External perception is becoming increasingly important to the UK's law firms, despite increasing worries about the launch of external 'voodoo valuations'. Georgina Stanley reports on the results of the latest Big Question survey

Law firms are putting increasing value on the external perception of their brands, according to the results of the latest Legal Week Big Question survey, despite lingering scepticism from partners regarding 'voodoo valuations'.

The survey, conducted in association with EJ Legal, follows the recent news that some of the world's top law firms are set to see themselves ranked by brand value in a new venture by the Managing Partners' Forum (MPF) and consultant Brand Finance.

More than half of the respondents (57%) said they believe brands have become 'very important' to law firms, with a further 40% agreeing that they have become either 'important' or 'fairly important'. Just 3% of respondents in the survey, which received nearly 200 responses, did not see brands as important.

Denton Wilde Sapte chief executive Howard Morris told Legal Week: "What is the difference between a company selling Coca-Cola and professional services? It is not a recipe or a product but it depends on the people and their ability. All top City law firms provide a very high-quality service and are interested in developing their brand because it gives them a way of differentiating themselves to clients."

Linklaters senior partner David Cheyne (pictured) commented: "Brand is absolutely crucial for any organisation. Your brand is what you do and you have to be careful that the work you do fits in with that brand and enhances it. Your brand reflects the business you do and the quality of your work."

Clive Gringras, head of internet and e-commerce at Olswang, said: "We have always seen brand as something central and separate to the financial reputation of the firm. Our brand and reputation are critical; it is a function of how we are positioned for next year. I think other firms are starting to see it as more important."

When it came to identifying the most important element of a law firm's brand, quality of clients and staff were clear winners, cited by 54% and 42% respondents respectively (see box, above). These were closely followed by a firm's 'market positioning', which was cited by 37% of respondents. In contrast, the least important factors were 'quality of management/quality of leadership' and 'staff retention'.

Partners responding to the survey were so convinced about the importance of market positioning in calculating the value of a law firm's brand that nearly two-thirds (61%) of respondents said firms categorised as 'magic circle' would carry a major premium. A further 35% said that the magic circle tag should raise a firm's brand value 'to a certain extent' while only 4% believed that it should make no difference in calculating a law firm's brand value.

Nigel Read, a corporate partner at Lovells, told Legal Week: "The magic circle has definitely benefited from the term 'magic circle'. It is self-perpetuating - which is good for those inside but tough for those outside. They have to decide whether their strategy will be to try and break in or work out another way to distinguish themselves."

Freshfields Bruckhaus Deringer intellectual property partner Avril Martindale (pictured) added: "It is a badge of quality. Our law firm is not a franchise operation - we want our clients to know that if they approach us in any office they will get a top-quality service.

"I do not think it is simply being branded 'magic circle'. The firms in that group are there because of the perceived quality of the service they offer."

Given how much significance firms are putting on brand value, respondents largely reacted positively to the planned rankings with 55% of respondents believing that it is possible to calculate a law firms' brand to a considerable extent (see box, left).

Similarly, respondents felt law firms would hold their own against the other professional services firms if they are judged by external investors. Fifty-nine percent said that law firms 'would do well' when judged against other professional services firms, though only 6% thought they would 'top the list'.

Gringras commented: "If you fast-forward to a time when law firms can sell equity and merge with other non-legal providers, it will be critical that when buying a stock you understand the value of the brand. ."

Read summed up the importance given to brands: "It has become vital to law firms. A good brand is associated with being a safe pair of hands - no-one will criticise you for going to a big brand - and that is why a lot of work tends to gravitate to the top six or 10 firms. For firms outside that list to become another viable choice, brand is vital."

What the respondents said:

Stand-out quotes:

"Market brand and perception is extremely important. Having worked for a number of international law firms and now working for a smaller national law firm I frequently have to refer to the names of my previous law firms to assure clients at the outset of a transaction that I have the 'perceived expertise' to advise. It is then frequently clear at the end of a transaction involving negotiations with lawyers from 'top' international firms that my 15 years of experience in the industry far outweighs that of the 1/2 year qualified lawyer from the 'top' international firm."

"Branding has become increasingly important over the last five years because we seem to have reached the stage where it is no longer possible for a firm to bullshit its way up the ladder. Quality counts, but it is just as important to have good management and enthusiastic partners and staff who buy in to the firm's goals."

