against which all future candidates would be assessed on the basis of the value they could add to the business.
A significant part of the client’s business came from SMEs. To serve this market, we worked with the client to develop a set of fixed-price packages, which we helped to launch via a series of promotional announcements, seminars and networking events.
We introduced a client relationship management (CRM) software system with training for all client-facing staff, and helped to create individual client management plans for the top 100 clients. To do this we had to gain a deep understanding of the client’s own business development plans and associated needs. With our advice and guidance, the client embarked on a programme of proactive cross-selling.
We identified a number of large companies with international operations as potential clients, along with a significant opportunity within several emerging markets. The client worked with us on an initiative to secure direct arrangements with relevant firms in these areas. This process took around nine months to complete. With our advice and guidance, the client organised a series of targeted meetings and communications, initially with existing clients, to raise their awareness of these connections and the work that could now be run via our client’s UK offices.
We instituted our own watching brief on the new “Tesco law” competitors, and on our recommendation the client firm set up its own market intelligence operation. As a result, we were able to work together to evaluate the competitors’ offerings and develop appropriate responses. This process was subsequently extended to a top 20 list of key traditional competitors.
Finally, we helped the client to organise a comprehensive programme of internal briefings and feedback loops to fully inform all staff members of the new strategy and approach, and their personal role in implementing them. This included helping them to understand that they all represented the firm and all had part responsibility for promoting it. This was an essential step, as there had been, in some areas, an attitude of “I didn’t join the firm to be a salesman”.
After 18 months the client’s revenue growth rate was double that of the previous period, PEP was up by more than 30%, and total profits had increased by 24%.
For more information on how we can help law firms to grow profitably:
- Read our case study Mentoring helps a breakaway legal firm to launch successfully in adverse market conditions.
- Find out about Legal Leverage™ – our specialist service for legal practices.
- Email us or call us on 020 7099 2621.