Case study: Getting to grips with growth

Top-100 law firm Weightmans recently restructured its business lines. Here the firm assesses its growth strategy – identifying the factors behind success and future priorities, but also the problems that can result.

The business of Weightmans LLP has grown significantly in the past two years. The firm’s heritage is litigation – mainly for insurers – but in 2007 it restructured into three business lines: commercial, public sector and insurance.

Turnover has increased from £32m to year end 2005 to £44m to year end 2007. Headcount has risen from 560 in May 2005 to 760 in May 2007. Profit per equity partner (PEP) has risen from £200,000 to £290,000 over the same period, during which total (fixed-share and equity) net profit has risen from £7.95m to £12.40m. This article asks why this has happened; whether it is necessarily a good thing in all respects; and whether the growth is likely to continue.

The following is not exhaustive and is in no particular order, but it represents the ten main factors behind Weightmans’ growth.

Education and communication

A fundamental reason for the growth is communication of two important principles. First, that the law firm is a business. Second, that it is the duty of the partner to make his or her maximum contribution to that business, and that contribution not being confined to fee-earning work. Neither of those principles is radical or terribly innovative in modern law-firm practice. But it is important to communicate and educate, and not to make assumptions about any partner’s understanding of what the role involves. The majority will tend towards client work and getting hours on the clock. They will need to be persuaded that managing people and clients, developing products and raising profile can be just as, if not more, valuable.

A continuous process

Once you have undertaken the initial education and communication it is necessary to do two things: carry on believing and communicating the consistent message, and highlight success and good behaviour. A firm must not have a blitz on training and then put the manual away for a year. It is important to keep coming back to key points or themes.

People working together

Growing a business is difficult – and daunting. At Weightmans growth has been achieved by lawyers working together with other lawyers, management heads and members of the IT team. Combined practice has become a prized behaviour. Teamwork is lauded. Tenders and presentations are now project managed, and success is a shared firm or team experience. Very rarely do you see partners refusing to allow others into the client relationship. That has happened because of a positive reaction to the culture we have created by the messages we send out, and also – probably – because of a recognition that most of the work we do for major clients requires a huge amount of infrastructural support.

Lateral hires

Growth has not really been on the back of the acquisition of partners bringing in their own chunks of business. In relative terms, lateral hire numbers have been unspectacular. In 2005 we decided that buying business by hiring partners was not a successful strategy. We now look to bring in people who will fit the culture of the firm; who are prepared to work together to build business; and who are in for the long term. Some of the lateral hires that have joined the firm in the last two years will bear fruit in the next two to three years. What they have already done, however, is send a very strong and positive message about the direction and the momentum of the firm. Internally and externally, for example, we are now seen as a credible offering in commercial work. We have grown our public-sector offering from litigation to a fairly wide base in health, local government, police and fire. This is one of the reasons growth is likely to continue in the future.

Management information

We have focused almost exclusively on turnover growth. I do not say that is a good thing. We are now realising that it is probably not. In the wake of this, various problems have arisen, outlined below. We need more of an emphasis on quality, not just quantity; profit, as opposed to simply turnover. But we now have a level of turnover and volume of business that means we can make some significant differences to how the business is run. We are in the midst of reforming our management of information (MI) and this will pay dividends in the future. MI is crucial to financial, client and performance management. Although we are far more open about what people see in terms of the firm’s facts and figures at all levels, we are still relatively unsophisticated about how we manipulate our data and use MI to drive change.

Client, practice area and sector growth

In the past the firm grew on the back of client growth, and that still applies to a certain extent. For example, we saw the business of SIF and MMI grow in the late 1980s to mid-1990s, and we were on those panels and reaped the rewards of the positions. We have also seen some spectacular growth in fee income from one or two clients over the past two to three years. In a nutshell, the positions of our three business lines are as follows:

Insurance has grown because of a declared strategy to be the dominant national law firm, which our people have really bought into. We have invested hugely in this area, whereas some firms have become less interested;
Public sector work has diversified away from just litigation, and has developed products such as expertise in ASBOs and fraud, healthcare advisory and clinical negligence, and has maintained its position as the leading provider to police forces. We are now on several consortia for the provision of legal services and set up the mutual for many London authorities this year. Growth here has been hard work, with much investment of money, time and energy;
Commercial has been tasked with growing to critical mass stage and has achieved that goal. We now have a good platform to build on.

The well-managed practice

For many years there has been a commitment to managing the practice well and not simply focusing on what the lawyers are billing. We are still on that arduous journey, but the fundamental point is that if people really understand what the business is trying to achieve, they will generally do their bit to help get there.

Most of our legal teams are quite highly geared, with a manager being responsible for perhaps 15 people, including support staff. The initial focus in the management role was the delivery of an income budget. Our perception and expectation has moved on over the past 12 months, however, and there is now a wider appreciation that to grow the firm we have to do everything properly.