On-the-record

"The problem with attaching value to the brand of a law firm is that it comprises the sum of many parts, and most of those parts have their own legs; whilst the brand can withstand the loss of some of the parts it can be easily damaged if too much goes. The stronger brands have institutionalised clients and business and protected market postitions and are accordingly less dependent on individuals."

Michael Greville, managing partner, Watson, Farley & Williams

"Lawyers have traditionally been reluctant to talk of brand in relation to legal practice. As clients increasingly shop around for consistent reliable quality across a broad range of legal service, brand is increasingly important. It takes years to create, constant effort to maintain and improve and can be lost in an instant."

Alan Jenkins, chairman, Eversheds

"The importance of brand will increase dramatically as clients and prospective clients consider the impact of the increasing power in the hands of regulators such as the FSA and under the new Companies Act, in terms of directors' duties. The ability of law firms to be perceived as credible advisers to their clients in these areas will have an effect on their ability to win work across the board."

Iain Young, Brodies

"While clients buy principally on the people they meet, brand allows a firm to "get in the door"; it also gives access to work that perceived lesser brands do not get. "

Keith Spedding, Shakespeare Putsman

"Brand value is no more or less than a return of our old friend goodwill, i.e. the propensity of clients to return to the business. Whatever it is called, it is fundamental to law firm planning."

Nick Mallett, Martineau Johnson

"I think it's particularly interesting and healthy that matters such as a law firm's values, culture and its stance on corporate social responsibility are now regarded as important elements of a distinctive and differentiating brand proposition."

Kim Walker, head of intellectual property, Pinsent Masons

"I believe firms that provide legal services have the same issues as other businesses and branding is very important.The name of a firm can be its quality mark, and being known to its target market is vital to its development. "

Clive Garston, Halliwells

"What really differentiates the top 20 or so UK law firms? I suspect that if you asked those same firms to write a list of their USPs, there would be a frightening amount of commonality. And where there is true differentiation, it is often very difficult to succinctly articulate what it is. Brand is increasingly important in a marketplace where you need to succinctly convey that differentiation - your message - and a strong brand says who you are, what you do, and how you do it. It defines your identity."

Mark Chester, Wragge & Co

"The answers will vary enormously according to the size, location and market position of the law firm and it's a pointless exercise to try to compare apples with pears..."

Jim Carter, head of ecommerce and technology ,Nelsons

The sceptics:

"Brand valuation is in my view nonsense. However it is clear that the peculiarities of the London legal market have meant that the 'magic circle' imprimatur creates a huge increase in value to the firms so bracketed. Whether it is really justified is extremely doubtful."

"It is quite painful sometimes to see the way that law firms' reputation is a trailing indicator - the market catches up very slowly. So firms which have long lost their pre-eminence are nonetheless picking up great instructions, and great firms building a niche for themselves still do worse as a result of the fact that "no-one got fired for using....". It's really sad, because, put purely neutrally, it should be more of a meritocrasy. However, the worst of it is that, to those in the know, even the directories are unbelievably fallible. They just write all sorts of nonesense, because the pieces are written by people who have nothing to go on except last year's guide and the puff presented to them by the law firms themselves - they aren't users of the services, and aren't really in a position to judge."

"Any attempt of an external valuation will either reinforce stereotypes or be ignorant."

"The Andersen brand didn't turn out to be worth much as distinct from its partners."

"Law firms brands are fairly well established in the market and I cannot see what this third-party approach would add, certainly at the top end. There may be some value if a firm is hoping to attract outside investment, but that is unlikely to be a top-end firm."

"I think that the problem with valuing law firm brands is that a brand is only as good as the partners' performance individually - particularly in a market in which clients increasingly shop around for individual specialists and are prepared to use different firms for different work."

"Sophisticated clients will have genaral counsel and legal teams who will usually have personal experience of various law firms which places them in a much better position to choose advisers than basing their choice on a third party's view of various law firms' brands."

"External shareholders in a legal services firm would face a task akin to herding cats but without the easy bits. If you have ever attended or participated in a partners' meeting it is readily apparent: (i) how diverse ,and slightly unchecked, we as individuals are; and (ii) despite this, how reluctant any of us would be to give up the reins of our particular organisation."

"It is more about the people - a brand can devalue rapidly - Andersens or Northern Rock. Concentrate on the right people first."

