Accelerating business Episode 5 | Rethinking the Law Firm and Investing in Client Relationships with Louis Frapporti, Gowling WLG

You are listening to “Accelerating Business”, a Gowling WLG podcast Episode 5 

Jordan: I'm Jordan Furlong. I'm a lawyer consultant and legal market analyst based in Ottawa, Canada but far more importantly I'm here today with Lou Frapporti, Managing  Partner of the Gowling WLG office in Hamilton, Ontario. Hello Lou. 

Louis: Hello Jordan. Nice to be with you today. 

Jordan: And you as well. We are here primarily because you and I have had a  number of conversations over the past 4 months about just really remarkable changes taking place in the legal market place. Not just in Canada but worldwide. But what has gotten my interest, and the interest of a number of people, is the really interesting project and initiatives you're undertaking with the Gowling office in Hamilton. I was hoping to ask you a few questions about that and maybe learn a little bit more. 

Louis: Looking forward to it. 

Jordan: Now, you are, from my point of view, taking on what seems like a pretty significant project at Gowling WLG Hamilton. The way I look at it it feels like the transformation of a law firm in a lot of ways. So, for the people who may not be as familiar or for people who are looking for this kind of perspective, help set the scene her, what is the end goal of your project at Gowling WLG Hamilton?

Louis: Well, first of all I think the question is a little unfair. 

Jordan: Alright. Fair enough.

Louis: I'm going to challenge your premise. I think I would challenge it by saying that in our wrestling, collectively, and within our organization about the future of law and how best to adapt and change, I think one of the reasons that lawyers and law firms fail is we tend to look at these issues as being about goals or initiatives. As if understanding or success is simply a function of accomplishing a goal or pursing an initiative. I think rather, from our perspective, the insight that we're developing yields the conclusion that this is really more about identity or behaviour. How is that lawyer and law firms ought to behave and act, especially as it relates to clients, but with each other within the organization in a way that makes them less susceptible to disruption, more resilient, more agile in time. It really is a question about identity and behaviour, culture, and less about goals or initiatives or plans. 

Jordan: That's a fair distinction and I think meaningful one. In practical terms what are you trying to change within the firm or about the firm?

Louis: I don't think this is really unique to our firm. The entire industry is wrestling with the disruption that is occurring in society as a whole and of course dealing with the demands, quite understandable demands that clients are making of them, in assessing and balancing the question of value and cost. If you attempt to unpack these issues, a few observations I think, come to mind. First of all, so much of the challenges that we're faced is the consequence of how the business model has operated over the last many years, has to do with how individuals interact with each other in service and interact with clients. It's a complicated proposition. It involves the question of incentives and how behaviour is motivated. It is a function in part of the challenges of dealing with the business model that is based on a partnership rather than a corporation. Partnerships, of course, are complicated entities because they involve the consent and consultation of a broadened group of owners in a business environment in which changes happen rapidly and businesses need to pivot or move in different directions quickly. Business models that require broad consensus among a variety of different people are maladaptive. There's that issue. There is, of course, the question of technology. Things like artificial intelligence and the commodification of portions of our business and how best to adjust and adapt to that. There is the increasing gap between client and firm which in part, I think, arises as a result of the distance that is caused by the technology that has become such a part of our lives. The paradox of social media. At a time in which, certainly in the advisory services space, where it's necessary to be closer to clients. To listen more effectively. To understand what it is that they're trying to accomplish in their businesses. We are pushed in the opposite direction of working faster at a greater distance. Without having the ability to deeply dive into the business vision or needs of another individual, the client. To explore them in a way in which we can't charge for that but as value to that client's business and their lives. That's what it is that we're trying to change. We're trying to take the existing business legal model and find ways in which we can create closer connection, adhesion, foster trust between the client and the law firm. We feel that that is, at the end of the day, the most effective differentiator in our business, if we can get there. 

Jordan: It sounds a little bit like what you are doing is you're taking a law firm model and a law firm culture, which is as you say it is kind of endemic throughout the profession, you're taking a culture and a model which develops in a different era. In a different time and that doesn't really suit itself anymore to the market in which we're living and it's saying, "You know what? We need to rethink the model and culture. It worked fine. It worked great in the past and that's wonderful but we have a new set of circumstances now." 

