The birth of global law firms and radical reform are luring more consultants to target the legal profession. Charlotte Edmond canvasses a sceptical profession to find out what they can bring to the table.

"A consultant is a man who asks you for your watch and then tells you the time with it."

Probably one of the more polite descriptions by one managing partner of the band of consultants circling law firms as the recession batters a profession that had grown used to unbroken growth.

Though the legal sector has not been a major target for the consultancy industry until very recently, there are an increasing number of widely varying consultants aiming to advise firms on everything from marketing, client relationship management, IT general strategy and everything inbetween.

The irony is that while consultants see an opportunity in a profession possibly facing substantive change as clients alter their buying habits and the impact of the Legal Services Act becomes apparent, law firms have become, if anything, more cynical about consultants.

A recent survey by Legal Week of partner perceptions of consultants underlined this jaded view, with 42% of respondents saying the standard and contribution of consultants that specialise in advising law firms was merely 'OK'. A further 30% thought they were 'not very good', while 6% rated them as 'poor'.

H4 Partners' Alan Hodgart (pictured) believes this cynicism reflects the variable standard of those who have targeted the UK legal sector. He says: "I'm not surprised that lawyers are cynical – there are a lot of people out there with no management or consultancy training and you wonder what they are doing."

However, if you look past lawyers' default disregard for other professionals, many senior lawyers concede that, with common sense and a clear brief, consultants can make a valuable contribution.

It is also plain that lawyers hold contradictory attitudes towards consultants. For
example, the above survey found partners were generally less impressed by non-legal consultants than those that specialise in acting for the profession. Yet partners also rated bluechip consultants McKinsey & Company and Bain & Company as among the top names, despite both consultants having attracting mixed reviews for their track record in the legal industry.

The appropriate snake oil

As views vary greatly on the contribution of consultants, so do the context in which law firms engage them. For some it is a case of having an external sounding board. Many firms appreciate the value of having an independent adviser able to take a business-wide view and gather opinions without those being consulted feeling they will be judged on what they say.

Giles Rubens, a London-based consultant at Hildebrandt, comments: "We are often brought in to test to some extent whether the client's perception of the issue really is the issue. And if it's not, you have to be able to tell them it's not – and tell them what is."

Tony Williams (pictured) of Jomati agrees: "I like to see a lot of our work as an agony aunt role for the managing partner or practice heads. People like to bounce things around with someone externally." However, the sounding board approach remains a tricky balance to get right with many partners being cynical about instances in which managing partners bring in an external adviser to validate what they want to do anyway. By consensus, this approach tends to breed mistrust on both sides and injects needless complication – and expense – into law firms' decision-making.

As Ted Burke, chief executive of Freshfields Bruckhaus Deringer, warns: "It's important you bring in consultants to add value not just to lend credibility to a decision you have already made."

Hodgart also advises law firms thinking of bringing in a particular consultant to look at the advisers' long-term relationships and references, which is probably the clearest indication of expertise.

What partners are less likely to admit to is the fairly common practice of using consultants as a means of soaking up market intelligence – sometimes without paying for the privilege.

As one managing partner puts it: "I go out for lunch with them all from time to time and see what I can glean about what my rivals are doing – and check they are not trying to nick my clients with some fantastic fee deal. Basically, I ignore the consultant's crap and hope for a couple of good bits of info."

A more respectable reason for bringing in consultants is not having the expertise in-house and, in truth, this is the one area in which even the most jaded partners concede consultants bring something to the table.

A number of firms have turned to consultants over the years to help put together career structures, for example, or overhaul IT or human resources functions as well as softer issues like branding and marketing.

The field of law firm mergers and office openings is also familiar ground for external advisers, one example being US law firms looking for an outpost in the City – either by merger or team acquisitions. In this context, the contribution of a consultant is obvious and easy to measure.

Addleshaw Goddard turned to Alan Hodgart when its two legacy firms combined while more recently Deacons turned to Jomati as it sought a UK merger partner – resulting in its tie-up with Norton Rose earlier this year.

