Q&A with Malcolm Shelton-Agar – "Expect a shakeout of Australian partnerships that have aligned with global firms"

In the second part of a two-part Q&A, Jackson McDonald chief executive officer Malcolm Shelton-Agar* explains why his firm wants to stay independent in an era of mergers with major international firms, and why soft skills are still crucial for managers.

Despite the rise of multinational firms in Australia, Jackson McDonald is on the record as saying it believes being an independent law firm is the way to go in its case. Is that right?
The market is still evolving in Australia. I’ve worked in what was the precursor to DLA Piper and I’ve met very senior people in the Magic Circle firms over the years. I think there is a constructive tension in the marketplace between the global national offerings and the local independent offerings. What is exciting is that it’s going to evolve quite quickly and settle quite quickly. We’ve had the past three or four years where the global firms have come in and either acquired or set up a position in Australia and Asia and elsewhere.

I’d make a couple of observations. I think that process is coming to an end in the sense that the alignments or marriages that are largely likely to occur have occurred. But the process has not come to an end in terms of what they will finally look like. I’m of the view that there will be a relatively significant shakeout of the Australian partnerships that have aligned themselves with the global firms. Partners either won’t want to or won’t be able to meet the KPIs that the globals will set them. As a result they will downsize. Some are self-selecting – that is, some partners are seeing that coming already and they are self-selecting to that point, and some will get selected to that point.

The reason for this is that the model the global law firms are running has to fund a machine that covers the globe. The infrastructure has got to span significant geographies and that comes at a cost – both in terms of money and in terms of where the firm is controlled and run. People talk about the decentralisation of the global law firms, but my experience is that they are not decentralised at all – in fact, they are strongly centrally run for all the obvious reasons.

Therefore, two things occur – you are getting a real loss of a sense of autonomy at the local level that first started when firms went from city-state to national. But it’s gone one step further. And, secondly, you have got not only a loss of autonomy about the destiny of careers and what people can and can’t do, but you also have a significant cost impost that is placed over and above your business that will require you to meet certain KPIs. That means you will only be able to service, by and large, certain types of clients that can sustain a certain hourly rate and volumes. It is a difficult series of KPIs to meet, which will mean that a number of people who have survived perfectly happily in a national environment will not survive in a global environment.

What happens to those lawyers? Do they join a smaller firm or set up a boutique firm?
You’ve got all the normal choices. There’s nothing wrong with all this, but there are consequences of the strategic decisions that the businesses have made. I like the idea of getting more autonomy back and being more closely associated with the market that I work in – and that’s where I think this concept of independence is beginning to evolve.

One of the arguments that was placed around, first, the nationalisation of firms and, second, the globalisation of firms is that firms won’t be dependent on any one economic cycle. The argument goes that if it all turns bad in the east we’ll have the west and we’ll have Asia and England to look after us because we are part of the global pot – and that’s true. But the other side of the coin is that you are no longer as invested in your local market as you were, whereas if you are an independent firm you don’t have that argument. Where my clients go, I go. If this market is falling, I’m falling – so I have to invest in this market both at an emotional level and arguably at a practical level. It’s more skin in the game. If you think of that in terms of Western Australia, you’ve got in Jackson McDonald a partnership that has absolutely invested in Western Australia and absolutely invested in its clients here and it doesn’t have any other ‘outs’ – if I can use that language – in terms of saving itself here. We are more invested.

So the decision to be independent will not change?
Well, you never say never because you always have to be open to evolution and change. But in terms of the way the market is positioning itself at the moment – and the firm’s traditions and history – I think that is likely to be the case, certainly in the medium term.

In the past, you have been a champion of lawyers having ‘soft skills’ such as communication skills and people-management skills – not just lawyering skills. Do you still maintain that stance?
Should you have soft skills, or can you just ignore those skills and be a good lawyer – whatever that means? No, you can’t. If you want to stay competitive you have to have these softer skills and you have to understand that they are important. What’s fascinating for me as a Baby Boomer is the different expectations younger generations have as they come into law firms. They have strong expectations about how they will be managed and led. They have strong expectations about the quality of work they will take on, and not particularly strong expectations about staying anywhere for very long. So if you are not prepared to meet those expectations then you had better change the model of your law firm and just turn it into partners only – and good luck to you – or if you want to run a law firm which involves people and lots of them then you have to embrace it because your competitors will do it and win the war for talent.

You previously retired for a very short period but are back in the tick of work. Do you have a way of easing the stress of corporate life?
Well, for my wife Elizabeth and I, our children have flown the coop so we don’t have to worry about educating my children any more. To relax, the stock answer for me is reading and I hopefully might get back into riding, which I was doing in eastern Australia but not in Asia. I rode for about four or five years when I was in Sydney and I hope to pick it back up again in WA. I did a little bit of dressage. But equally we’ve got this exciting opportunity of exploring the regions of Western Australia – just exploring this part of Australia. It’s an exciting time.

* Malcolm Shelton-Agar is chief executive officer of Jackson McDonald, the largest independent law firm in Western Australia. An experienced litigator, his career spans the management of international and independent law firms and he has worked in countries including Singapore, Australia and New Zealand.