CMS' Andrew Kozlowski (pictured) argues the basics of client services excellence will see CEE advisers through hard times

The economies of Central and Eastern Europe (CEE) are like small boats on a huge stormy sea. The leading American economist Nouriel Roubini (one of the few forecasters to anticipate the 2008 crisis), predicts up to 15 years in the doldrums for the global economy. Others make more moderate forecasts, but most economic analysts agree that there is no question that we're in for a double dip – it is only a question of how deep and long the next downturn is going to be.

Although most of the region's economies were not hit as badly as in Western Europe during the first wave of the crisis (the Polish Government presented Poland as the only island of gross domestic product (GDP) growth in Europe), we cannot ignore the fact that CEE will be very vulnerable if a shock comes from European Union and the US. In such circumstances it is wise to plan for a worst-case scenario – if it turns out that we were overly pessimistic, we will be even better off at the end of the day.

The first wave of the crisis three years ago impacted heavily on the legal services market in the region. The most tangible trend, and the one most often complained about, is the fall in hourly rates, especially noticeable in areas such as real estate and banking. But we should get used to it. Clients' legal spend budgets have been decreasing, and I do not think this trend – apart from in certain individual cases – is going to change anytime soon. More than ever before, clients expect predictability of legal expenditure, hence the growing popularity of capped and fixed fees, as well as pricing solutions that include an element of sharing the client's risk. I believe that these changes are here to stay.

With the notable change of far less foreign direct investment (FDI), even markets as attractive as Poland and the Czech Republic should not expect any significant increase of FDI inflow. This translates into fiercer competition between law firms, because those that want to grow will have no other choice but to take business directly from their competitors, thus changing the existing divisions on the market.

Whatever happens, we have a very interesting time ahead of us. The good news is that for those in CEE, we already have some practice in surviving inclement economic conditions. Most of the leading international players have operated in the region for close to 20 years, and have been through numerous ups and downs over that time. The last three years have also been a battlefield for some firms.

But one would be mistaken to believe that there is a magic shield able to protect us from the impact of the economic crisis. There are no fluffy white marketing rabbits to be taken out of business development hats either. Instead, there are simple rules on how to successfully compete in the professional services market, which have been in the handbooks for decades. The tricky part is implementation – even though the rules are simple, somehow not many firms manage to apply them in practice. In my view, the key principles, especially in a downturn, are the following:

  • Client service. It is an old truth that in the market for professional services, the way you provide services to the client has a greater impact than the advice itself. In each market segment, law firms fundamentally offer the same thing. Whether you are advising in Paris or Bratislava, what can make you different – for better or worse – is the way relationships are built with your clients and how services are delivered. At the same time, it is vital to listen to clients and provide legal advice based on an in-depth understanding of the business context.
  • Cost control. We are not very good at it, are we? This is especially true in CEE, where our business was growing at double figures for two decades, and we got used to being lax with our budgeting. In this way, we are a bit like Greece – now we learn that we must give up some of the expenditures we got used to, and we're not very happy about it. To ease swallowing this bitter pill, we should bear in mind that this is the reality for everybody – for us and for our competitors as well.
  • Diversification. It is obvious that some legal practices will be better off in a crisis than others. For us at CMS Cameron McKenna, one of the keys to a sustainable business is diversification of our services and practices. During the first wave of the crisis we kept on growing in most CEE markets, largely due to having a business that offers a full range of services. The real estate market in Budapest substantially deteriorated, but the office could continue development building on other practices.

    Traditionally, dispute resolution teams are busier in difficult times – we expect growth, especially in Bucharest and Sofia, and therefore we invest in local teams. At the same time, practice areas that deal with projects financed by the public sector are in a relatively strong position. Infrastructure, particularly in the energy sector and transportation, still looks very promising, especially in the EU member countries.

  • Keeping the best people. It is a cliche that our people are our most valuable asset. But indeed, we are able to compete effectively by having the right set of people – and the best people. In a downturn, it is sensible to put special emphasis on encouraging cross-selling and on motivating and rewarding the strongest rainmakers.

Andrew Kozlowski is managing partner of the Warsaw office and international managing director for CMS Cameron McKenna.