As two magic circle firms close offices in the us, lawyers have highlighted stark differences in business and cultural outlook between practices on both sides of the pond. Grania Langdon-Down identifies the key attributes firms need to succeed in either market


The decision by Clifford Chance to close its San Francisco and Los Angeles offices because they did not make a ‘good fit’ with the rest of the firm, and Slaughter and May’s recent closure of its New York office, raise some fundamental questions for law firms with international aspirations (see [2004] Gazette, 24 June, 5 & 8 July, 8).



The hours and the pressures may be the same on both sides of the Atlantic – but how important are issues such as the culture within firms, the different methods of remuneration, and disparities in fee income? And just how difficult is it to break into the two markets?


For Clifford Chance, the key problem was profitability. The two Californian offices joined its global network of 29 offices in 21 countries slightly more than two years ago. With 27 lawyers, including nine partners in San Francisco and two in Los Angeles, the offices were intended to complement the firm’s other Californian offices in Palo Alto and San Diego and the longer-established east coast offices in New York and Washington DC.


Peter Cornell, Clifford Chance’s managing partner, explains: ‘At the time, we thought it was an interesting strategic move to try to cover the technology sector in greater depth, plus give us an entrée into another important region.


‘However, in February, we had a partners’ meeting in which we set out our ambitions for the next three years to make a concerted effort to beef up our profitability against a relatively flat global economy. Being a lockstep firm, we can’t say to a particular jurisdiction or office: “It doesn’t matter if you make less, we’ll just pay you less.” So, while the two offices’ revenue had built up well to $40 million (£21.5 million), the profitability wasn’t as good as we wanted. The partners understood the business issues and accepted that what we wanted would be too much of a stretch.’


He adds: ‘They are good people but lockstep can be fairly unforgiving and we do need to ensure the US as a whole attains robust profitability.’


He says the firm’s short-term plan is to continue developing the east coast offices and building a global intellectual property practice out of Palo Alto.


‘Opportunities may present themselves in other cities but at the moment the focus is on the east coast.’


If they do, there are key pointers to consider, he says. ‘With any new office, the first is business synergy – how is it going to mix with our current products, does it make sense from a client’s point of view? Then we have to consider the implications of both our lockstep and our global culture. Clients don’t belong to us personally. We share work. We are often working on deals with seven or eight of our other offices which raises a number of cultural challenges to lawyers who are not used to working that way.’


Another difference is over remuneration. Mr Cornell says: ‘Most US firms work on the basis that you “eat what you kill”. That has its advantages in incentivising people, keeping them hungry and efficient. But for those brought up in lockstep, the advantage lies in knowing that everything we do is for the good of everybody else. However, lockstep only works if you are pretty intolerant because you have to make sure partners are consistently performing at the right level, otherwise it is unfair on the others.’


American lawyer Mike Goetz is co-head of banking in White & Case’s London office, which was established in 1971 but grew sharply over the past four years from 65 lawyers to more than 230 fee-earners. Mr Goetz sees ‘vast’ differences in terms of culture and business plans between the UK and US after 15 years’ working in White & Case’s New York office and four years in London.


‘Historically, UK firms tend to be a little bit more organised and have more management than US firms.’


While he says the style of working is ‘difficult and intense’ on both sides of the Atlantic, he believes the UK’s lockstep formula makes lawyers work more co-operatively. ‘It is a difference in approach which flows through the entire business community and leads to a slightly different level of tolerance of work/life decisions.


‘Here, holidays are seen as an entitlement – in the US, they are something you get if you are lucky.’


He also points to significant differences in the length of lawyers’ working lives. ‘The way a top UK firm is structured, you make your money early on in your career and retire at about 50 or 55. In the US, it is a longer process to get to the top, which tends to be higher than in the UK, but you can work to 65 or even 70.’


English lawyer James Chesterman has worked on both sides of the fence. After working for Clifford Chance and Freshfields, he joined Weil, Gotshal & Manges in 1995 as part of the initial four-partner group setting up its London office. He then moved to Latham & Watkins’ London office in 2000 and is global co-head of banking and leverage finance.


He says: ‘It is a very different type of existence if you plug into the corporate machine that is a magic circle firm in London. Frankly, for me and most other Europeans who go to the London offices of US law firms, the attraction is you are more involved in building the business. US firms also tend to be less hierarchical, while ours is different again to other US firms in that we are the only major law firm to involve associates in a very material way in decisions as to who makes partner.’


For US lawyer Paul Wickes, the attraction of moving within New York from Shearman & Sterling to Linklaters’ US office last year was to be part of building up its New York practice. He became managing partner on 1 July. ‘The office has been here for almost 30 years. But last year, the firm made a real commitment to growing the practice from 50 lawyers to 200 over the next two to three years.


