"You are either seen as one of the good firms, or one of the bad ones – it's such a binary thing," laments a sector group head at Addleshaw Goddard on the firm's public image. "In the past there were days when externally we were getting good publicity, but internally we weren't sure whether it was telling the whole picture."

Like it or not, going into 2015 Addleshaws is suffering from a bit of an image problem. A string of high-profile partner exits and plunging profitability, combined with perennial cries of internal friction and criticism of both its domestic and international strategy, mean the national firm has had a tricky few years.

Its new five-year strategy drawn up just before Christmas, dubbed 'A Fresh Perspective' and driven by recently appointed managing partner John Joyce (pictured, bottom), offers the firm a shot at changing all that.

With the aim of doubling the earnings of partners at the top of the equity and positioning Addleshaws as both a City heavyweight and regional leader, a FTSE stalwart and a volume provider, and with a full-service offering built around a tight sector focus, it is either incredibly ambitious or entirely lacking in focus, depending on your perspective.

Given how long the firm has underperformed against market competitors and the debatable progress it made during its last strategic plan, announced in 2011, what is clear is just how much work the firm has ahead if it is to achieve its goals.

So, how do the odds look? Since 2009-10 combined revenues across the UK's 50 largest law firms have ballooned by 21%, rising from £11.9bn in 2009-10 to £14.4bn in 2013-14. With numerous mergers taking place over the period, consolidation has clearly driven much of this growth. Even so, a quick glance at Addleshaws' results shows how different the firm's own performance has been. Turnover climbed by 2.3% from £167.5m in 2009-10 to £171.4m last year, while profit per equity partner (PEP) has fallen nearly 8% from £426,000 to £392,00. Both measures are a long way off the firm's 2007-08 peak of £195.4m turnover and £586,000 PEP – figures achieved after year-on-year growth since the 2003 merger that created the firm in its current form.

Looking at the most recent financial year alone, while the average revenue increase across the top 50 was 7.3% in 2013-14 against a 7.5% hike in PEP, Addleshaws reported a 2.9% rise in revenue against a 14% drop in PEP.

The performance gap with firms often seen as peers is also significant. Eversheds, for example, has seen PEP growth of 41% and revenue increases of 7.5% since 2009-10, while Pinsent Masons posted combined like-for-like revenue growth of 5% in 2012-13 in its first full set of annual results since merging with Scottish firm McGrigors, followed by a 4.5% uptick in revenue and a 4.7% increase in PEP last year.

Deja vu
But while the numbers alone may not look great, Addleshaws' management team has been here before and at least half of them have lived to tell the tale. In May 2011, with revenue down to 2006 levels and PEP at a seven-year low, senior partner Monica Burch (pictured, below) and then managing partner Paul Devitt were facing similar financial issues, suggestions of internal tensions and a regional split between London, Leeds and Manchester.

There was also similar criticism that the firm, which had previously looked to be a star performer among its peers with an enviable client roster, had lost its sense of direction along with its former leadership team.

The response was an updated strategic plan in 2011 complete with the firm's first international office openings (Addleshaws hoped to achieve 25% of its revenues from international work by 2014), a focus on FTSE clients and increasing cross referrals from key clients to hit mandates across six practice areas. These targets came alongside business services redundancies and plans to make better use of its Manchester paralegal offering to cut costs for clients and the firm, with management focusing on business processes.

It would not take an especially harsh critic to argue that on financial metrics at least the last plan appears to have failed, regardless of any progress the firm may have made on other individual targets.

But there are also several additional challenges this time round. In 2011 the firm had yet to see many partner exits, but in recent years Addleshaws has experienced a string of departures. Companies House filings showed that 12 partners – plus retirees and corporate head Philip Goodstone who quit for EY – left for other law firms in 2013-14. Meanwhile, more recent departures include those of real estate head Mark Haywood, who left for Nabarro in May last year, client delivery head Andrew Chamberlain, who departed for DWF in the same month, and corporate crime head Ian Hargreaves, who left for King & Wood Mallesons in October.

Over the same period the firm added 30 partners, including laterals and promotions, and some of those leaving were pointed towards the door. So it has not all been bad news. But the high profile of some of the partners who have departed – and the number of practice group heads in the mix – means the exits have captured market attention. The aborted merger discussions with Nabarro in February 2013 also generated a high level of interest. These early talks and rumoured subsequent approaches to other domestic players led several ex-partners to suggest that many within the firm – particularly in London – believe it is now 'merger or die' for Addleshaws.