Louis: It's a fair point but if you were to think about it, and I have a great deal, one thought does occur that there was a time in the early history of law in this country in which some of the elements of which we are trying to rediscover right now were much more pronounced. We talk about things like culture, a lawyer's responsibility, ethically and professionally, the client's business outcomes, their personal outcomes, the ownership that lawyers in the past have taken over from a holistic sense, outcomes for clients evolved over time for commercial reasons. The evolution of the business model put pressure on lawyers and law firms to do more at higher rates. There was an increasing gap, I think, between the culture of lawyers and law firms from days gone past and what it is, the commercial reality of the last 30 or 40 or 50 years has prompted lawyers and law firms to have to do. Some aspect of it, I think, of this is simply rediscovering that connection. That sense of social responsibility of professionalism that marked the best traditions of the practice of law. That's an aspect of this conversation that I think is critically important to remember. 

Jordan: Now one of the things that's interesting to me is that as part of your project at Gowling Hamilton, you've made a priority of the effort to really kind of renew the investment in the City of Hamilton and kind of the Southwest Ontario region, generally. What kind of new commitment and activities in this respect, what are you planning to do? What are you planning to make in practical terms, in terms of new investments? In terms of new commitments.

Louis: You asked me a little bit earlier about some of the challenges and deficits in the practice of law. I think there is a few that speak to, and point at the path for, to what we're trying to accomplish. First of all, the business of law has become, for a variety of reasons, very reactive. It is the tendency of lawyers and law firms to spend an enormous amount of time, in part because of the realities of how we bill, sitting at a desk doing work reactively. Because it's difficult to find the time to invest in a deep understanding of an industry sector or a client's business, and invest in that knowledge in a way that adds value, we are less capable as a profession of providing really differentiated value to clients. So this is an issue that needed to be solved for and looking at that we began to look at, in a very broad sense, where it was that economic activity was really happening. If you look at clusters or any area of economic activity there are a number of pillars of that economy. Those pillars would be comprised normally of government, various levels, the institutes of higher learning, post-secondary institutions where a great deal of the world's research is being conducted, and of course private companies that are connected with government and post-secondary institutions doing research with a view to extracting innovations that will, of course, propel those businesses in the future. If you were to look at those groups of entities operating in an economic cluster and you had to position a law firm in a way that would provide the greatest advantage, the greatest social utility, you'd position in this center of those actors. Connected to all of them in a way that permitted the law firm deep insight into the economy, technology, innovation, the future regulatory, the control of government. So what we have done over the course of the last year or so was to reach out to those pillar institutions in our region, the City government and our two very significant post-secondary institutions, McMaster and Mohawk College, and talk with them about how it is that we might purpose our business with a view to enhancing or propelling their mandates, both as government and as economic or as educational institutions, in a way that would ultimately serve a business purpose for us. 

Jordan: I can see that and I can see how it would make sense especially in an area such as Hamilton which is really experiencing kind of a rebirth in a renaissance in many ways and a tremendous upsurge in growth and development. I can see that in terms of making sense in terms of Hamilton. How does this make sense though from the point of view of Gowling WLG at large. This is a global law firm. How does a firm like this going to benefit from an initiative like this in one of its offices?

Louis: First of all the initiative really was propelled or advanced as a result of our senior national leadership team resolving to take our brand commitment of being aligned with our clients and ambitious for their success by putting our clients first and finding a way in our businesses across the country to realize on that aspiration. What we're attempting to do and what we're largely doing at this point with the City and with these educational institutions and the research that they're undertaking and the private companies that connect with them, is to do exactly that. To have a deep understanding of how those businesses can benefit. Take advantage of technology. In the case of our regional government, which is so connected to economic development and prosperity in the region, understand what it needs and then to, to answer your question, to connect with them in a way that permits us to elevate our brand and gives us opportunities to access both domestic and foreign clients coming into market in a very differentiated way. Not as a legal service provider but as a partner to these key institutions that are so critical to economic activity in the region. When you're introduced to private companies, either regionally, from foreign jurisdictions, as a key pillar of the community, helping to accelerate business growth in partnership with leading educational institutions and regional government, you're seen in a different way. That provides you with access to clients and to opportunity that you would not normally have access to in a way that's differentiated in a reactive sense from competing with other law firms over things like price. 

Jordan: It's interesting because it sounds like in a way, you've used the term partnering to describe, but it sounds like you're really kind of going beyond that. I've seen law firms partnering with clients and it's a good initiative that they undertake but it sounds like with the research institutions, especially, you're kind of going beyond partnering in the way that even advanced law firms understand that. I'd like to learn a bit more about that. What are you hoping to achieve with the research institutions in particular?

