The following interview is with Stephen J. Immelt, CEO of global law firm Hogan Lovells, which spans 47 offices in 24 countries, comprising over 2800 lawyers. In it, we broach topics ranging from the primary challenges facing today’s global firms and the trajectory of the non-lawyer skill set to the impact of technology, the Big Four and the challenges that the Magic Circle have faced in attempting to plant roots in the U.S. market, and more.
On the Top Challenges Hogan Lovells Faces Today
Parnell: What are the top areas of focus for succeeding in the market right now?
Immelt: I would say the key strands of it are, first of all, to be able to offer first class execution in the global markets. The clients that are doing cross-border work tend to be more sophisticated clients and they say they expect to be working with people that are top of market people and if you can't offer that then you're not going to be successful.
The second strand is just to be relentless in pushing people to be at the leading edge of whatever they're doing.
The third strand is sector focus. In other words, deep industry expertise and a kind of breaking down our silos and bringing people together across the different practices so clients are getting a much more joined-up approach.
I think finally, we feel like we're pretty good at trust-based relationships internally and externally. And I think that's one of the ways that we were able to make our combination work is that's a skillset of ours.
On the Structure of Hogan Lovell’s Practice Portfolio
Parnell: How is your practice portfolio set up? What is the structure?
Immelt: We go to the market and we try to manage our client relationships through the sectors. Practices are where people are trained. So, we still think it is relevant that you've got to learn how to be a litigator, on how to lawyer a transaction. You need to have those practices as a place where people are managing careers and making sure that they're developing the skills that they need and that you're staffing matters appropriately. All those things still happen in the practices. And then the offices are where people go every day. You've got to manage this matrix and it requires a huge amount of communication and collaboration across the organization.
On P&L
Parnell: Do any of those strata have their own PNL?
Immelt: No. We look at it but we try to get everybody focused on the firm P&L. But of course, you'll look at your practice to try to get a sense of how they're doing and you need to look at where is the work coming from? So, you want to really encourage people to be anywhere across the different offices and practices; litigators, typically they're busy or highly profitable, but usually, they depend on others to give them work.
On Commoditized Work
Parnell: I'm assuming that you do at least a level of commodifiable work. And it is my assumption that you do it as perhaps a means to an end, getting a foot in the door...
Immelt: You know, we do some of that. It varies market by market because we're in some markets where just the nature of the market is such that more of the work is, I would say routine. And there's less of the high-value work for you if you're going to be competitive for that, you've got to be in the market and be visible in terms of the U.S. market. I think there are some places around the edges where we may pursue that strategy, but it's a tough strategy. In turning this into a profit center isn't a part of our strategy right now.
On Technology Affecting Clients
Parnell: You said something earlier about external tech and how it's affecting the clients. It's an interesting perspective…
Immelt: Imagine if you're an automotive company. They, for decades, thought of themselves as people that made machines and were very engineering driven. And how do you put the machine together? You have this global supply chain and now suddenly you've got all these technology issues that may completely transform their business and may make it easier for somebody to show up and offer a competing product. It’s autonomous driving, it’s connected cars, you've got all this data that may allow you to draw all sorts of insights - where the people you sold these cars are going and what they're doing - so that's an example of a very traditional industry that is having a huge transformation because of technology.
On Positioning Themselves Within Clients’ Strategic Value Chain
Parnell: What are you hearing from the clients on this, specifically? How are you working within that reality?
Immelt: For example, A lot of clients are trying to understand how they use their data, how do they develop a data strategy. Our position to clients is “yeah, but you really need us to be involved the whole way because if you develop a data strategy that's not compliant, what good is it?” And so again this is a way of, I think, trying to engage with sophisticated clients in a way that shows that we, as lawyers, can not only help them avoid a problem, we can help them get a better strategy that's going to put them in a better position in the marketplace.
On the Trajectory of Nonlawyer Skill Sets in the Law Firm
Parnell: This has me thinking about consulting, working with non-lawyers, because what you're talking about, or at least what I'm hearing, is a kind of an expansion of services.