We have tried to communicate that all aspects need to be right to grow the business and all must play their part. For example, it is no good having success in tenders if you cannot recruit good people to do the work. It is no good selling to clients who want online reporting if you do not have the resource in IT to deliver that. HR, marketing and IT have all become integral to the growth of the business – not just an emergency service called on when the lawyer or partner realises he is struggling. We are not there yet, but we are committed to being a well-managed practice and are currently reviewing many processes so as to become more efficient.

A dynamic organisation

When I became managing partner a colleague in another law firm said that one of his firm’s key strategies was simply to carry on doing things. I do not agree entirely and unequivocally. But one of the reasons the firm has grown in the past two years is that people are trying to do things. They are networking; raising their profile and that of the firm; and diversifying – looking to bring people into the firm. Activity is infectious, and we now see it throughout the organisation.

People are no longer as fearful or resistant to change as they once were. Indeed most recent changes – for example, to the website and the firm’s structure – have been almost universally welcomed. There is now recognition among the partners that we are a commercial organisation and not a traditional law firm. You cannot have an appetite for change and then require partner approval all of the time.

Results

Growth is dependent on investment and it is necessary to be confident to invest. Poor investments lead to a loss of confidence and a lot of unproductive cleaning up to do. The law is a fragile business, and a big part of the ongoing progress in a firm is achieving good results year on year, so you can keep improving terms and conditions. A dip in results, not just PEP – although that is clearly also an issue for investors – sets the firm’s growth strategy back. We have seen it vividly in our attempts to establish a commercial presence in Manchester, which is only now re-establishing a foothold.

It is important to preach the gospel of growth and success. It is an aspect that came to us rather late. We are still too quiet and retiring about our achievements compared to other firms. Internal PR is hugely important. It is multifaceted, but fundamental that people know what is going on in the organisation. And clients like to see their law firms doing things – big cases; having respected opinions on topics; and carrying out corporate-social-responsibility activities.

The single biggest factor in growth, however, is partner behaviour, and if the majority of the partners are on board and on message, then those leading the practice areas and the client relationships have a greater chance of successfully growing the business.

Has growth been good for the firm?

Growth has helped to raise profile and morale and given critical mass to key areas. It has enabled the firm to invest in structures and systems. We are now embarking on major investment in IT and knowledge management, for example.

Growth has also revealed lots of flaws and deficiencies in the infrastructure of the practice along the way, however, and some of those have been painful. We underestimated the importance of system compliance, for example, and even now individuals embark on small and large projects without thinking through the consequences.

The main implications of growth have been financial, however. We have underestimated the working-capital requirements, and have failed to have due regard for management disciplines in various areas. When you send a message that it is good to grow and a large number of people pay heed to the message, it is difficult to prioritise. All parts of the business are at different stages of development. Some will take perhaps three years to deliver a return on investment. In a relatively low-margin business the ability to grow in these areas is finite and restricted. We have not been sufficiently rigorous about saying no in some areas. You can end up with a relatively high number of business units that do not deliver profit in any financial year, which reduces your margin and causes strain on the cash flow.

But it is difficult to put the brakes on growth. The rising headcount is housed in expensive accommodation, which means long leases and liabilities etc. We decided in the second half of 2006 that we had to be more focused on managing for profit and the cash implications of running the business. Growth also meant that the structure of the firm had to be addressed. We were too flat, with a structure that had practically all roads leading to the managing partner.

Will growth continue?

It often seems that growth is an imperative, but it is clearly possible to grow in the wrong ways. At the moment we probably need a little more emphasis on growing quality rather than quantity, but growth has given us a different perspective on the potential of this business. We now have many opportunities to improve what we do for our clients, developing brand and market position. We are also much better placed in the employment market. We can offer better opportunities for people who want to make a career at the firm.

It is easy to get carried away and say that we will see between 15 and 20 per cent growth over the next two to three years just because of where we are now. We are living in relatively prosperous times. The legal market seems to be expanding in terms of revenue. The definition of legal services seems to be widening. Relations with clients do seem to be moving further towards partnering in a true business sense.

So if we can add value, which is very much about having good-quality people, then all should be set for further growth. We do not see this as coming from large rises in hourly rates, however, and price sensitivity is an issue in most of what we do. But we do see increased prospects in winning work as a result of competitive tendering; enhanced relationships with clients; improved PR and brand; and most importantly, as a result of attracting and retaining the best people we can get.

This is an ever more complex business, with lots of pressures, a rapid pace of change, and management theorists on every street corner telling you what to do. We have benefited immensely from the assistance we have received from some. But if you bring in a good person to a do a job for the firm, that person will be productive and help you to build the business. That is the first immutable law of growth.

Patrick Gaul is managing partner of Weightmans LLP. He can be contacted at patrick.gaul@weightmans.com