Strategy in the Law

Volume 3 • Issue 4 • May/June 2017
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Selling a Strategy

The rollout of Clear Blue Water at Linklaters

A recent Harvard Law School case study, “Linklaters: Seeking Clear Blue Water,” examines one British firm’s experience implementing a new strategic initiative. The piece, written by Ashish Nanda and Lauren Prusiner, explores the challenges of both devising a well-aligned strategic approach and securing buy-in from a diverse partnership.

The lead-up

Linklaters, which according to its website was founded in 1838, began expanding internationally in the 1970s. In 1998 the firm transformed into a “global law firm aligned with global clients, having a global footprint and practicing many laws.” By the time managing partner Tony Angel presented his “Clear Blue Water” strategy to the firm in 2004, Linklaters was already recognized as one of the top law firms in the world, operating offices in 22 countries and placing 11th among the “global elite” firms.

In order to reach this mark, Linklaters underwent a massive expansion. In the few years preceding 2004, the percentage of United Kingdom–based partners was nearly halved from 80 percent to roughly 40 percent. Unsurprisingly, this dramatic expansion posed challenges to the firm’s cultural integration. As one partner noted, “We need to structure the firm consistently and align our offices to our strategy. Right now our strategy is not sufficiently clear to all our partners.” Another partner remarked:

The fracture lines of the recent mergers need time and attention to heal. We have not paid enough attention to the healing. We have had too strong an emphasis on profitability, and have cut down on social retreats. Partners have responded to management pressure for profitability by distancing themselves from management and from one another. The mood is not enthusiastic; it is subdued—too much talk about numbers. There is a lack of trust within this partnership.

One point of contention within the firm was over whether to attempt to develop a top-notch U.S. practice. Some partners felt that the strength of American firms would make it almost impossible to achieve anything close to market leadership. Among those who favored U.S. expansion, there was disagreement over whether to grow organically—an approach the firm had been pursuing—or to instead merge with an American firm. Partners worried that leading American firms boasted markedly higher profits per partner than Linklaters and other Magic Circle firms and that the firm’s “lockstep” compensation structure—in which all partners of a given tenure level are paid equally, regardless of individual performance—would fail to attract top-tier American lawyers.

In the few years preceding 2004, the percentage of United Kingdom–based partners was nearly halved from 80 percent to roughly 40 percent.

The firm also struggled with how to manage performance. Nowhere was this more evident than in the internal debate over partner compensation. Some partners credited much of the firm’s success to its lockstep compensation system, while others questioned its continued utility given the wide range in the profitability of different offices internationally.

Partners voiced their objections and defenses of the status quo of the firm’s performance management along other lines as well, including questions over retirement, lateral recruiting, and underperforming partners. Some favored asking underperformers to leave, which the firm eventually did in the early 2000s. Others lamented the departures as disruptive, damaging to the culture, and fostering insecurity.

What is a case study?

A case study is an educational tool that allows students to analyze a factual situation confronting an individual or organization. Case studies, which are historically accurate, address topics such as the evolution of an organization’s business model, cooperation within teams, a corporate lawyer navigating his turbulent career, or a difficult merger between two law firms. Cases are not meant to provide definitive answers but instead to show multiple points of view and highlight the complexities and ambiguities of particular situations.

The rollout

In the midst of these internal debates, in June 2004 Tony Angel unveiled “Clear Blue Water—A Vision for Linklaters in 2007” (CBW), an internal strategy paper. CBW boldly asserted the firm’s intention to “achieve market leadership amongst global law firms within three years” to ensure that “we are always the first choice legal provider of premium work for premium corporate and financial clients globally.” To that end, the plan called for a focus on high-end work, geographic alignment of the firm with its core clients, tripling the size of the U.S. practice, and a sizeable increase in profits per partnership share (“profits per part”). CBW concluded with an equally bold pronouncement:

There is nothing that is beyond our capability or too weighty to be supported by the foundations we have built.… As a firm, we suffer from a lack of confidence in ourselves and our abilities. This is manifestly unjustified as our excellent reputation and strong performance in league tables and on transactions demonstrates.… We need to focus on our destination of market leadership and the need to put clear blue water between ourselves and our competitors…

Some partners took offense to what they perceived as the imposition of CBW by Angel through fiat. The strategy was presented as a finished product, without an opportunity for preliminary discussion among the partnership regarding the best approach to pursue. Although Angel subsequently tried to win buy-in from the partnership, organizing numerous meetings with groups of partners, some believed that implementation was already underway and that any discussion thereafter would be purely academic. Other partners wrote off critics as simply resistant to change and afraid that the existence of a plan signaled a clear path to change.