Immelt: I think that it is too early to tell whether those non-lawyer resources are going to sit in a law firm instead of sitting in a consulting firm, where the law firm works with them. So, you have to take technology or privacy or cyber – which are all very hot areas today — and you have the technology aspect to it. I don't think though that our view is “hire us so that we can do an audit of all your technology”; I’m not sure that's the business I want to be in. But we may want a team with those people to really provide a holistic view of the client's risk profile.
On Challenges the Magic Circle Has Faced in Setting up in the U.S.
Parnell: Some of the magic circle firms have had some real challenges over the years getting something up and running over in the U.S. What are your thoughts on that?
Immelt: Well, I think that those firms are great law firms and they've got very strong cultures. But I think they've really struggled to translate those cultures to the United States. And I think they have historically seen their natural partner as being an elite New York firm. But I don't think the elite New York firms have seen a reason why that was something that made sense for them.
So that, I think, has created a limited view of what could make sense.
On Getting Critical Mass
Parnell: So, what’s the answer to that? The best way to go about gaining a critical mass?
Immelt: I think you've got to commit to being a global law firm. I think one of the things that has given us some strength in our approach is we're a “global law firm."
We don't have a headquarters. We're going to manage this firm with a team that is drawn from all over the world. That's a different proposition than saying “hey, the good news is you get to be part of an English law firm.”
On the Big Four
Parnell: Now what are your thoughts on the Big Four?
Immelt: Well they certainly have resources. There's no question about that. I think KPMG has revenues in the $25 billion range. There is a resource level there and the ability to invest in things like technology and support that I think does give them advantage.
I think they are, nevertheless, going to struggle in this country with attracting talent. Maybe they'll just overcome that by paying very large amounts to attract the talent. I suppose that's possible. But when I think about what is it that lawyers gravitate toward, I think they like to have some degree of autonomy in what they do.
On the Big Four Recruiting Talent Out of Big Law
Parnell: Obviously, there's a spectrum of lawyer quality in any law firm. But with regard to the Big Four recruiting them, you're talking about the best of the best?
Immelt: There is, but how many times have I been told over the years by clients “we don't pick law firms, we pick lawyers.” And I think that there is a nuance to that. Of course, they want to say the client wants to pick the leader for that matter that is the right fit for them. They don't just say “call up and give me whoever you've got.” So of course, that's right. But the law firm matters too because they want their lead to be surrounded by a team that is going to be supportive and supported. And today lots of matters require not just one person, not just a lead, but 10, 15 supporting lawyers. You can't do an M&A transaction without a CFIUS expert or tax expert or a benefits expert and the client needs to be comfortable that the lead has got those resources.
On Whether or Not the U.S. Legal Market Will Liberalize
Parnell: Do you see the U.S. bar liberalizing any time in the near future?
Immelt: I don't see what would drive it. You look at it; it's still very highly decentralized. I mean, 50 different regulators. I think at times that creates inconsistencies that are pretty frustrating. do I think that California is really going to embrace the idea that there ought to be a single bar for the entire country? I'm skeptical.
On the Protection of Legal Consumers
Parnell: Through a certain lens, there's a dichotomy in the spectrum of legal consumers: those that are complex and those that are wholly unsophisticated. And I think it makes relevant the question, should the bar continue to protect all legal consumers?
Immelt: To me, what would be a more interesting question is not whether it's going to liberalize in the sense of kind of create a single bar, which some people do ask about, but instead is there going to be a move to say “we're going to have a different type of provider that's going to be called something other than Juris Doctor? They get a year or six months of legal training and a rent mall and they become a housing specialist or something like that. Personally, I think that there could be a huge benefit to that type of approach which will allow some people's legal problems to be handled by admitted lawyers who just have very specialized training in that one little area of practice.
About the Author
Along with being the co-founder of the Legal Institute for Forward Thinking and the founder of partner search and placement boutique True North Partner Management, David J. Parnell is an American Lawyer Fellow and a business of law author, columnist and speaker.