‘Linklaters, like most of the magic circle firms, looked long and hard at mergers but decided that there wasn’t an appropriate merger out there. Our strategy is to build primarily by lateral hires, which sets the basis for organic growth, and we spend a lot time trying to gauge how well people are going to fit into our culture.’


He identified two key differences between US and UK firms. ‘I think Linklaters has maintained a stronger commitment to a genuinely collegial and co-operative culture, supported by the lockstep system, than is true of most US firms. The second is that UK firms are more sophisticated about business management in terms of quality of information, the sophistication of business planning and the level of non-lawyer support.’


English lawyer Peter Teare is managing partner of Crowell & Moring’s London office. He joined the US firm’s Washington DC office 18 years ago, moving to London in 1991 to open the office here. The firm now has 14 lawyers each in London and Brussels and has taken space in both cities for up to 30 lawyers.


He says different working styles in US firms have led him to identify some recurring themes as he interviews ‘unhappy’ partners from other firms.


‘US firms hire talented people in the London market and “cross sell” them into their existing client base. For instance, a US firm with a strong banking practice will hire a banking group in London and then try to introduce their US clients to that group in Europe. But, having sold the partners on the promise that the firm will introduce them to a new and interesting client base, they don’t have the internal mechanisms in place to incentivise partners in other offices to introduce clients to them.


‘We don’t market outside our own client base and that depends on us being able to introduce more lawyers to the same clients. So part of our remuneration structure measures how much work a partner generates for other partners.


‘The second thing that causes a lot of angst is where the administration of a local office is centralised in the head office. We are very integrated at practice level but on a day-to-day basis, the office is run by the European partners.’


This means, for instance, that they are not expected to meet the US offices’ annual target of 1,800 billable hours. He explains: ‘Smaller offices have more peaks and troughs in workflow, so instead we have a total investment hour target, which can be either billable hours or hours devoted to a client or business development project.’


When it comes to differences between UK and US firms, Mr Teare says: ‘We have a rule in our office that when you write to a client, the first sentence states what the question is and the second sentence states what the answer is. English lawyers often have a problem with formulating a definite black-and- white answer in their legal advice. US lawyers have to do that all the time because we are expected to help business clients make commercial judgements.’


For DLA, which now has nine offices in the UK – 14 in continental Europe and four in Asia – the first client-driven priority is to become a top five European full service law firm with a significant presence in Asia before tackling the US market. The firm is reported to be in merger talks with Chicago-based US firm Piper Rudnick.


Managing partner Nigel Knowles explains: ‘We haven’t left the US until last because we think it is necessarily a harder market to break into but, if you try to do something in continental Europe, Asia and America all at once, you have a recipe for complete chaos.


‘However, once we have achieved what we want in Europe and Asia, then we will have a stronger hand and be able to offer more to a future US partner, which might mean we get a better one. We have started looking because clearly you can’t finish off one plan and then go into the next one as clinically as that, but there is no time limit. We will only do anything in the US through a merger and it has to be with the right firm and for the right reasons rather than because we have a deadline.’


He says firms get themselves in a ‘complete tangle’ because they think they have to achieve ‘cultural synergy’, which he says is ‘probably not possible or even necessary’. He explains: ‘You will never get UK firms achieving the same levels of billable hours as US firms, while gearing in the UK is higher than in the US so the business models are going to be different.’


And he points out that cultural differences apply just as much between London and Liverpool and Birmingham and Glasgow as London and New York.


When it comes to which market is the harder to break into – the US or UK – Mr Cornell says: ‘The US is a huge market. But New York has many more firms operating at the high end so it is tough to break into because a lot of the client relationships are deeply embedded. Similarly, firms coming into the UK have an advantage because it is a smaller market with fewer firms but then the economy is that much smaller.’


Mr Chesterman takes the view that, because US law firms focus more on being business counsel rather than just legal counsel, they tend to have closer relationships with their clients ‘which makes it hard for UK firms to go to the US and prise them open’.


Mr Goetz agrees. ‘The market in the UK is somewhat more open to change as the small number of firms at the top have put some distance between themselves and the chasing pack, leaving room for others, including US firms, to fill the space.’


The ‘flip side’ of that, according to Mr Wickes, is that the size of the US market means ‘you need a much smaller market share to succeed in New York than in London’.


Where it becomes interesting, he says, ‘is when you ask the question about the UK and the US and the rest of the world. There, I think, UK firms have some very significant advantages because they are used to seeing themselves in the context of a larger international community. Americans still have a tendency to think it’s the US and it’s the rest of the world.’


But at the moment the US global position as top dog and sole superpower might justify such a stance.



Grania Langdon-Down is a freelance journalist