The converts

"I worked for 8 years in the market research industry as a lawyer and learnt that the valuation of brands is difficult and quite radical philosophies exist about the subject. For B2B services advertising which is the usual method of creating brand awareness, in fmcg or other consumer markets is next to useless. So it has to be done by other methods - being large enough to offer a complete range of the relevent services, getting known for doing that type of work, being in the right locations and hitting the radar of the referers is what matters.The brand depends on the quality of the client service provided at whatever level. This will determine the quality of client that is attracted. "

"Brand is not new, they live long in the memory. We all recognise the magic circle and even those not interacting with them praise the quality. Herbert Smith has had the premier reputation for litigaton since, forever! Is it all true? It doesn't matter, it is believed, and absent a disaster it takes a long time to dismantle. At DLA Piper we have recognised the brand internally for some time but there is a time lag for external validation. We are now beginning to enjoy the 'brand dividend'!"

"Well run premium brand law firms would be an excellent investment opportunity. Slaughter and May Limited would have given a much better return than most FTSE 100 companies."

"What lawyers think is very different to what outsiders think, so maybe a better judge of value is a customer. Above a certain level of competence branding is more important than technical ability."

"The 'brand' depends primarily upon the quality of the people providing the service. So there has to be a relentless focus on quality at all times to maintain it."

"I do not think that it is the size of a firm that matters, but its quality. The bigger the firm the greater the potential for the exposure of its brand, but niche practices can shine in their own markets. The brand represents a genuine chance to add lustre and to differentiate - it should represent a considerable part of a firm's value."

"The value of a partnership is the sum total of its partners. If the good ones go, so do the clients and so the value ascribed to the brand is materially dependent upon those who inspire client loyalty."

"Brands are not as important in a b2b environment as in a b2c environment. Relationships are still key."

"The major problem would seem to be that staff, partners and clients are all, essentially, transient. "

"A brand name can be the doing and the undoing of a firm. The good names are well known to lawyers and sophisticated clients. A well-respected name is of great value, both in terms of marketability but also in terms of results. Some firms are respected by other lawyers and the judges and it all helps their clients to get the best results."

Talkback: Which camp are you in? Is branding so much hot air, or can it make or break a firm? Post your comments here

External perception is becoming increasingly important to the UK's law firms, despite increasing worries about the launch of external 'voodoo valuations'. Georgina Stanley reports on the results of the latest Big Question survey

Law firms are putting increasing value on the external perception of their brands, according to the results of the latest Legal Week Big Question survey, despite lingering scepticism from partners regarding 'voodoo valuations'.

The survey, conducted in association with EJ Legal, follows the recent news that some of the world's top law firms are set to see themselves ranked by brand value in a new venture by the Managing Partners' Forum (MPF) and consultant Brand Finance.

More than half of the respondents (57%) said they believe brands have become 'very important' to law firms, with a further 40% agreeing that they have become either 'important' or 'fairly important'. Just 3% of respondents in the survey, which received nearly 200 responses, did not see brands as important.

Denton Wilde Sapte chief executive Howard Morris told Legal Week: "What is the difference between a company selling Coca-Cola and professional services? It is not a recipe or a product but it depends on the people and their ability. All top City law firms provide a very high-quality service and are interested in developing their brand because it gives them a way of differentiating themselves to clients."

Linklaters senior partner David Cheyne (pictured) commented: "Brand is absolutely crucial for any organisation. Your brand is what you do and you have to be careful that the work you do fits in with that brand and enhances it. Your brand reflects the business you do and the quality of your work."

Clive Gringras, head of internet and e-commerce at Olswang, said: "We have always seen brand as something central and separate to the financial reputation of the firm. Our brand and reputation are critical; it is a function of how we are positioned for next year. I think other firms are starting to see it as more important."

When it came to identifying the most important element of a law firm's brand, quality of clients and staff were clear winners, cited by 54% and 42% respondents respectively (see box, above). These were closely followed by a firm's 'market positioning', which was cited by 37% of respondents. In contrast, the least important factors were 'quality of management/quality of leadership' and 'staff retention'.

Partners responding to the survey were so convinced about the importance of market positioning in calculating the value of a law firm's brand that nearly two-thirds (61%) of respondents said firms categorised as 'magic circle' would carry a major premium. A further 35% said that the magic circle tag should raise a firm's brand value 'to a certain extent' while only 4% believed that it should make no difference in calculating a law firm's brand value.

