Adviser focus: DLA Piper | Spring 2019
Simon Levine (SL), co-chief executive, DLA Piper: I had a bit of fun and looked at the article you wrote on me when I first started [as DLA Piper’s co-chief executive, published in our sister publication Legal Business in March 2015].
The In-House Lawyer: Are you trying to catch us out? Because we got into this job to be inconsistent.
SL: No, because if I’d realised I hadn’t done any of the things I said I would then I was never going to mention it. But I was delighted lots of things I said have been done.
IHL: So you’re on that battleship, delivering the Bush speech: ‘Mission accomplished.’
SL: I’m not that brave.
IHL: We did want some reflections from your first term. What are the highlights?
SL: One of the things that came out of the last article was about what [former DLA head] Nigel Knowles used to call the Alex Ferguson moment: is it possible to take over from someone after 20 years, who’s built the firm around one individual, without the first [successor] falling foul?
IHL: Or the second, or third…
SL: Yeah. If you take the Man United thing, you’ve got to go through quite a number. Secondly, what did this firm need to do to go from being a disruptor to turn us into a grown-up business? I also talked about improving communication within the firm and how we’ll be more joined up, serving clients around the world across practice groups and offices.
Four years ago, DLA was beholden to a small group of individuals, today it’s not. That’s the most significant change.
I look back over the past four-and-a-half years and I’m pleased. I took the decision early that a number of high-profile individuals in our business were not the best way to take things forward. We’ve made a lot of changes in our senior management team at a practice group, sector and regional level.
None of those have caused significant fallout and it has strengthened the collegiality rather than people behaving in a series of fiefdoms. We’ve just taken on a new head of talent and diversity in our HR team, and are increasingly taking on the people in our senior business services roles from industry, not law.
IHL: What’s her name?
SL: Liza Strong [formerly of Centrica and Royal Mail]. Focusing on talent and diversity is a good example of how we’re taking succession seriously. What Nigel built – and he did a fabulous job and remains a friend – was centred around an individual and each region was focused around individuals aligned to him. What we’ve done over the last four years is not around individuals anymore. Where we have lost the odd high-profile individual, of which the most obvious was Juan [Picón, former senior partner, to Latham & Watkins], the firm did not skip a beat.
SL: Other than outrage because there were some people that felt very disappointed. Spain ended the year above profit, above budget, and we had a senior partner election that people thought was pretty cathartic.
IHL: But a few million must have walked out the door with Juan?
SL: Only two partners walked out the door with him and a couple of associates. We still ended up doing that year the biggest deal we and the Spanish market had ever done [advising Atlantia on the €16.3bn authorised takeover of Abertis Infraestructuras].
IHL: So several million quid didn’t walk out the door?
SL: Of course, yeah. But profitability wise, not a lot.
IHL: Changing topics, does the partnership structure have to evolve? You’re a highly leveraged firm.
SL: There’s no doubt the partnership structure in all law firms is challenged. The real test is, can you take leading individuals out of this business and will it make a significant difference to performance? And that’s the point I’m making about any of the individuals, including Juan: it hasn’t made any difference. That’s not to denigrate those individuals – they’re very talented – but to have one high-profile individual of any kind who stops you developing your business overall, that is a problem. Four-and-a-half years ago, DLA Piper was beholden to a small group of individuals, today DLA Piper is not. That is the most significant change we have made.
IHL: How do you deliver that message to key individuals?
SL: I was very straightforward. They fell into three categories. Some got it and said this is the right thing. Some didn’t like it and we agreed to disagree and they left. There was a small number I believed were on board but were only pretending. As of today, we have significantly more people on board with our strategy. Even if you look at the senior partner election [which saw the appointment of Andrew Darwin in February 2018], the accepted advice is that after an election you get a whole bunch of fallout. We never got any of that.
IHL: So there was a significant number of people who left the European business because of the shift in direction, which was more institutional?
IHL: How many partner exits?
SL: The total number of unwanted exits was very small. We analysed the sort of work we think we can best serve our clients on rather than just doing anything that anyone wants us to do. The number of high-profile individuals over the last four years that have left is about 15 to 20.
IHL: You’ve talked about improving the consistency and quality across the business. What are the initiatives driving that?
SL: Some of it is identifying people who don’t operate to the standard you need, and parting company, and being careful about who you bring in. But even more importantly, it is to do with learning and development. A large part of the sixth floor in this building is our new global academy space. That is a very significant investment to make in London real estate, but if you don’t show a financial commitment nobody takes you seriously.
IHL: If you look back over your first term, what were the biggest lessons? And what was your biggest regret about what you didn’t achieve?
SL: The biggest lesson is what Harold MacMillan said about what could blow his government off course: ‘Events, dear boy, events.’ Whether you’re talking about a cyber attack or Brexit, those are the things that keep you awake at night. I could not be happier with the way the business has progressed. Profitability’s not everything but we had a profitability drive and it has gone up significantly, more than the benchmarks I set. But you only need some big event to blow you off course. There was nobody feeling more smug about the progression of DLA Piper in June 2017 than me, and two days later the world seemed to fall apart as every system shut down and we had our cyber incident. But that was also one of the highlights because it tells you something significant about the strength of your business financially and culturally. The firm came together.