Louis: Were blessed actually in Hamilton because both McMaster University and Mohawk College are, as educational institutions, at the forefront of what they're doing nationally. In Mac's case, for example, it's one of the top 3 ranked Canadian universities, globally. It is also the number one university in Canada in terms of the volume and intensity of private research money. More private money goes into McMaster and a variety of different research verticals that have commercial application than any other Canadian university. When you asked me what it is that we attempt to accomplish, by partnering with the university we're obliged to do a few things. First of all, we're obliged to understand, to listen, to what it is that they want to accomplish as a university. Not only as educators of young people but as partners with private business helping to take basic research and then find ways to bring that research to the world. Being in the intersection of that research and private companies looking to commercialize that research puts us in the position of learning a great deal. Both from our clients, or perspective clients, and from scientists and other researchers as to what the future holds. This gives us intelligence about the direction of the economy, the potential exploitation of a variety of different business and industry verticals. We can see much farther along the horizon than our competitors can. That partnership permits us access to those opportunities and individuals in a way that yields those insights or at least potentially yields those insights. Of course, because so much private industry today, in an environment in which technology and technology innovation is at a premium, is invested financially and otherwise in the success of universities, putting us within those clients and client relationships gives us, I think, a competitive advantage both in our capacity to understand our client's needs and, in some cases, to anticipate their needs in a way they might not. But also by having the credibility in behaving and performing that way to deepen the relationship that we have with them and to grow the business in a way that permits us to provide higher value services and maintain those client relationships, I think, at a close proximity for an extended period of time.

Jordan: You know what's interesting is the kind of relationship you're describing between your firm and these institutions, it kind of goes beyond, again, what I often find law firm client partnerships look like. Because a lot of times these partnerships are essentially the clients more or less shaking down the law firms. I'll give you all my business of this kind but I want a flat rate on this and I want this, this and this, so forth, and it's all kind of one way. What you're really setting out here or aiming for is more of a two way street. It's like we're both getting advantages from this. From the law firm point of view it's not just yeah, we're getting business but we're getting perspective and we're getting opportunities and we're getting knowledge that we would not otherwise get through any other kind of initiative. 

Louis: Fair enough. Of course when you reflect on this though it speaks to one of the deficits or issues of the practice of law is facing. We tend to spend so much time focusing on thinking about technology. I think there is some more basic fundamental truths to deal with in a personal relationship that are key to the thriving of law firms in the future. That is that every institution, including a government or an educational institution or private company, is essentially comprised of human beings. Shockingly enough. What is that human beings want and need in terms of the developing of relationships? Whether it's with a service provider or with any company which whom they do business, so indeed with their friends and other relationships. That is they want to be able to trust that that other person or that institution cares about their success and future. In this particular case these relationships that have been formed, and they're holding so much promise for us, began not with us attempting to sell anything, but in fact quite the opposite. By reaching out to these institutions and offering to listen and better understand what it is that they need and to find ways to be able to assist them that had nothing to do with the sale of legal services. To commence a conversation, to commence a relationship in that fashion, completely alters the perception of value, facilitates the creation of trust and opens people's minds and hearts to considering a different way of doing business. That opened the door to a conversation about how it is that we might support those institutions in being successful as their partners. So, you're quite right to say that it's completely differentiated from the normal type of law firm and client partner, it's because we share and have, whether you call it skin of the game or not, a deep resolve to partner with those institutions in a way that provides, not just a return on investment, of course we're in business, we have to be concerned about that, but also significant social impact to these institutions that are such a key to the future of our region. In the case of the City, of course, its fostering economic development. How is it that you bring in companies, create employment, fostering diverse and engaged and energetic regional economy and in the case of the universities, how can you bring to the university, whether its capital, private research partnerships, businesses that are aligned with universities mandate and being in the center of that is not only profitable but also deeply rewarding in that it is a question of all the votes being lifted at the same time. 

Jordan: I want to extrapolate this idea of the collaboration and trust that you talked about between the firm and the client and kind of extend that internally, within the firm, because as we both know law firms do not tend to traditionally, traditionally it would be terribly collaborative environments. They're very kind of silo wise, everybody's going to offer themselves, competing with clients and origination credit and all those kinds of things. There's a lot of strife internally in the traditional law firm model. Again, it seems like you're trying to aim for something a little bit different than that. From your point of view, if you were to have an actual collaborative law firm, what would that look like in practice, in practical terms?