Nigel Read, a corporate partner at Lovells, told Legal Week: "The magic circle has definitely benefited from the term 'magic circle'. It is self-perpetuating - which is good for those inside but tough for those outside. They have to decide whether their strategy will be to try and break in or work out another way to distinguish themselves."

Freshfields Bruckhaus Deringer intellectual property partner Avril Martindale (pictured) added: "It is a badge of quality. Our law firm is not a franchise operation - we want our clients to know that if they approach us in any office they will get a top-quality service.

"I do not think it is simply being branded 'magic circle'. The firms in that group are there because of the perceived quality of the service they offer."

Given how much significance firms are putting on brand value, respondents largely reacted positively to the planned rankings with 55% of respondents believing that it is possible to calculate a law firms' brand to a considerable extent (see box, left).

Similarly, respondents felt law firms would hold their own against the other professional services firms if they are judged by external investors. Fifty-nine percent said that law firms 'would do well' when judged against other professional services firms, though only 6% thought they would 'top the list'.

Gringras commented: "If you fast-forward to a time when law firms can sell equity and merge with other non-legal providers, it will be critical that when buying a stock you understand the value of the brand. ."

Read summed up the importance given to brands: "It has become vital to law firms. A good brand is associated with being a safe pair of hands - no-one will criticise you for going to a big brand - and that is why a lot of work tends to gravitate to the top six or 10 firms. For firms outside that list to become another viable choice, brand is vital."

What the respondents said:

Stand-out quotes:

"Market brand and perception is extremely important. Having worked for a number of international law firms and now working for a smaller national law firm I frequently have to refer to the names of my previous law firms to assure clients at the outset of a transaction that I have the 'perceived expertise' to advise. It is then frequently clear at the end of a transaction involving negotiations with lawyers from 'top' international firms that my 15 years of experience in the industry far outweighs that of the 1/2 year qualified lawyer from the 'top' international firm."

"Branding has become increasingly important over the last five years because we seem to have reached the stage where it is no longer possible for a firm to bullshit its way up the ladder. Quality counts, but it is just as important to have good management and enthusiastic partners and staff who buy in to the firm's goals."

On-the-record

"The problem with attaching value to the brand of a law firm is that it comprises the sum of many parts, and most of those parts have their own legs; whilst the brand can withstand the loss of some of the parts it can be easily damaged if too much goes. The stronger brands have institutionalised clients and business and protected market postitions and are accordingly less dependent on individuals."

Michael Greville, managing partner, Watson, Farley & Williams

"Lawyers have traditionally been reluctant to talk of brand in relation to legal practice. As clients increasingly shop around for consistent reliable quality across a broad range of legal service, brand is increasingly important. It takes years to create, constant effort to maintain and improve and can be lost in an instant."

Alan Jenkins, chairman, Eversheds

"The importance of brand will increase dramatically as clients and prospective clients consider the impact of the increasing power in the hands of regulators such as the FSA and under the new Companies Act, in terms of directors' duties. The ability of law firms to be perceived as credible advisers to their clients in these areas will have an effect on their ability to win work across the board."

Iain Young, Brodies

"While clients buy principally on the people they meet, brand allows a firm to "get in the door"; it also gives access to work that perceived lesser brands do not get. "

Keith Spedding, Shakespeare Putsman

"Brand value is no more or less than a return of our old friend goodwill, i.e. the propensity of clients to return to the business. Whatever it is called, it is fundamental to law firm planning."

Nick Mallett, Martineau Johnson

"I think it's particularly interesting and healthy that matters such as a law firm's values, culture and its stance on corporate social responsibility are now regarded as important elements of a distinctive and differentiating brand proposition."

Kim Walker, head of intellectual property, Pinsent Masons

"I believe firms that provide legal services have the same issues as other businesses and branding is very important.The name of a firm can be its quality mark, and being known to its target market is vital to its development. "

Clive Garston, Halliwells

"What really differentiates the top 20 or so UK law firms? I suspect that if you asked those same firms to write a list of their USPs, there would be a frightening amount of commonality. And where there is true differentiation, it is often very difficult to succinctly articulate what it is. Brand is increasingly important in a marketplace where you need to succinctly convey that differentiation - your message - and a strong brand says who you are, what you do, and how you do it. It defines your identity."

