Leading in uncertain times
“When there’s no change, you can just passively manage your business,” Wim Dejonghe observes with a smile as he and Managing Partner Andrew Ballheimer describe their first year in office and a momentous 12 months in the firm’s history.
“As a business, we’ve always thrived when faced with change. Sure, unpredictability is intimidating, and change can create uncertainty. But we’ve faced these challenges with confidence and embraced them as opportunities.”
The past year has been dominated by the Brexit vote and its somewhat chaotic aftermath, Donald Trump’s election, ongoing worries about global economic growth, worsening conflict in the Middle East, and the continued challenges unleashed by the disruptive forces sweeping businesses across sectors. It’s hard to imagine a more challenging environment.
Yet, despite global, political and economic turmoil, A&O has experienced a year of record-breaking growth crowned with a July announcement of a 16% increase in revenue to GBP1.52 billion. The firm’s performance, although flattered by currency fluctuations, has been built on a foundation of solid underlying growth.
Curiously, perhaps, the firm’s ability to deal with such a huge amount of change is, in part, down to continuity – a determination to stick to a well proven strategy that has served A&O increasingly well over the last ten years.
It’s that strategy that saw the firm invest through the downturn following the financial crisis to build its network of offices around the world – there are now 44 in 31 countries – at a time when competitors were halting expansion or actively retrenching.
It’s about creating what both leaders call a “hedged” and “diversified” business that can balance its leading financial practice with other top tier practice groups like litigation, antitrust and corporate, and a business that can remain strong both in the world’s main financial centres and, crucially, emerging markets as these mature.
Performance and market strategy
Since taking office, Wim and Andrew have set a number of new priority areas for investment.
“When you look at what the four largest economies might be in say the next 25 years… market commentators believe these will be the U.S., China, India and Indonesia – so again we’re talking about a long-term vision,” says Wim.
The U.S. is key and the firm has invested heavily in building its practice, recruiting 13 new partners from other firms. Revenues have grown by 32% and the firm has taken market share, but A&O remains a “collection of boutique practices” rather than the full service offering Wim and Andrew want to build.
“We have the quality,” says Andrew. “We now have to build scale because the U.S. is a big market, half the world’s legal market, in fact, as well as being extra-territorial in its regulatory reach. We’ve done very well so far, and we’re definitely looking to expand much further.”
That’s all the more important, they say, as there is growing competition between English law and New York law as the two legal systems that are most exportable and A&O needs to have a world-class and deep capability in both.
China and other emerging markets are a priority too. “We’ve been in emerging markets for 30 years and we’ve learned a few lessons,” says Wim.
“There is much more volatility in those markets, but if you take a long-term view the growth potential is substantially bigger than in the more established economies. So the future of the firm depends on building a credible presence in these diverse markets.”
A&O’s third priority is to continue to build-out its top continental European presence, notably in Germany and France, replicating the leading position it has already achieved in countries such as Spain and Italy.
While continuity has obviously been key to the firm’s success, there’s always a need to develop our strategy and forge new paths.
Nowhere is that more evident than in A&O’s development of its Advanced Delivery offering which has seen it build the Belfast Legal Services Centre, the Peerpoint contract lawyer business, MarginMatrixTM, the aosphere online legal services offering, the project management office and, this year, its tech innovation centre, Fuse.
In the past, client general counsels had to break up projects between different suppliers to achieve efficiency and get more service for less budget. Advanced Delivery means that A&O can bring all those elements back under one roof in a cost effective way – “a one stop shop solution” – with no loss of quality.
The Advanced Delivery offerings have grown rapidly in a very short space of time. They are all now profitable and, if taken together, generate revenues equivalent to the firm’s fifth largest office.
More importantly, this is a market-leading approach, stresses Andrew. “I’m not sure many or any of our competitors are doing anything on this scale, or this breadth. With each of the offerings profitable on a standalone basis, this is good business. More importantly, it is helping clients address their issues and agendas by giving them a composite offering of uniquely different solutions.”
Advanced Delivery, innovation and technology
The launch of Fuse is an extension of that solutions approach, bringing together A&O’s own legal technology experts with early stage tech companies and clients to work together in a dynamic working space within the London office to create relevant solutions in the closely connected worlds of legaltech, regtech and dealtech.
