CHAPTER 1
SLATER AND GORDON
"Lawyers are Just One Piece of the Puzzle"
For years, I've been interested — my friends would say "obsessed" — with Australia's regulatory regime: one that permits law firms to be owned and operated by persons without legal training. A regime that allows law firms to be publicly traded on the Australian Securities Exchange, giving the average Aussie a piece of the legal meat pie.
To most people, however, such a regulatory environment looks rather mundane and boring. And so my excitement would often be met with blank stares and a patronizing, "Sure, OK mate." But to a multitude of lawyers around the world, the idea of allowing anyone other than lawyers to own or operate a law firm is catastrophic, akin to global nuclear war wrapped up in a super nova.
Not surprisingly then, it was the federal government, not lawyers, that instituted change in Australia; it saw little reason for lawyers to be exempt from competition rules that governed all other Australian businesses. And while the government agreed that lawyer self-regulation was important, self-regulation should not restrict competition unless (i) the objectives of self-regulation could only be achieved by restricting competition, and (ii) the benefits of such restrictions outweighed the costs. In short, the legal profession was no longer able to hide behind the facade of self-regulation in order to keep out those without law degrees.
In the mid-1990s, legislative changes were soon enacted across Australian states to allow regular people to own up to 49 percent of a new professional structure called multi-disciplinary practices (MDPs); the new structure also allowed lawyers to mix their practices with those of other professionals, such as accountants. But this was merely a warm-up, as by decade's end another national competition policy review advocated for even further liberalization: that there be no restriction whatsoever on those who could manage or own law firms. Legislators accepted the recommendation and so, on July 1, 2001, New South Wales became the first Australian state, and the first jurisdiction in the world, to allow lawyers to structure themselves as Incorporated Legal Practices (ILPs) without any restriction on share ownership. Other states quickly followed with similar legislation, including the state of Victoria, with its capital city of Melbourne.
Melbourne's Slater and Gordon soon took full advantage of these legislative changes to embark upon the most extreme makeover that any law firm could ever undertake: morphing from a small partnership of seven equity partners into a publicly-traded law corporation in the space of six years.
That firm's journey was the reason for my visit to what's known as the Sports Capital of Australia. My wife and I had arrived in Melbourne two days before and we were staying in a loft-style boutique hotel along Flinders Lane, a location that was just steps away from a stop for the City Circle Tram that would take me to Slater and Gordon.
The City Circle Tram is a well-preserved antique tram that winds its way through Melbourne's historic city core, lined with magnificent pieces of historic architecture steeped in Victorian grandeur: the Parliament House, the Treasury Building, and the Windsor Hotel; all of which reinforced my preconceived notion of "oldness" that I expected at my 10 a.m. meeting with the Slater and Gordon team. After all, "Slaters," as it's known in Australia, could trace its roots back to the early part of the last century.
As the tram waited for its required jog onto La Trobe Street, I paged through Michael Cannon's book, That Disreputable Firm ...: the Inside Story of Slater & Gordon, hoping to get a sense of what I could expect. William, or "Bill," Slater volunteered to join the 10th Australian Field Ambulance during the First World War, then afterwards decided on a career in law. He clerked with Maurice Blackburn (whose firm of the same name remains among Australia's most respected law firms), and after being admitted to practice law in 1922, Bill became partners with Blackburn under the name Blackburn & Slater in Melbourne. Less than a year later, however, Slater struck out on his own and opened his own office in the city on the top floor of Unity Hall.
Soon, however, Slater's love of politics superseded his love of practicing law. In the summer of 1924, the 35-year-old lawyer was chosen as Attorney General for the State of Victoria and for the next eleven years, Slater remained in politics. But in 1935, he decided to revive his old law practice with his brother-in-law, Hugh Lyons Gordon; the new firm would be called Slater and Gordon.
Unfortunately, the partnership was short-lived. Hugh joined the Royal Australian Air Force in 1941 and was killed in action in 1943. Despite Hugh's death, Bill Slater retained the firm name and continued building Slater and Gordon as a personal injury law firm that "assisted the underdog and provided legal services to the disadvantaged" until his death in 1960.
