Restraint, caution the new legal orders

LEGAL firms in Western Australia have been feeling the pinch in light of the shrinking economy, and they are implementing strategies of all shapes and sizes to deal with the slowdown and prepare for the inevitable recovery.

Regardless of organisational structure, key areas of focus, numbers of staff or their history in the market, all law firms have been affected in one way or another by the global financial crisis.

And while the market downturn has caused headaches for most legal outfits, including top-tier firms such as Freehills, Allens Arthur Robinson and Minter Ellison, they are all either considering or implementing new strategies to counter any negative effects.

Just last week, Allens became the latest of this group to announce cost-cutting measures to help the firm trade through the decline in demand for services.

Allens' staff members were told that salaries would be frozen from July 1 and that partner profit was tipped to fall.

Also policy changes encouraging flexible working arrangements, purchasing annual leave and career breaks to reduce costs were spruiked alongside a voluntary redundancy package offered to long-term staff, which could include up to a year's salary.

Freehills announced similar plans last month, as did Minter Ellison last week, both firms citing comparable motives to Allens'.

Freehills Perth managing partner Jason Ricketts said his firm decided to place a freeze on all salaries following a review.

"We'll continue to make sure that our processes and systems are the best they can be and that we prudently manage our expenses," Mr Ricketts told WA Business News.

"Our aim is to maintain jobs where we are able.

"Things would have to deteriorate considerably before we took a different approach."

Fellow top-tier firm Blake Dawson has not frozen salaries, preferring instead to make major internal changes including 89 redundancies across the country, five of which were in WA.

Blake Dawson practice leader Perth Leigh Warnick was not surprised at the actions taken by the other top-tier firms.

"I think all major law firms are affected, the difference between them is only the matter of degree," Mr Warnick said.

"We chose to move quickly, do a review, make some redundancies, modify our structure and then move forward as business as usual.

"The net effect for all of us is the same; we're trying to balance the resources and structure of our firm to make it fit for current match conditions."

However, Mr Warnick emphasised his firm was operating within a "framework of restraint".

"What that's going to mean is significant restraint in the revision of salary, significant restraint in the hiring of people, but we are not making absolute judgements about it," he said. "There's a certain psychological effect of saying salary freeze, it conditions the expectation of your people.

"We haven't taken that decision, we are preferring to respond flexibly and retain the ability to reward high performance.

"That's not to say that will change some time in the future, it will depend. Everybody's reaction will be responsive as we go through this and see what's happening to us."

For some of the smaller operators, however, the current climate is recognised as an opportunity.

Managing partner for boutique firm Blakiston Crabb, Michael Blakiston, for one, is adamant the current market is a true opportunity for his boutique firm.

It's a sentiment echoed by Lavan Legal and Jackson McDonald, which stand apart from their competitors as independent Perth-based full-service firms, both feel their diverse portfolio of work has helped them.

Neither has implemented hiring or salary freezes, nor made any redundancies.

Lavan Legal managing partner Greg Gaunt said his firm's focus on litigation had served it well.

"March was the best month we ever had, and there were only 21 working days in that month, which is better than say October, which is a 23-day working month," he said.

"Our commercial litigation is up 20 per cent on what it was last year, but so is our property services. Corporate services is up almost 16 per cent and of that property is down, so corporate is massively up."

Jackson McDonald chief executive John McLean admitted the downturn was impacting upon his firm psychologically and also in terms of work flow and revenue.

Mr McLean said negatively affected areas included mergers and acquisitions, capital raisings and corporate transactions, while insolvency and reconstruction were positive areas.

"There are also some areas of commercial disputes and litigation that are definitely seeing something of an uptick," he said.

Mr McLean said tax, business succession planning, estate planning and insurance work continued irrespective of the economic climate.

He also believes some firms that leveraged themselves to the economic upturn, and as a result had at least five years of strong performance, will probably be fine-tuning that model for the next 12 to 18 months.

While his 10 years as chief executive of Jackson McDonald, and a previous career as a PricewaterhouseCoopers accountant, has left him optimistic regarding the recovery of the market, Mr McLean does hold concerns for some of his younger employees.

Blakiston Crabb's Michael Blakiston, agrees this is a clear issue for his staff, currently approaching 50 in number.

"There is the tension that's developed between a generation of lawyers that has not seen a downturn," Mr Blakiston said. "We are strong in the areas we practice in, so we effectively are the cells of a major law firm in the resources and corporate area and litigation," Mr Blakiston said.

"We are very positive about the opportunities this sort of event brings along because it gives you the chance to add value to your client and it means that if you're good at what you do, you'll stand out."

Meanwhile, small firm Balance Legal is also optimistic, suggesting the current state of the market has been good for business.

''We're not being hammered to the extent that the full service law firms are ... our model rides it out in its own way,'' managing director Ken Jagger said.