Paul Rawlinson, Global Chairman, Baker McKenzie - interview

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Having taken the helm at Baker McKenzie soon after the Brexit vote and the month before the US elections, Paul Rawlinson is well placed to discuss how leading international law firms can help clients adapt to the fast-changing world. In conversation with former CNN anchor Todd Benjamin, he also offers predictions on new technology and legal services.

Todd Benjamin (TB): Your firm generated $2.6bn in revenue in 2015/16, has 77 offices across 47 countries, and some 4,600 lawyers. What do you see as some of the big challenges in having a global firm, and where are you putting priorities?

Paul Rawlinson (PR): I’ve just come to the end of my first 100 days as Chairman, having been at the firm for 30 years. Through that period, I’ve seen a lot of change. I remember when I first joined the firm, joining the East-West Trade Department and seeing the Berlin Wall coming down, and I spent a couple of years in Hong Kong, pre-handover.

The challenges in a global law firm are in staying the distance, because markets go up and down. Volatility is now the norm, but it’s been that way for a long time. When you’re in emerging markets, new markets and even mature markets, with the global financial crisis we had not so long ago, you get used to the fact that things go up and down. 

At the moment, with Brexit in the United Kingdom and the change in administration in the United States, the challenge is to anticipate what that means for clients. When I first joined the firm, I don’t think we were expected to have that sort of real deep sense of business advice and to anticipate trends. But now, our clients are coming to expect more of that. So law firms have to respond.

TB: Does that mean you need a different type of lawyer?

PR: Yes, let’s call it ‘the new lawyer’. That means a lot of things, but it means fundamentally a lawyer who is more adapted to looking at business opportunities internally, while also anticipating business needs of clients. So how are we going to do that?

First of all, we’re going to be much more sector-focused in our approach, and make sure our lawyers are equipped to look at trends in sectors, to really understand the dynamics of a sector, and to consider our clients of today and the emerging clients of tomorrow through that sector lens.

We’re also going to look at delivering legal services in a different way. The majority of our lawyers are millennials. If you look at the profile of our associates, they think and act differently to the way that I was trained as a lawyer – embracing the digital age, agile working, flexible working, but being more business-focused. That’s an exciting place to be in an international environment.

TB: Let’s talk about some of the specific trends you’re seeing in certain industries that you think are real game-changers.

PR:We’ve just done a study with Oxford Economics looking at a transactions forecast going out to 2017 and beyond. We think this year’s going to be a little slower than last, but picking up pace in 2018.

If you look at the analysis of where those transactions are going to come from in the short-term, it’s the tech sector and the pharma and healthcare sector; energy, mining, infrastructure are a little more sluggish; and consumer goods and other sectors are somewhere in the middle. Digging deeper into the regions, in terms of technology and healthcare, a lot is happening in the US with the new Trump Administration, and also in Asia-Pacific in terms of the healthcare demographics in that region, which is going to drive a lot of growth.

That’s where, as a law firm, we have to adapt to changes in sectors and really anticipate what’s coming down the pipeline, and align our industry leaders to see those trends.

On Brexit:

I think there will be a Brexit hangover, and we’ll have to wait and see what policy really means in practice

TB: Let’s move on to Brexit, because there’s a lot of uncertainty for UK firms and for Europe itself. What are your thoughts on Brexit and the key questions that clients are asking you?

PR: About a week after I was elected Chairman, Brexit happened, and soon after Trump won the US elections. It just shows how, in 100 days, the world has changed – and therefore we have to adapt.

We mustn’t look at Brexit as simply a London issue; it’s a global issue. What we noticed since the referendum is, first of all, not a downturn in activity – initial public offerings are down, but mergers and acquisitions activity as a whole is pretty stable in terms of our book of business in the London office. What’s driving that is still a lot of cross-border work.

But, certainly, there’s a pause; there’s uncertainty with domestic work, domestic transactions. If you look at the client base, we’ve seen a very robust response from consumers and from the FTSE100 and even the FTSE250, who’ve got quite a lot of internationally-based businesses.

I think there will be a ‘Brexit hangover’; we’re starting to get into that now as we hear these different messages from the government about hard and soft Brexit.

We need to wait for the clarity of positioning, not just from a UK point of view but also from a European point of view, because the big question for me is its impact on the rest of the European Union and the rest of business.

TB:So if you’re trying to help your clients anticipate what may happen, what is your gut-level feeling? How are you telling your clients to position themselves, or are you saying wait and see?

PR: I think the latter, and we have to wait and see what policy really means in practice. As lawyers, we need to see the detail as to what the trade agreements look like, what the customs union approach is. These are important framework rule of law issues: what is the basis of our relationship with the EU? That translates into hard specifics of legal treaties and so forth.