I was reading about the firm's financial difficulties in the mid-1980s — financial difficulties that nearly destroyed it — when the tram started up again and hit the noisy jog in the tracks bringing it onto La Trobe Street. I put my book away and concentrated on the view of the old Courts and caught a brief glimpse of the old Melbourne Gaol where Australia's most famous outlaw, Ned Kelly, was hanged in 1880. Some writers have suggested that poor Ned was an early victim of what we now call the access-to- justice crisis: he couldn't afford an experienced lawyer and had to make do with a cheaper, less experienced one — ultimately to his demise.
At Flagstaff Gardens, I disembarked and walked across the street to a modern, shiny office building that housed the head office of Slater and Gordon, a mere five-minute walk from Unity Hall where Bill Slater had started his practice in the early 1920s. Bill and Hugh likely walked past this site many times, never dreaming that it would one day house Australia's largest consumer law firm, employing over 1,200 people across 54 offices; and another 3,130 people in 27 offices across the United Kingdom. Now Slaters offers much more than personal injury legal services to everyday Australians; its large menu of offerings includes: family law, conveyancing, wills, estate planning and probate, as well as business litigation services, professional negligence litigation, class or group actions, and criminal defence work, among other services.
Entering into Slaters was a far different experience from the one I had imagined while on the tram. Slaters clearly understands the retail legal services sector and has created a separate reception area on the ground floor of its large office building. No need to search a directory, or remember the correct floor; one walks straight in off the street. And there was no shrine to Bill Slater or Hugh Gordon in sight. The reception had a decidedly corporate feel about the place; an entire enterprise was there to assist you, not just a particular person. In fact, clients would be forgiven if they didn't think of "Slaters" as anything more than a generic company name like Google, Apple, or Microsoft.
I had time for only a few sips from my coffee before a helpful gentleman at the reception desk called my name and directed me to the proper elevator and floor.
Game on, I thought.
Time to see what this puppy was all about.
A New Era Needs a New Structure
During the short ride up the elevator, I began thinking about the traditional structure of law firms and how law schools spend no time teaching law students how to structure and properly manage their firms; as a result, lawyers simply default to creating a partnership (or, where allowed, a wholly-owned personal corporation) and muddle along. Of course, firms of even a modest size require a specific lawyer to manage the thing; that someone is either elected, or shanghaied, into becoming the firm's managing partner.
Along with being the face of the firm, the managing partner takes responsibility for strategy, risk management, tactics, and administration of law firm operations — all while managing her own law practice. The luckier ones will have their practices looked after by other lawyers while in management.
Behemoth firms with hundreds of lawyers are typically run by a managing partner, who has the advice and support of an executive council, all of whom will also be lawyers and partners in the firm. They are, to think of it another way, a set of elite lawyers who govern the firm's operations–sometimes known by the most cynical as a Star Chamber. Many large law firms will employ the services of a CEO and even a CFO (neither of whom is a lawyer) to assist with day-to-day operations. However, despite the lofty titles, these roles lack the authority, power, and importance that they have in a non-legal business corporation.
More often than not, the business experience of the managing partner and any executive council is limited to their experience within the law firm itself. Depending on the size of the partnership, all partners will vote on most decisions proposed by the managing partner. It's a chaotic, politically-motivated decision-making process sometimes referred to by realists as "herding cats" — I apologize to cats for the comparison. To address the defects in this decision-making process, partners of large firms will cede a large amount of authority to the managing partner and to her executive council, allowing them to make all but the most major decisions on their behalf. As one managing partner once told me, "we're a partnership, but we run our firm like a corporation." I wanted to ask if he advises his business clients to structure and operate in a similar fashion, but I was unnaturally polite that day.
The partnership structure served Slaters fairly well throughout the 20th century. However, by the turn of the century, a majority of Slaters' partners determined that in order to stay true to the firm's mission of providing accessible legal services to everyday Australians, the firm needed to offer a more diverse range of legal advice, and that wider range of advice had to be based on a national platform. However, the firm's partnership structure at the time would not allow that vision to become reality. Slaters not only needed access to a greater pool of capital to invest heavily in IT infrastructure, team careers, and in direct-to-consumer marketing, it also needed access to a wider pool of business expertise and experience.
In 2001 Slaters converted from a partnership to an ILP, then listed on the Australian Securities Exchange in 2007. The few Slaters partners who voted against such a transformation were moved on. Since Slaters went public in 2007, only a very few other legal services offerings have listed on the Australian Securities Exchange, with varying degrees of success.