Mark Chester, Wragge & Co

"The answers will vary enormously according to the size, location and market position of the law firm and it's a pointless exercise to try to compare apples with pears..."

Jim Carter, head of ecommerce and technology ,Nelsons

The sceptics:

"Brand valuation is in my view nonsense. However it is clear that the peculiarities of the London legal market have meant that the 'magic circle' imprimatur creates a huge increase in value to the firms so bracketed. Whether it is really justified is extremely doubtful."

"It is quite painful sometimes to see the way that law firms' reputation is a trailing indicator - the market catches up very slowly. So firms which have long lost their pre-eminence are nonetheless picking up great instructions, and great firms building a niche for themselves still do worse as a result of the fact that "no-one got fired for using....". It's really sad, because, put purely neutrally, it should be more of a meritocrasy. However, the worst of it is that, to those in the know, even the directories are unbelievably fallible. They just write all sorts of nonesense, because the pieces are written by people who have nothing to go on except last year's guide and the puff presented to them by the law firms themselves - they aren't users of the services, and aren't really in a position to judge."

"Any attempt of an external valuation will either reinforce stereotypes or be ignorant."

"The Andersen brand didn't turn out to be worth much as distinct from its partners."

"Law firms brands are fairly well established in the market and I cannot see what this third-party approach would add, certainly at the top end. There may be some value if a firm is hoping to attract outside investment, but that is unlikely to be a top-end firm."

"I think that the problem with valuing law firm brands is that a brand is only as good as the partners' performance individually - particularly in a market in which clients increasingly shop around for individual specialists and are prepared to use different firms for different work."

"Sophisticated clients will have genaral counsel and legal teams who will usually have personal experience of various law firms which places them in a much better position to choose advisers than basing their choice on a third party's view of various law firms' brands."

"External shareholders in a legal services firm would face a task akin to herding cats but without the easy bits. If you have ever attended or participated in a partners' meeting it is readily apparent: (i) how diverse ,and slightly unchecked, we as individuals are; and (ii) despite this, how reluctant any of us would be to give up the reins of our particular organisation."

"It is more about the people - a brand can devalue rapidly - Andersens or Northern Rock. Concentrate on the right people first."

The converts

"I worked for 8 years in the market research industry as a lawyer and learnt that the valuation of brands is difficult and quite radical philosophies exist about the subject. For B2B services advertising which is the usual method of creating brand awareness, in fmcg or other consumer markets is next to useless. So it has to be done by other methods - being large enough to offer a complete range of the relevent services, getting known for doing that type of work, being in the right locations and hitting the radar of the referers is what matters.The brand depends on the quality of the client service provided at whatever level. This will determine the quality of client that is attracted. "

"Brand is not new, they live long in the memory. We all recognise the magic circle and even those not interacting with them praise the quality. Herbert Smith has had the premier reputation for litigaton since, forever! Is it all true? It doesn't matter, it is believed, and absent a disaster it takes a long time to dismantle. At DLA Piper we have recognised the brand internally for some time but there is a time lag for external validation. We are now beginning to enjoy the 'brand dividend'!"

"Well run premium brand law firms would be an excellent investment opportunity. Slaughter and May Limited would have given a much better return than most FTSE 100 companies."

"What lawyers think is very different to what outsiders think, so maybe a better judge of value is a customer. Above a certain level of competence branding is more important than technical ability."

"The 'brand' depends primarily upon the quality of the people providing the service. So there has to be a relentless focus on quality at all times to maintain it."

"I do not think that it is the size of a firm that matters, but its quality. The bigger the firm the greater the potential for the exposure of its brand, but niche practices can shine in their own markets. The brand represents a genuine chance to add lustre and to differentiate - it should represent a considerable part of a firm's value."

"The value of a partnership is the sum total of its partners. If the good ones go, so do the clients and so the value ascribed to the brand is materially dependent upon those who inspire client loyalty."

"Brands are not as important in a b2b environment as in a b2c environment. Relationships are still key."

"The major problem would seem to be that staff, partners and clients are all, essentially, transient. "

"A brand name can be the doing and the undoing of a firm. The good names are well known to lawyers and sophisticated clients. A well-respected name is of great value, both in terms of marketability but also in terms of results. Some firms are respected by other lawyers and the judges and it all helps their clients to get the best results."

Talkback: Which camp are you in? Is branding so much hot air, or can it make or break a firm? Post your comments here