There was nobody feeling more smug about DLA Piper in June 2017 than me. Two days later the world fell apart.
IHL: Not everybody. I remember you saying you were getting a tonne of annoying emails.
IHL: You said you were keeping a list.
SL: I wouldn’t go that far. Certainly partners asked: ‘How did that happen?’ There is nothing you can do to prevent it. You get some people who are upset and complain, but people did genuinely come together. Clearly that had a financial effect. However, we had our best ever year and grew our profit significantly.
IHL: How much did it cost putting it right?
SL: I’m not going to give you the exact figure.
IHL: Roughly? £5m?
SL: There could be two elements: one is whatever matters or clients you get dis-instructed on, and those were nil. A special thanks to the legal community because other law firms were magnificent about saying: ‘Come to our offices, work with us. Let’s delay a deadline.’ The element you don’t know is the unknown unknowns. I don’t know if there were clients who would have ordinarily instructed us and thought on this occasion: best not. That must have happened. What it cost to put right, that’s tricky. There’s a whole insurance issue ongoing. We’re in the middle of that.
IHL: Is that a dispute?
SL: You end up in a long discussion with your insurers. One of the things I inherited was an infrastructure that needed a lot of revamping. We’ve changed office space around the world a lot over the last four years, a lot of the leases came up and we had to take a position on whether we were going to spend proper money on it, and I felt we should. If you go to the partnership and say: ‘I want to spend significant sums of money on IT infrastructure’, they do get it, but equally they are concerned about what it does to profits. When you’ve undergone the events that we did, nobody’s arguing with you.
I regret Juan leaving. We were close. It’s hard not to take that personally.
IHL: Do you think you’ve done enough now to reassure clients about security?
SL: I can categorically answer that as a yes. One of the key lessons was that we brought in a couple of independent suppliers to verify how we rebuilt the system. That happened within the first 24 hours. The reason that mattered was because where clients wanted verification that you haven’t lost data, which we didn’t, we could provide that.
IHL: What about first-term regrets?
SL: I regret Juan leaving. Juan and I were close. It’s hard not to take that a little personally. I regret we had a cyber attack.
IHL: You don’t feel like you’d have liked to see London jump forward? It’s a bit subdued isn’t it?
SL: I wouldn’t agree. There is a mantra sometimes put out, that London has not jumped forward enough.
IHL: I am saying that.
SL: From where I’m sitting, that isn’t the case. We continue to get some great partners in London, both laterally and through promotions. The profitability of London has gone up year-on-year. The quality of the work is good.
IHL: I’ve known Nigel a long time. He has strengths and weaknesses, but what he had in his heyday was flair, imagination and impact. I get that you’ve had a thankless four years dealing with unglamorous things that needed attention, but do you feel DLA now needs more dramatic measures that kick it into the consciousness of the top end of the legal market?
SL: You can be the most dynamic, free-flowing organisation in the world and bankrupt in two years. We have to get the balance right.
You need to understand why Nigel did what he did: when you start with an office in Sheffield and have an ambition to be a global player, you have to make a very big noise. The difficulty is there comes a point where if you don’t put substance behind it then that is not going to continue.
In its DNA, the firm has an entrepreneurialism that can be a difficult balance when you’re trying to get people who come from that aspect to start behaving in an integrated way. The challenge for me now is having set that platform out and structure, what do you want to do over the next four years? And what does the firm want to do over the next ten or 15 or 20 years? [This firm has] the ability to start using new ways of working and technology and move out of the traditional legal establishment to be a true business-consulting partner. Have I told you my Frank Crisp story?
SL: My Frank Crisp point is even more relevant today than it would have been four years ago when I first tried to explain to the partnership what we were doing.
IHL: Tell the story again.
SL: I started life working in the media industry and one of the clients was the Beatles and George Harrison. He lived in a big house called Friar Park in Henley, built on the legend of Friar Tuck. It was built by Sir Frank Crisp, one of the founders of Ashurst, and I got to wondering how a guy like that could earn so much money that he could build this. If you research what lawyers did at the turn of the 1900s you found they were business consiglieres or partners. If you were founding a new business you went to Sir Frank Crisp just as much as you would with your wills, your family, if you had a problem with your butler, or anything else. Today clients who have a business and want to IPO or whatever, they might go to Accenture or McKinsey for strategy, the Big Four for tax stuff, they’ll go to JP Morgan or Morgan Stanley for their investment: the lawyer is the scribe in the corner writing up the playbook everyone else has delivered. That’s what the legal profession has done to itself in the last 100 years. There is scope for some law firms to go back to being a business partner. That will mean doing some services that are ancillary to law, without trying to become Accenture.
IHL: Why not become Accenture?