Not quite 20:20 vision
All in all, if 2011 was seen by those inside the firm as a make or break year for Addleshaws, the same is even more true of 2015 – so much is riding on the  new 2019 vision.

 "The difference this time round is the buy-in from partners and the determination to succeed," says managing partner John Joyce. "In 2011 the buy-in was patchy. The problem wasn't the kpi's – there was support for those- it was the tag line 'different legal business' which put a lot of emphasis on delivery models. There was tension about whether we were about volume or quality and some felt it suggested everything was about the process, which isn't actually what we were trying to say.

"This strategy goes back a step to the basics that underline the business – the quality – and we have built consensus. Everyone in the firm has been involved in the consultations," he adds.

The strategy focuses on five key performance indicators (KPI) on which the firm will judge itself between now and 2019: financial performance, employee engagement, market recognition, client satisfaction and market share.

The first KPI – financial performance – sits at the core of everything Addleshaws is trying to achieve: a headline target of increasing the equity spread and getting its top-earning partners to take home £1m a year by 2019, compared with £560,000 last year. The firm has also committed to raising its profit margin above 30% from around 23% now and will shortly set revenue per lawyer targets.

Joyce underlines the importance of improving financial performance: "If the financial measures aren't going in the right direction then we aren't going to be satisfied, even if the others are.

"Accountability is a new watchword for our partners. We are not entering into a race to drive PEP up by aggressively managing partners out – that's not our style – but there will be an increasing focus on partner performance.

He adds: "Partners need to feel the pressure to perform – you just need to make sure they have the tools to do something about it."

While the precise metrics on which partners will be judged have yet to be finalised, the target itself has received a mixed response from the market, though none can deny the ambition.

"I don't really care what happens if we don't meet it," comments one partner. "I'm very happy to take on that aspiration, but I'm personally not interested in the metric."

Meanwhile, in a comment on the Legal Week website, one frustrated reader writes: "Is it just me, or is it a little crass to announce a strategy that is built around paying people £1m?! Profitable businesses are not designed with pure profit in mind. A strategy should be built around providing a high-quality service to clients and market differentiation, not increasing partner draws."

Given the previous strategy was also intended to improve profitability, Joyce will have to be prepared for intense scrutiny. Former partners say the previous 'New Horizons' financial targets remained in place even after former chief financial officer Martin Gaskin was understood to have admitted to partners that the firm would not hit them within the stated timeframe.

The 'soft' targets
The other KPIs in the latest strategy are softer and less tangible but, according to management, are just as important, both when it comes to improving Addleshaws' image and feeding into its financial performance.

In terms of market share, the firm wants to be in the top quartile compared with its peers in each geography and all eight of its chosen sectors: financial services; retail and consumer; real estate; industrials; energy and utilities; transport; digital; and health. Meanwhile, its market recognition KPI will see it set out to improve its standing in the Legal 500 and Chambers rankings, while for employee engagement and client satisfaction the firm is looking to gather independent feedback after abandoning the practice a few years ago.

Through all of these benchmarks Addleshaws wants to re-establish its top 20 position by deepening ties with its existing FTSE 350 client base, although management stress that they are not planning to ditch work lower down the food chain. Burch says that being able to do more volume work in some teams and locations is a key advantage in terms of securing panel places.

While the KPIs and targets such as "we will be the go-to law firm in our chosen markets… recognised for quality and value across our portfolio" along with a route map stating an intention to do this "through UK growth, expanding our international footprint and greater focus" may sound slightly fluffy, according to one recruiter they are already making a difference to hiring efforts.

The recruiter says that many junior lawyers are now looking at Addleshaws' regional offices because of its "ambitious" overall strategy.

The execution
With targeted two-page business plans for all practices and sectors still in the process of being drawn up, what becomes of the corporate department will play a key part in Addleshaws' future success given it intends to move further up the pyramid in terms of the type of work it wins as it targets elite City status alongside regional dominance.

"We want to be clear on the concrete targets and milestones that we can measure ourselves against," says corporate head Yunus Seedat. "It won't take that long to pull together. We will have that up and running by the end of the first quarter, probably by February in reality."

In Morningstar's most recent Corporate Advisers Rankings Guide – for Q4 2014 to November – Addleshaws came seventh for the number of FTSE 100 clients counting it as a lead adviser, acting for eight in total. Meanwhile, despite not featuring in the list of top 20 firms for AIM clients by volume, the market capitalisation of the firms on its AIM roster passed the £1.5bn mark during the quarter, giving it the 14th largest client list by value.