Andrew Grech, whom I would meet later, was the founding managing director (and a director on Slaters' board of directors) of the publically-floated Slater and Gordon. And while Slaters' management team was comprised of some of his former partners, they were fully accountable to an independent board of directors selected by skill-set: people with deep experience in risk management, capital markets, retail, governance, human relations, and technology, to name just a few. This outside experience is powerful and vital to Slaters' future, Andrew Grech later told me. "We need different, independent thinkers on our board. It helps us avoid a myopic view of the world." Slaters' board composition is also designed to send a strong signal on gender diversity; 50 percent of the board is to be populated by female directors and Slaters' first board chair was a woman.
Technology + Workflow + People
Upon arrival, the elevator doors opened to a classic office layout with a reception desk and a suite of conference rooms. The receptionist ushered me into the conference room that I would call home during my time there and offered me a selection of beverages. Nothing distinguished this area of the firm from that of any other large law firm I had ever visited. The area was modern and well laid out, but not overly so. This was clearly not where Slaters was investing the bulk of its money.
Reminiscent of retail business strategies employed by many successful global companies, Slaters makes considerable investments in IT infrastructure and business processes. "We focus first on creating the best business process and workflow," Jonathan Pangrazio, group head of IT, told me via a rather terrible phone connection. He wasn't in Melbourne at the time of my visit and so we resorted to a bad combination of hands-free cellular phone service and office speaker phone. "We then build IT around that process. Our goal is to be the most technologically-enabled legal services business in the world."
As our conversation continued, I had to pinch myself several times to ensure that I was hearing things correctly. We talked at length about the importance of process and technology as the cornerstones of Slaters' competitive advantage: the way Slaters sets itself apart from its competitors. It was distinctly different from the conversations I've had with traditional law firms, which always start with, "Our lawyers are really great" and always ends with, "Our lawyers are really great." However, there were still more conversations to be had and I was sure that stories of the excellent abilities of Slaters' lawyers would soon reveal themselves.
Unfortunately, I was also stuck with my speaker phone for my chat with Ken Fowlie, who was then CEO of Slaters Australia. The connection was much better, but like my conversation with Jonathan, it was less and less about lawyers. In fact, Ken proudly told me that because of Slaters' reputation for opportunity and openness to new ideas, the firm was facing a situation virtually unknown to traditional law firms: job applicants from a broad cross-section of industries — all with no law firm experience. The firm had actually done the impossible, become an enticing place to work for those without a law degree.
"Our pool of candidates is broader and deeper than it's ever been," he told me. "We're able to attract people with terrific experience, who previously would never have thought of working at a law firm. When you realize that legal services is miles behind where other service industries are now, and we can bring in people who have gone through similar changes in those industries, such as banking, financing, insurance, or telecommunications, there's a lot we can learn from them. The experience and insight from other consumer-facing industries is invaluable."
But where would all these non-legally trained people fit in? Isn't the engine of growth for law firms the lawyers themselves? Isn't that where scale is achieved? It seemed odd that a law firm would be looking for more than technical experts in the law.
Ken's voice crackled over the speaker phone. "It's critical for us to implement a business-process approach, and we've seen the importance of having dedicated resources in areas such as business process, business process improvement, and business analysis. The best people are those who understand legal services but aren't captured by the current process — they have greater understanding of how those processes can be improved."
"We have a good footprint in Australia," Ken continued. "And an ongoing challenge for us is how to configure it to best serve our clients. Being local is very important to our clients; we can't compromise that. But we need to consider new ways to transact work and deliver that work to our clients as we build scale. It's often through achieving scale that we can be more creative in tackling some of these challenges."
Again, I heard nothing about the greatness of Slaters' lawyers.
"Everyone here has a role to play in delivering quality legal services," Ken told me, perhaps sensing my confusion over the phone. "Every interaction with the client is critically important and there are lots of ways to mess it up. So all points of contact are important."
Slaters' clients are, like most non-corporate consumers of legal services, fairly price sensitive. This forces the firm to constantly improve how it manages labour costs and staffing mixes. So it's little wonder that the firm places a great deal of importance on team members who didn't graduate from law school. Underpinning it all is a focus on learning and development that encourages employees to build competencies and to become more autonomous, all supported by appropriate workflow. Slaters goes to great lengths to skill up clerks and non-legally trained staff with the right supervision and the right workflow to enhance the client experience and, at the same time, create opportunities for its teams. The firm is willing to constantly experiment with different team compositions and workflow to ensure maximum efficiency and client satisfaction for each area of law.