Louis: Certainly I would begin by noting that virtually every law firm talks about, because it has too, collaboration and team work. In part that's driven by the fact that most clients, virtually all clients, certainly our institutional clients demand that we behave in a way that reflects our value in collaboration and team work, both with the client and individually. There's no question that within the legal industry, generally, there tends to be to varying degrees, a gap between the aspiration and the reality of that. Of course one of the reasons that that gap, that deficit, is so vexing or challenging is because things like the compensation system or model doesn't in the abstract, or at least it hasn't historically, valued team output and performance. We tend to value in our industry individual performance on an annual basis. So we have a fundamental misalignment, generally speaking, within the industry between the aspiration of team work and how it is that we incent and reward people. Now, having said that, our national leadership in the firm has really resolved to attempt to crack the nut to the extent it can by looking at questions like compensation and incentive in a different way. By incentive I don't mean just, of course, financial incentive. But incentive and recognition can be a function of the types of experience and clients that you have access to. How your performance is acknowledged and recognized both within the firm and generally. Our exploration of that has taken a variety of forms. In our case we're trying to realize our leadership's desire to move the business in that way by pursuing these unusual public private partnerships with a view to obliging people to behave in a way, focused on the acceleration of the interests of these institutions which has an immediate financial or business return. But that business return, that financial return, is almost entirely obviously connected to the extent to which we can create or facilitate the success of these institutions. Our challenge in doing that is to create real visible nexus or connection between the behaviours, behaviours of collaboration and team work, and the return on that investment, if you can look at collaborations as in investment, and draw examples of that as often as we can. What's been so heartening is that the investment, the risk that we've taken in going first by volunteering to support before we insisted on billing, is that, not shockingly, people being people the trust that it fosters, the brand it creates, the desire that these individuals and institutions have to support a group, a law firm, that is so heavily invested in the success of the community is paying, not only financial dividends but increasingly dividends and satisfaction in the enjoyment that many of us have and actually being deeply connected to the community and the success of the people who live in it.  

Jordan: I want to draw down a little bit on this question of compensation which we touched on. You've mentioned the idea of maybe expanding beyond more traditional of criteria the kinds of activities or behaviours you would find ways to compensate lawyers for. You made the point that behaviours or activities that are going to maximize value for the client. That is what we want to see more of around here. If we can find a way to hook that into the system, to incentivize or motivate you to do that, we will do that. I'm with you on that. I'm on record as saying that law firms are limiting themselves. All they really pay lawyers to do is bill hours out and bring business in. Not that these aren't important. Obviously they are. What would you add to the list in addition to the traditional biggies that we've had and what we just mentioned? What else would you add to a list of activities and behaviours you want to normalize and incentivize in law firms?

Louis: First of all, I think we have to acknowledge that the legal industry being what it is changes fairly incremental. Changes relating to compensation or impacted very significantly, (a) by the partnership model and (b) by the fact that the business runs on an over teamed earnings and annual business cycle. This creates some distortions in terms of how compensation can be used or leveraged to incent appropriate behaviours that we all have to take into consideration. There is no way, certainly that I can see in the near term, to fundamentally alter the way in which firms compensate people. Having said that you can, by making a better connection between certain behaviours and outcomes, and how that ultimately will increase both law firm revenue and individual partner or professional compensation incent those sorts of behaviours. Often it's a question of what it is that you're able to shine a light on. To speak to this particular issue, the question of for example, the investment in client outcome, typically speaking if a lawyer or law firm, over the span of only an hour or two brilliantly, because of its understanding of the client's business and business issues is able to come up with a solution that adds enormous value to the business, in reality the law firm generally bills for 2 hours of its time. There is no nexus or connection between the value of that work and the revenue that's received. Often the reverse is the case and an enormous amount of time or hours are spent in something that the client doesn't perceive as having a great deal of business value. If in understanding the client firm relationship, holistically, it were to be obvious for a variety of reasons to a lawyer that being invested in the client's success fosters trust, permits the lawyer insight into the business needs of the client and then positions the lawyer to offer advice or a service of considerable value. What that results in is a deeper relationship to the client and, in many cases, more work, more opportunity. Because the client is less concerned about an asset of trust or deficit in trust and more willing to share opportunity with that law firm. In those circumstances, were you able to do that and consistently and rigorously execute on that, you end up generating a great deal more value which we're using now, how it is that we currently measure and incent our lawyers, origination credit or production, those things if they're seen in a certain way as arising from deep trust and value can be used to incent the appropriate behaviour. It's really a question of what it is you model and how you look on or view success and then communicate it back within the organization. 

Jordan: I'm with you completely on that. I'm with you on the idea of maintaining and improving this outward focus on the client. Which, again, I think is absolutely the right approach to take. But as we also know the outward focus is not something that comes naturally or easily to many lawyers and not too many law firms. I've run out of counting the number of law firms that say that, "We are client focused. Clients come first." But it's like well, come on. Not really. What you really are is lawyer focused and lawyer first. That's what you are. So, one of the things you want to do is you want to help Gowling to achieve what you have mentioned is this global strategic goal. We are honestly, truly, aiming to be a client first law firm. With this project that you're undertaking in Hamilton how do those two dovetail? How does that global plan for Gowling dovetail with your efforts here in Hamilton?