According to Seedat, Addleshaws also effectively has sole provider relationships with some of its FTSE 250 clients, with some of the innovative fee structures that have long been a hallmark of the firm's litigation department now employed by others departments, including corporate.

Though corporate is one of five practice groups (alongside litigation, real estate, commercial and finance) sitting above the firm's newly enlarged sector list, it is the latter that will play an increasingly dominant role. Future headcount growth will be focused on these target sectors.

"We have not pushed a sector focus in the way some other firms have," admits Joyce. Now, though, he says: "There's absolutely no confusion about what we are doing or where we are going."

Identity crisis
The existence of a large and expensive London office has been at the centre of longstanding rumours of a North-South divide at Addleshaws. This is strongly denied by management, and the new strategy makes the City and its northern bases equally important. Further international offices to go along with its existing Hong Kong, Singapore, Doha, Dubai and Muscat outposts are not planned, though the firm may well build up existing overseas offices.

Instead, the focus of its international strategy looks set to be strengthening its European and American preferred firm networks.

While some have questioned whether there's room for anyone other than Slaughter and May to have a strategy built along these lines, Burch is more positive: "I would be really proud of that [an aspiring Slaughters' badge]. When you think of Slaughters what do you think of? Excellence."

Given the failed discussions with Nabarro it is inevitable that the firm will continue to be linked with potential UK merger partners – many of which it may never have spoken to. Right now management insists that Addleshaws is not in active talks, but those outside suggest it is likely that the firm will find a suitable partner by 2019 – especially given its past success carrying out significant domestic combinations without major fallout.

Even partners within the firm suggest that the new strategy is more likely to change what a potential partner might look like, rather than whether or not the firm is looking for one at all. As Seedat puts it: "It's an evolving piece around what combination would make sense in the context of a refreshed strategy that has refined who our potential targets are."

Should the 2019 focus start paying off in terms of profitability, the strength of Addleshaws' hand in any merger would increase and the firm would start to look like a more attractive partner either to UK or international firms. One ex-partner, however, picks up on another potential issue for Addleshaws' suitors outside the UK. "I think in terms of them looking for a merger partner there are two problems," he explains. "Historically, yes, one has been profits, but for US and European firms it will be 'why do we need such large offices in Manchester and Leeds?'"

Seeing it through
Regardless of whether or not Addleshaws achieves a merger, it is clear that it will have to work very hard to rebuild the firm's reputation and to turn a vision of what it wants to be into a coherent workable strategy with clearly defined and achievable targets.

According to one former partner: "The last five-year plan was pie in the sky. We were responsible for achieving the targets and that was it – there was no pathway to get there."

Addleshaws cannot afford to let that happen again, even though it may well want to allow its partnership a certain degree of flexibility and freedom when it comes to finding ways to turn its aspirations into reality.

"If you spend your whole time worrying and being fearful about how you're going to get there then chances are you won't make it," says one Addleshaws practice head. "I'm more concerned that everyone is pushing in the right direction, and we are."

"I think we've already made a difference," asserts Joyce. "The attitude of the people is different, the enthusiasm is different; people feel good about the changes we've already made and the greater clarity about our longer-term plans. The kpis will take at least 6 months but in the feel of the place you can already feel the difference… I can't remember the mood being as high as this in the last five years."

There appears to be a general feeling within the firm that it is now on the right track and that Joyce has the strength, determination and internal support to drive it forward. But doubters will be waiting with baited breath to see whether Addleshaws reaches new heights or gets lost in the mid-market wastelands.

————————————————————————————————————————— Addleshaw's key clients

• CDC Group
• NAB (National Australia Bank)
• Barclays
• Sainsbury's
• Royal Mail
• Nationwide
• South East Water
• NHS Business Services Authority
• Transport for Greater Manchester
• boohoo.com
• Department for Transport
• Diageo
• Leeds Beckett University
• SSE
• Lloyds Banking Group
• Santander
• BP
• Ofgem

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Related articles:

• Addleshaw Goddard unveils five-year vision: we want our top-earning partners on £1m-plus a year by 2019
• Addleshaws re-elects Burch as senior partner as challenger withdraws
• Addleshaw Goddard elects John Joyce as new managing partner
• Addleshaws star Chamberlain quits for DWF after 19 years in partnership
• Addleshaws doubles monthly turnover at paralegal transactional centre
• Addleshaw Goddard creates new sector head role and scraps international managing partner post after strategy review
• Legacies lost – can Addleshaws regain that old polish?