Having said that, we do have to look at the prospect of other trade agreements. About, for example, being at the back of the queue or the front of the queue with the US. Because if that’s a reality, it’s obviously going to impact investment decisions in a really material way.

TB: But five years from now, there will still probably be a certain amount of uncertainty. Ten years from now, is it possible that the UK could actually be in a stronger position than it was pre-Brexit?

PR: I’d like to think so, and I’d like to think the whole of the EU will be in a much more stable place because of all the other issues we’ve had recently with the eurozone. This is what I find fascinating about the current climate: the fundamental economics are in really good shape pretty much across the globe.

North America’s never been in better shape: the Obama Administration has left a very vibrant US economy which, arguably, doesn’t need a fiscal stimulus. The eurozone is growing; that wasn’t the case until recently. Asia-Pacific is still healthy. Latin America is starting to come back with growth. China is still at 6.5 per cent, so growth is good even though it’s not hitting the heights it was.

So we’re looking at a very positive picture for the next few years, but the politics of these big economies and the mature economies is where the uncertainty lies.

TB: And then enter Trump policy and the rhetoric that we’re hearing. What are the key questions your clients are asking you there, and what assumptions are you making?

On the global economy:

We’re looking at a very positive picture, but the politics of big economies is where the uncertainty lies

PR: For business, the two key things that are important for the US are the fiscal policy – what will that mean in terms of tax reductions – and the second is deregulation. What clients tell us consistently is regulation is not just a cost to business, but sometimes stops them doing business, because of the complexities.

So if we get a US economy which is liberated from some of the over-regulation that we’ve arguably had, and a fiscal stimulus that is really material, then that produces a very fertile investment opportunity for clients.

Now, the other side to consider is the international trade angle and the protectionism. What will replace the Trans-Pacific Partnership? What’s going to happen with the North American Free Trade Agreement? Yet consumer confidence in the US economy has never been higher, and certainly the stock market reflects that.

TB: But in terms of protectionist rhetoric, for instance, the idea of an import tax could be quite devastating for many companies. You can’t really advise until you know what’s on the table, but clients have to be extremely nervous.

PR: We’re still in the days of wait and see because the questions are as broad as: is this going to happen at all, and is that going to impact certain sectors rather than others? The regulated industries are, I think, the ones finding it most difficult because it’s a very different landscape when you combine protectionism with deregulation. There are pros and cons which clients are finding difficult to navigate through. Let’s see what trade policy emerges over the first six months of the new Administration.

TB: The Chinese have to be very nervous about the type of rhetoric that Trump is using – be it currency manipulators and so on. Could the opportunities you see in China be derailed to a certain extent?

PR: Will there be a reduction in outbound investment work from China because of Trump or because of concerns about rising US protectionism? I don’t see it. Chinese companies are being very successful, and they’ve got a good track record of not only investing overseas but also making companies survive and prosper. The idea that China is there as some sort of rogue trader in the way the Trump Administration would characterise it is completely flawed.

TB: One thing that is clear about the Trump Administration is that, from the type of people he’s putting in his Cabinet, it will be very transactional as opposed to strategic. That’s a very different mindset.

PR: Yes, so the notion of intervening on specific deals is not scalable. Obviously, it’s politically interesting at the moment to see what’s happening with Ford or General Motors or so-and-so, but the Administration needs to know what the policy is once you get into government and start looking at dealing with the scalability of those policies.

TB: Moving on to innovation, we’re at a fourth Industrial Revolution right now when it comes to digitisation and disruptive technology. What do you see as some of the future technology trends?

PR: Technology’s getting faster and better. We have data analytics, artificial intelligence (AI) coming, and we have a lot of demand from clients to do more with less. Put all of those things together and what clients are expecting law firms to do is embrace that technology in order to be more efficient, but also to be able to help them forecast, better manage their affairs and analyse their matters.

TB: And what could it mean specifically for legal services?

PR: There’s a lot of talk about AI and what that means. The basic view at the moment is it’s still a little way off becoming the transformational sort of tool that, whether it’s law or anywhere else, is going to really shake up business models in a fundamental way.

The first stage is embracing digitalisation and data analytics, so you have the best tools to make the most robust business decisions. So for an industry sector, getting the data that’s driving all the different industry players, getting the granular detail around that, and being able to make much more reliable forecasts.

On the new US Administration:

It’s a very different landscape when you combine protectionism with deregulation

For us as a law firm, it’s about getting smart at global solutions, whether it’s our finance system or our matter management system, but also in client-facing tools. We have partners who have a lot of the information they need to advise clients on certain apps in certain industry sectors. So ask a question about a pharmaceutical regulatory issue in Asia-Pacific, and you can use an app to get the answer. That’s information at your fingertips, and clients expect you to have it.