Profit versus culture. Given CBW’s insistence upon achieving £50,000 profits per part, an increase of £15,000, some saw the strategy as prioritizing profits over culture and quality of life. One partner worried that “[t]he drive for profit is threatening congeniality. When congeniality disappears, lawyers become solo practitioners instead of partners.” Another agreed, asserting, “We are in a cultural crisis. We need more confidence. We need common principles people share and can live with.” Some expressed concern that senior partners, who were already stressed and exhausted, would conclude that they could not be worked any harder and instead opt to quit.

Some criticized the widespread fixation upon the £50,000-per-part profit goal. “Although CBW is a detailed 11-page document, it is amazing how many partners have latched on to the goal of £50,000 profits per part as the paper’s only message,” lamented one partner. Another emphasized his belief that profit was merely the metric, not the goal. Firm leadership echoed this view, clarifying their belief that “profit is expected to be an economic consequence of market leadership.… Achieving high profits is not a strategy; to be the leading global firm is.”

Although Angel subsequently tried to win buy-in from the partnership, organizing numerous meetings with groups of partners, some believed that implementation was already underway and that any discussion thereafter would be purely academic.

Others questioned whether market leadership and high profitability were necessarily intertwined. As one London partner said, “Market leadership is not about market share, nor is it solely about profit. It is about the quality of our clients and the quality of our work.” Another recounted, “I didn’t want to become a Linklaters partner just for money. I wanted to do high quality legal work of which I can be proud.”

Local versus global. Outside the London office, partners worried about whether “market leadership” entailed turning down local clients in favor of more-global clients. One partner viewed CBW’s directive as markedly less extreme, explaining his view that the decision of how best to balance local and global clients would be left to local practice leaders and that the results would look different for each individual office and practice.

Why does it matter—and what should we make of it?

Ultimately, Angel realized that to achieve strategic reform, he needed to share his broad vision rather than sell his detailed plan. The name “Clear Blue Water” was eliminated, but the approach remained similar. Instead of a unilateral rollout, the plan was put to a vote and won overwhelming approval. The £50,000-per-part profit goal was retained, but Angel clarified that this was merely a metric. Market leadership remained the goal, though tempered with the recognition that it would be practically impossible to achieve in every market.

One year later, in 2005, revenue was up 5 percent and profits had climbed an impressive 25 percent. For Linklaters, it came to be understood that premium work entailed work with a global focus that involved multiple offices. This was where their competitive advantage lay. The more offices a given matter touched, the more profitable it was for the firm. Linklaters worked to redirect lower-value work to other providers, severed ties with satellite offices that produced a drag on profitability, and saw many partners who were discontented with the new approach leave the firm. Culturally, the firm was stronger than ever. The defections meant that the firm’s remaining partners were productive and excited about the high-performing culture. The once-stunning £50,000-per-part profit goal had been met, not in three years but in two.

This case study illustrates the important role that strategy can play in defining a law firm’s vision, improving its market position, and ensuring coordination between numerous global offices. It also highlights the challenges faced by management in attempting to secure buy-in from line partners, many of whom perceived Clear Blue Water as an unwelcome disruption. Although the partnership of a global law firm could not function like an Athenian democracy, Angel learned, neither could his strategy succeed through unilateral effort. Ultimately, to ensure the smooth implementation of a strategic pivot, it is important that management invite feedback from the partnership writ large.

Strategy in the Law Volume 3 • Issue 4 • May/June 2017

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