Another acknowledged advantage of consultants that are either entirely or substantially focused on the legal industry such as Hildebrandt and Jomati is that they are better suited to advise on areas highly specific to the sector like compensation structures and billing practices.

By the same token, legal-specific consultants typically have the edge on generalist consultants in understanding the lawyer/client dynamic – a shifting, contradictory relationship which often stumps outside observers when they try to draw parallels from other industries.

Industry expertise?

If there are specific briefs like branding or IT that consultants can provide demonstrable results, there is less consensus about the value of bringing in advisers for cross-industry expertise.

On one hand, as law firms have matured and accumulated internal management skills – both in terms of partners carrying out executive roles and non-legal professionals – larger law firms have less interest in gaining general management input from consultants.

DLA Piper chief executive Nigel Knowles sums up this view: "If you are talking about general strategy, I don't need an outsider to tell me where I should take DLA Piper. That's what I should be doing and it would be a strange position for us to be in if we needed that."

This is rapidly raising the bar for consultants targeting the UK legal sectors. While even a decade ago, fairly basic management theory and a few case studies would have been news to many firms, managing partners at top 100 practices usually have much more grounding in management now.

As such, one area in which some major firms have been interested in getting consulting input is in bringing in cross-industry knowledge to allow law firms either to gain insight in what other sectors do, or to improve client knowledge.

This is part of the appeal of bringing in bluechip consultants like McKinsey and Bain (Accenture and Boston Consulting Group have made less effort to build their profile in the law firm space).

While some major firms undoubtedly value this perspective, the track record of general consultancy businesses in the legal industry does appear mixed. Notably, a major strategy review conducted at Norton Rose by Bain in the 1990s was felt by some to be divisive, counter-productive and expensive (one observer refers to "staggeringly high fees" paid by Norton Rose). Likewise, McKinsey has both detractors and supporters (see below).

A debate remains over the extent to which some firms are turning to such consultants for the comfort of the brand, a tendency which is particularly strong among US practices.

One exception that appears to straddle the professional services-specific and generalist approach is Deloitte. Given its professional services background, many lawyers see Deloitte's consulting team as more instinctively in tune with law firms. Linked to its audit arm, Deloitte has also been able to set up a successful line in tax structuring consulting, as well as carving out work in the IT area, the latter being cited as a particular strength.

One example of its work saw Osborne Clarke (OC) call in Deloitte Consulting to advise on an unusual outsourcing project that saw the firm shift a raft of support services, including IT, document production, knowledge services to the legal process outsourcer Integreon.

"Deloitte has good knowledge of outsourcing," says OC managing partner Simon Beswick. "We had the vision but needed their market research, sense check and independent judgement."

Deloitte's Stephen Mercer (pictured) comments: "We are perceived to be successful and approachable because of the professional services background and people like to think they understand how Deloitte works in return."

Competitive advantage

Deloitte, which focuses more on operational issues like finance and IT than broad strategy, is hoping to benefit from the current recession-driven focus from law firms on gaining competitive advantage through technology and systems.

"There has been a big technology play in recent years – people are looking to technology to make fee earners more productive and move tasks to cheaper resources in the UK or beyond," says Mercer.

Taken in the round, there appear to be some ground rules about how to effectively use consultants. Clear briefs, especially those with demonstrable outcomes, tend to work best. In addition, seeking advise on operational and specialist issues, where it is relatively easy to ascertain specialist experience on the part of the consultant, tends to work better.

Within this context – partners give a much stronger endorsement to the value of consultants. But what is also clear is that – with a relatively small group of consultants focused on what has been a rapidly growing industry, no one has come remotely close to carving out a dominant position in the legal sector.

By common agreement, there will also be a greater demand in the future for consultants to back their work with demonstrable research. Hodgart in particular emphasises this approach: "The key is not to make assumptions. I always tell my team you have to go in there with a blank sheet of paper, you investigate the problem and then work back to the basic principles."