Since its announcement in April this year, nearly 90 early stage tech companies have applied to join the first cohort when Fuse launches in September. Separately, A&O has invested in Nivaura, a fintech start-up working on a bonds solution for small and medium sized companies using blockchain technology, which has since agreed to be entrepreneur-in-residence at Fuse.
“I would struggle to find an industry that is not subject to huge change because of technology,” comments Wim. “As a lawyer that creates challenges and opportunities, and we’ve seen a lot of interest from clients because Fuse is a great opportunity to get a different, deeper perspective on the innovations that can change business. I’m really excited about the opportunity that this will generate in the next couple of years.”
Both are incredibly proud that the partnership with Nivaura and the development of Fuse and MarginMatrixTM were ideas that people within the firm identified as opportunities. The key, they say, is to create a culture where people feel confident to bring ideas forward and know that, if they look promising, the firm will back them.
Andrew emphasises the importance of this to a global law firm. “We’ve strived to encourage a culture where people feel empowered to voice their ideas, and to build successes for themselves and the firm, even if that occasionally means having the courage to fail. This spirit of innovation creates a fantastic energy in the firm and we want to keep encouraging it.”
Getting the working environment right takes innovation too.
“Our business is all about our clients and our biggest asset is our people,” says Andrew. “We want to have the best people, the happiest, the most supported, the brightest, clearly, and we want to be as inclusive and as diverse an environment as possible.”
He readily admits there are huge challenges here – particularly in terms of gender balance at partnership level – and that finding answers is taking longer than is ideal. “Our partners are split 18% female, 82% male, and yet our intake is 50% female. That means we are losing a lot of talent which is both wrong and bad business. There is no easy fix. So we have a whole series of initiatives to help us get to the root of the issue, find sustainable solutions and action change. We are determined to turn this around.”
“But what brings it together”, says Wim, “is that constant opportunity to develop people. We need to make sure that the platform remains attractive by offering the best training programmes, both in legal and non-legal skills, and I think it’s essential to be the best in class in our industry in doing that.”
One key area for development is leadership, and, in partnership with the international graduate business school INSEAD, A&O has launched its new A&O Leadership Centre, headed by Wim’s predecessor, David Morley. The focus is on developing the skills, qualities and abilities that leaders of the future will need to thrive in an uncertain world.
“The pace of change is accelerating and that means the quality of our leadership has to follow. We need to make sure the next generation does even better than we do,” says Andrew.
Another proud area of achievement for both leaders is the growth in pro bono work being done by the firm (up by 15% during the year) and the fantastic support people across A&O have given to the staff-selected refugee charity, War Child. The GBP500,000 fundraising target was quickly overshot and raised to GBP1 million.
“A&O is a major employer, a major institution, and we have a social obligation to put something back into the community,” says Andrew. Seeing that in action is very powerful.
“I was privileged enough to go to a couple of refugee camps that War Child looks after in Jordan – truly inspiring in terms of its work and truly humbling, frankly. Our GBP500,000 is literally transformative for hundreds of families. It is very important to both of us,” he says.
So how does the year ahead look?
“Exciting, but remaining volatile,” says Andrew. But he is convinced the 2017 results prove that the firm has the right presence across markets, the right product mix and the right mindset to remain highly agile. “A&O is in good health, happily.”
Wim agrees and says there is no reason why the underlying growth achieved by the firm this year should not continue.
“We don’t have a crystal ball but it’s quite clear that the uncertainty just becomes part of day-to-day life – it’s political, economic, it’s there.
“The performance of the business in the first couple of months of the new financial year gives me confidence that we are on track. But we need to remain vigilant and agile to make sure we are not caught by a surprise somewhere and are ready to seize opportunities as they arise.”
Wim and Andrew were interviewed by Simon Beavis in July 2017.
OF REVENUE FROM MATTERS INVOLVING TWO OR MORE COUNTRIES
“The pace of change is accelerating and that means the quality of our leadership has to follow. We need to make sure the next generation does even better than we do.”