SL: It’s very dangerous if you suddenly say: ‘I’m a car and I’m trying to be an airplane.’ I’m saying: ‘I’m a car and I’m going to find a more efficient way of getting you from A to B.’ You can do ancillary things like consulting, technology, design thinking. I have now gone to the partnership and said: ‘We’ve done a lot of the hard work. We now have to do three things: evolve, expand and lead.’ We have to evolve the types of work, our mindset. We will increasingly have more people who are not qualified as lawyers working on client-facing engagements. There’s scope for a new type of law firm and I would like to see us lead in that.
IHL: I agree with that.
SL: I might retire now a happy man.
IHL: I can imagine a scenario in which DLA becomes a world beater. But you’re going to have to change up the level of tactics because at this rate, it’s not on the cards.
SL: Give me some examples.
IHL: Some of it is about the level of radicalism. DLA could become a professional services giant underpinned by law, but a lot of that is about making much more dramatic steps and incentivising the people that are brought in.
SL: At the risk of two blokes agreeing, I’m agreeing with you.
IHL: The problem with law firms is, they’re awful at incentivising non-lawyers, usually because they don’t want to make them accountable.
SL: 100%. What comes with it is absolutely why we’re bringing in more senior business service people from industry, because if you’re going to start putting in place things like looking at your structure, how you reward people and everything else, you need experience outside the legal world.
IHL: But law firms generally have a terrible track record of even identifying good people outside law.
SL: We’re working with a bunch of people – some internal, some external – to do that. I know to bring people in, we are going to have to change the way you incentivise people who aren’t lawyers. I made this clear when I did my manifesto for my re-election – this is what I’m up for. I now have four more years in this job; there is no halfway house for me.
So far I’ve had nothing but absolute excitement and enthusiasm from the partnership, and the firm. The one caveat is that you couldn’t have done this four years ago because there was no underpinning of structure.
IHL: It was more style than substance and you need both.
SL: Exactly. I took a big risk because after Nigel, I took four years doing the hard graft in the hope people would understand there was a very exciting direction we could go in.
IHL: So first term was substance, now you’re into the style term.
SL: Not getting away with anyone calling me a stylist.
IHL: Institutional style.
The partnership is going to have to face up to an exciting possibility of being a little different.
SL: That’s a nice way of putting it. Attracting people into law firms is tough from outside. I suspect it’s easier if you’re a big tech company – they’ll think you’re sexier.
IHL: How quickly do you think you can get there?
SL: I would expect to make some reasonably key changes, hires and some structural decisions over the next 12 months. I’m going to Germany for a meeting with my international board to present on this tomorrow.
IHL: Does the partnership structure change? Some of the things you’re describing may mean less leverage.
SL: The partnership will have to decide. One of the things the partnership will have to decide is: is the traditional law firm structure something that will enable what you want to do in the future? You can imagine situations where you want to invest in some things or work with other businesses, where you want to incentivise your people with share option schemes. These are all possible, but the partnership is going to have to face up to an exciting possibility of being a little different.
IHL: Does external investment play a role in that?
SL: It’s possible. The most obvious place of external investment is with IPOs and I do struggle with that. I remain to be convinced.
IHL: So do you change the way you capitalise the business? The most obvious thing is to move away from full distribution.
SL: That is obviously one thing you have to look at. The short-term nature of full distribution is a real challenge. The short distribution model or long-term investment is tied into do you see yourself here in five or ten years or do you only see yourself here year-on-year? You’ve got to get the culture right,and make people believe they want to be here and therefore invest in their future.
IHL: Some of the things you’re talking about, surely a big pool of outside capital would supercharge that?
SL: It’s a logical proposition. But it becomes super-complicated for the reasons we’ve just been discussing about the partnership model. When you’re not in a vacuum there are other law firms and headhunters ringing those partners every day saying: ‘I’ll offer you 50% more.’ You’ve got to build up the narrative and the enthusiasm and take people with you.
IHL: If you’re talking to partners about ditching full distribution that can equally turn into a wider conversation around capital…
SL: It can. The key thing which you’ve both clearly thought about a lot is that these things are interconnected. A lot of people talk about them as separate topics, but they’re not. They’re questions CEOs of industrial business deal with all the time and law firms haven’t before. But we’re in a pretty unique position to consider them.
IHL: What’s your message to future DLA partners?
SL: I don’t want this firm to change its heart and culture. I want it to go and fulfil the destiny it’s had from when Nigel first built it. I know it has its doubters and that’s fine because you have to challenge yourself. I feel massively optimistic.
At a glance: DLA Piper
Headcount: 1,219 partners (including 492 full equity), 4,289 lawyers, 7,971 staff
Revenue 2017/18: £1,799.5m
Profit per equity partner: £994,000
Five-year growth track (2013-18): 17%
Number of offices: 99
Five largest offices: London, New York, Chicago, Washington DC, Paris
Key clients include: British Airways, Lloyds Banking Group, National Grid, Unilever
International executive team: Simon Levine, global co-chief executive and international managing partner; Sandra Wallace and Jan Meents, joint managing directors for the UK and Europe; Olaf Schmidt, managing director for practice groups; Charles Severs, managing director for Asia-Pacific, the Middle East and Africa, and executive partner; Jacqueline King, chief operating officer; Paul Edwards, chief financial officer