TB: You recently conducted a global survey, ‘Ghosts in the Machine: Artificial Intelligence, Risks and Regulation in Financial Markets’, which investigated the potential benefits and risks of the automation of financial services. What really stood out?

PR: Well, I think with issues around ‘do you trust the machine’, it comes with legal ramifications: what happens if the machine gets it wrong? Who’s going to pay? Where are the liabilities? That’s a fascinating area for a lawyer. The driverless car is the example everyone talks about: when it knocks someone over, who’s to blame?

But the real issue is trust. At the end of the day, there’ll still be the human interface that’s needed, even if the machine gets it right more often than the human. Our human instinct is to want to speak to a human. I don’t think that fundamentally will change.

TB: The survey concludes that people perceived AI to be useful for conducting risk management for business. But the participants in the survey – senior executives from financial institutions and fintech companies – also raised concerns over the uncertainties and lack of testing of AI.

PR:Yes, absolutely. If the machine-learning can do the job of a paralegal today or tomorrow, where are the paralegals of tomorrow going to come from? How are you going to train your people to invest for the more sophisticated work later down the track? How are we going to manage the interface between the two?

TB: Broadening out the discussion on legal services, what, over the next five to ten years, will be the biggest trend?

PR: We see the increasing consolidation of the legal market as gathering pace. There will be a position where, unless you’re clear in what your proposition is, then the client is going to go elsewhere. That applies whether you’re a global law firm, or a boutique firm, or a service provider in a different part of the market.

I think the evolution, like all sectors, is to consolidation and segmentation. We’ve started to see an acceleration of that in the last few years: clients have been getting more competitive with their demands of legal providers. And I see the continued development of the delivery of legal services in a much more cost-effective way – using technology, alternative resourcing and project managers to really professionalise the degree to which we serve clients.

TB: What about pay?

PR: Well, there’s still a war for talent and we need to absolutely be competitive with the pay that we offer talent. Young people coming into the legal profession will have choices. Our people want to be paid competitively, but I think they also want flexibility; they want agile working; they want to be in a law firm that offers career opportunities and international opportunities. 

TB: Let’s talk about in-house lawyers. General counsel always want you, as big firms, to be more competitive in your pricing. But what are the biggest challenges facing general counsel? And is more being done in-house?

On innovation:

The first stage is embracing digitalisation and data analytics to make much more reliable forecasts

Paul Rawlinson

PR: Absolutely. What I like about the environment we’re in now is that working closely with general counsel and their teams has changed dramatically. When you have a general counsel that has an in-house team that you work with well, the power of both – and how that translates into a real working partnership – really makes that a special relationship. That’s what we’re trying to nurture with our global clients.

The challenges for general counsel are always in being an advisor to the board but also looking at managing the team and being stretched in different directions. And they’re also struggling with the same issues as law firms: getting the best talent and managing global teams.

TB: Let me ask you about diversity, specifically female partners. Your firm has aspirational targets to increase female equity partners to at least 30 per cent, female junior equity partners to 40 per cent and for 30 per cent leadership roles in the firm to be held by women. How are you going to achieve this and by when?

PR: We don’t have a target date, but we do have a real sense of accountability and responsibility to each other to make those improvements. People want to be able to have a very meaningful career and take time out to have families as well. And for a lot of women, it can be hugely challenging sometimes to get back on track.

But there is also a partnership aspiration issue here. We find, not just in our firm but in others, that more male associates aspire to be partners than female. We need to look at why that is.

On US-China relations:

The idea of China as some sort of rogue trader as the Trump Administration characterises it is completely flawed

We are making progress: 40 per cent of our partners globally last year were female. So we are seeing the pipeline improving.

To meet these targets and beyond, we need to get more granular about very specific individuals: how we can make sure they get the support, sponsorship, training and awareness, and client opportunities to give it the best possible shot. And we should recognise too that men are facing this issue as well: we all want diversity in our lives, we all like to have a social life and a family life, and I think there’s a changing culture.

TB: A final question on corporate social responsibility (CSR): does it come into play when you’re selecting new clients?

PR: It tends to come up in the reverse, in that clients ask us: what are you doing on CSR? We’ve made it a pillar of our strategy. So it’s more that it’s a requirement of clients, in a similar way to a firm’s diversity and inclusion approach, your approach to training your lawyers, and all those other topics.

TB: Would there be a certain client to whom you’d say: ‘no, we don’t want to deal with you?’

On diversity:

More male associates aspire to be partners than female. We need to look at why that is

PR: I think we’re agnostic as to sector. We would call out ethical issues as we see them, whether it’s a current client or a new client, and I think we have to be robust. We’ve adopted a global code of conduct for ethics, which we take very seriously. Without your ethics and without your integrity, you’re nothing as a lawyer, so we hold that in a very high place in our value system.