Louis: I'll explain that by saying that if you are wanting to differentiate the business it's largely not necessarily going to be because you're lawyers are smarter than other lawyers in similarly sized firms. Generally, all of the lawyers at all of the major firms, and even the smaller firms, are intelligent and very capable. This isn't a huge differentiating factor. You also don't want to be in a position in which you're looking to differentiate yourself on the basis of price, because that's really ultimately a race to the bottom, although part of our business has to be focused on the commoditization of certain types of work. In reality the more rewarding, both financially and otherwise, work is the higher value advisory work. The strategic work. The consulting work. If you take what we have, which is really a latent capacity in our firm of having 14 or 1,500 lawyers positioned around the world, you could look at it as just 14, or 1,500 lawyers around the world, each individually servicing clients. However, there is something else there that prevents or presents itself as a considerable value to the institutions in our region and that is the clients. That is the ability to make connections between the 150 or 1,000 so clients we have globally and other relationships that we have and the client and client relationships in our region and otherwise. The capacity to be able to understand a business's vision and then be in a position to assist that business, and resourcing what it needs to accelerate its vision beyond simply providing table stakes legal services, presents an opportunity for highly differentiated value. Really takes what is an existing or latent capacity in our business. The fact that we have the significant number of relationships globally that can be connected together in a way that adds value to each of those client relationships, and to the many lawyers within the business that can differentiate themselves by making those connections. That's what we're attempting to do globally and because of course the value of doing this for significant institutions in our region, whether it's economic development or whether it's the universities themselves, is in opening up those ecosystems to the world. I can't do that. The firm can't do that, or can't do it efficiently or effectively, if it isn't positioned around the world with clients around the world. That's the value differentiating proposition that we're looking to take advantage of and are acting on here. 

Jordan: I want to close this conversation, Lou, by coming back to this idea and concept of clients. Which really has been under the platform around which many of these aspects of the conversation has gone because it's great to talk about it, as we are, the process of kind of re-engineering the identity, as you said, of law firms. But in my experience the rubber never really hits the road here until clients actually validate it. Not just say, "This sounds wonderful." but are actually not just the words but their actions and their activities and their very clear public support to say things like, "Yeah, we're on board with this." To kind of wrap us up here, what  have you heard from Gowling clients and how have they altered their relationship with the firm based on the path you've laid out?

Louis: First of all, let me say that for myself and an increasing number of our lawyers who have been in the room with, if you will, with a variety of different perspective and current client relationships talking about this approach to the law. It never ceases to amaze me that clients are taken aback by the idea that you're in a room with them, first of all listening, trying to understand what it is that they're wanting to accomplish rather than simply sitting there trying to tell them something. Secondly, when you are offering to provide assistance in accelerating the vision and dream that they have in their business, in ways that don't involve the provision of legal services for a fee, it is disorienting for the clients. It fosters trust. It has them thinking about you as somebody who cares, that is prepared to partner with them, that has skin in the game, that somebody who shares their values and vision. That re-orientates the relationship between the law firm and a prospective client. Immediately we are validated by how, often emotionally, they receive with such gratitude the way in which we're having a conversation. Secondly, we have found increasingly that when you are not asking somebody to essentially pay you for legal services but volunteering to understand what it is that they want to accomplish, and to support them in any way that you can and often in ways that don't involve charging for an hour of time, they are paradoxically prepared to give you many hours of time in terms of legal work. Because they are trusting that you are in it with them. The relationships that we have, many of them in the region, in which we've acted and behaved this way have resulted in those relationships deepening and growing. The main pillar institutions, the City and the university and the college with whom we're spending so much time, and in many cases with private industry relationships of theirs, are talking about us to the community, generally, and to the many companies with whom they interact in an entirely different way. These are not lawyers selling legal services. They are partners helping to provide social impact in this community and people that you should wish to do business with. When you talk about the rubber meeting the road it is resulting in our getting increasingly new work from new clients who wish to do business with people whose values they share. This is resulting in, of course, new clients, new client work, additional revenue, a feeling and sense among many of our people and clients and the employees of these clients that we're doing something differentiated and different. Something that they want to see and hear more about and, as you know, often brochures, websites, don't sell effectively what is essentially a trust business. But people who are well respected talking about you in that way as a partner, as community and caring, that adds enormous brand value and results in a lot of new business as it's doing for us today. 

Jordan: Fantastic. Lou, thank you very much for your time today. 

Louis: Thank you Jordan.