Some consultants are predicting the UK will see more advisory work for in-house legal teams – a practice that is common in the US but has only recently become established in Europe. But if more people intend to attack the market, they had better be prepared for some hard-to-impress customers. As one law firm leader warns: "I'm a terrible skinflint and I think consultants need to earn their corn."

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The legal consultants

Given the size of the US legal market is it not surprising that many of the major consultants with a particular focus on the legal sector were launched in the US. But so far only Hildebrandt has managed to build a substantial profile in Europe. Founded in 1975 Hildebrandt's business extends across the wider professional service space but has a strong focus on the legal industry. The group, which has a well-established business in the UK with more than 10 consultants largely focused on law, is the arguably the best-known consultancy brand in the legal sphere.

The US has a host of other consultants strongly indentified with legal space, most prominently Altman Weil and the Zeughauser Group, though neither has developed their profile much in Europe.

In the UK, Alan Hodgart's H4 Partners maintains a strong profile built on the back of Hodgart's long career focused on the legal industry. In 2008, H4 merged with Julia Chain's The Kite Consultancy, increasing its reach with in-house clients. The business now includes 13 London-based consultants and two full-time researchers, making it a substantial team. Hodgart describes H4 as "analytical consultants", working through specific projects backed by research.

The most successful recent entrant to the UK scene has been Jomati, the business set up in 2002 by Tony Williams, the former head of Clifford Chance and Andersen Legal. Jomati has been distinguished by Williams' position as one of the few consultants to have on-the-ground experience of running a major legal practice. The business remains small, but now includes ex-ICI legal head Michael Herlihy, former CC Middle East managing partner John Holmes and Benita Kumar, the former head of legal at Henderson Global Investors. Jomati has also just recruited Richard Tromans, a former researcher from Hildebrandt, to help build its research capability. Jomati, in 2004, also agreed an alliance with Altman Weil that sees the two collaborate.

Others consultants cited in the UK include KermaPartners, which focuses on legal and professional services across offices in New York, London and Toronto. Hedley Consulting, set up by former Pinsent Masons business development director Andrew Hedley, has been used by many UK law firms for advice on strategy and market positioning.

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McKinsey and the law

The world's most famous consulting firm, McKinsey & Company, divides the legal profession. Despite making much of its habit of recruiting individuals with legal backgrounds or training, some are turned off by its voguish argot which often rubs lawyers up the wrong way.

McKinsey also makes no claim to focus on the legal industry, or even professional services in general, but describes its key areas of work as strategy, risk management, operations and organisational design. However, it has handled a number of projects for the legal profession over the years. Recent customers reportedly include Cravath Swaine & Moore and Latham & Watkins.

One high-profile example of its work in the UK saw it advise Freshfields Bruckhaus Deringer on its finance practice in 2004, though the initiative apparently had a mixed reception. McKinsey was also called in to advise on integration after the 2007 merger between Dewey Ballantine and LeBoeuf Lamb Greene & MacRae, which resulted in a shift towards managing its global business further on practice lines.

However, what caught the attention of many in the legal profession was the consultant's work with White & Case, which engaged McKinsey in 2008 to help revamp its global structure. McKinsey was appointed after an extensive beauty parade and chosen, the firm says, for market experience, brand reputation and word-of-mouth endorsement – the latter being most important.

The process was substantial, lasting nine months and seeing White & Case give McKinsey substantial access to its partnership. Having originally envisaged McKinsey talking to a small group of partners, the discussion were ultimately widened to include three quarters of the partnership. Associates and support staff were also canvassed in some larger offices.

White & Case chose to have a small team from McKinsey travel around its offices for the sake of consistency rather than use the consultant's network, though this was more expensive. The result saw the firm restructure its management from office to regional lines – replacing a system where the firm was running more than 30 profit and loss accounts in favour of three regional groups for the US, Asia and Europe, Middle East and Africa. The firm also created a global 'practice council' to reinforce its practice focus. This was intended to make White & Case more efficient and accountable. The current mood at White & Case remains positive towards the process. The profession will be watching whether other major law firms engage McKinsey for similar root and branch reviews.

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