Q&A: Ken Jagger – "We won't recognise the legal sector in three years"

In our latest Q&A, AdventBalance chief executive officer Ken Jagger discusses changing law firm models, the empowerment of clients and the virtues of technology.

AdventBalance has built a flexible law firm that allows experienced lawyers to integrate with clients while operating cost-effectively with fixed fees. Why did you go down this path?
“For me, it was just about identifying a gap in the marketplace. It wasn’t a conscious decision of trying to re-engineer the practice of law. I was a partner at Freehills and I was responsible for the hiring of lawyers and what came with that was the seconding of lawyers to our clients. It struck me back then that clients loved having secondees – they loved having good, capable people come out to their organisation and work in that way. And clearly our lawyers liked it because often they didn’t come back. So it seemed that there was a gap in the market. Clients had a need for secondment lawyers and to fill holes in their team – and no one was doing it. There was also a gap in the market for lawyers. Really, the only options for lawyers were to work in a law firm or to work in-house, and I thought this new model might give some lawyers a third way.”

So the key is to give clients and lawyers what they want?
“In fairness to law firms, they are just not structured in a way which allows the secondment model to work. To make it a business model, you needed to establish a business from scratch in a different way. It’s not a criticism of the law firms at all. It’s just not what they’re set up to do.”

There has been great debate – and some trepidation – in legal circles around the world about abolishing the billable hour. So you are saying that it works?
“There’s still a place for hourly billing. The uncertainty of what law firms do lends itself to that model, so I am not critical of hourly billing per se. But what clients don’t like about hourly billing is not so much the hourly rate – it’s the uncertainty of the bill at the end of the day. It’s really about certainty so that in-house counsel can go to their CEO and say ‘this is what it’s going to cost’ and then they don’t have to explain a couple of months later that it actually cost a lot more.”

What else are you doing that works better for your firm?
“First, I wouldn’t like to suggest we are doing things better – we’ve just set up a different structure. From a management sense it’s very much a people business. It’s about knowing our lawyers and knowing what they want, what they’re capable of doing and what they’re not capable of doing – and matching that with the right clients. So I’d say again that it’s a very people-oriented business – both in terms of understanding the clients, understanding the type of work that will be done, the type of culture within each business and matching that with the lawyer. That’s the biggest management challenge – getting that right.”

You have commented in media reports about the need for law firms to adapt to the modern needs of clients and adopt new innovations. Where do trends such as insourcing and outsourcing fit into that vision?
“The overall picture is now very squarely being driven by the client. The trend that has led to that is the quality and size of in-house teams at the moment. The quality has certainly improved. General counsel these days tend to have been partners of big law firms, so you’ve got a very sophisticated buyer of legal services. The days of 10 years ago are done, when people just picked a law firm or a panel of law firms and outsourced all their legal work to those firms. What clients are doing now is unbundling their work. They recognise that there is absolutely work that needs to be done by top-tier law firms and specialists, but they’re also recognising that there is a whole heap of work that they’re responsible for that can be completely outsourced and done in lower-cost jurisdictions. There’s work that can be better done by bulking up their in-house teams, either by employing in-house lawyers or by supplementing their in-house teams with a firm like ours. They’re also now looking at technology solutions – dedicated software to deal with particular tasks that come up often within their business. So it’s absolutely client driven. They’re looking at the work they have to do and they’re making very conscious decisions about where that work should be done, who should do it and where the best value is. And that’s going to draw from people like us, the LPOs, traditional and boutique law firms and technology. I think it’s a very exciting time.”

Clearly, clients have a lot of choices. Right?
“The Australian legal market is sophisticated and there are a lot of great law firms and the clients now understand their ability to (set prices) and get the services they want. They are exercising that power and insisting that work be done at the appropriate place at the appropriate cost.”

Where does that leave the law firms?
“Well, the good law firms are already restructuring themselves in ways which can meet these demands. It’s interesting to observe what various firms are doing. I think everyone is conscious of what is happening – and I don’t think it will be reversed.”

In your opinion, what are the big management issues confronting law firms?
“From the perspective of traditional law firms, the biggest challenge will be getting their structures right. In the past they’ve worked off a high-leverage model and I don’t know that the market is keen on that any more. You’ve already seen that international firms entering the Australian market are entering in a much leaner way – a smaller head count, which tells you something about the way that law firms will end up being structured. So it comes back to what clients are asking for. The biggest management challenge for existing law firms is to structure their own operations to meet their clients’ demands as opposed to structuring it to meet their own demands. A lot of law firms are grappling with that now and some are making significant changes. In terms of new entrants like us, the big challenge is finding out what the clients want and when they want it. It’s changing so rapidly now that it’s going to be a significant battle to keep up with our clients and make sure we’re meeting their needs.”

Are there any particular leadership philosophies that you bring to the role as CEO of AdventBalance?
“I’ve never thought of myself as having a leadership philosophy, to be honest. For me it’s always been about getting a great team in place. If you can get a range of views in your leadership team you’re always going to have much better success than some kind of command and control philosophy. So that’s what I’ve been trying to achieve. We’ve got great leaders on the ground in all of our offices. And I see my role as setting the tone and the model and allowing our people on the ground the freedom to manage.”

Your firm has been operating for more than five years now. What feedback are you receiving from clients?
“Our clients like the flexibility and the fact they can add to their legal teams or reduce them as their project needs require. Often clients are caught between not knowing whether they should employ another in-house legal resource or just outsource it all. This allows them to manage that in a third way. They like the flexibility and they certainly like the fixed nature of the way we charge. We are able to work on a fixed-fee basis and that gives them budget certainty. They also like the fact that we can provide quite senior lawyers who can hit the ground running. Our average lawyer is in that 10-14-year senior associate range. So we are sending them lawyers who are quite capable of getting on with it from day one, hour one. The lawyers also like the flexibility that our model allows them to have and the diversity of opportunities – going to different clients and different sectors.”

AdventBalance has opened an office in Brisbane to add to the firm’s other domestic offerings in Sydney, Perth and Melbourne. How big a decision is it to open a new office?
“We did spend a lot of time testing the market in Brisbane before we committed to the full office. We had a number of roles in Queensland – some of them in the resources sector, which is why we initially thought it would be a good sector for us because we are already strong in that sector, particularly in Perth. We’ve got good knowledge of the sector and good lawyers. But what took us by surprise in Brisbane was that we were getting roles across a much broader range of sectors than we thought – health, IT, financial services, infrastructure – and that led us to the conclusion that this was as good a market for us as Sydney, Melbourne or Perth. We didn’t see any impediment to the model working in Brisbane. So we tested the market, liked what we saw and have now gone the next step to formally open an office on the ground there.”

You also have offices in Singapore and Hong Kong. Please tell us about that experience compared with setting up offices in Australia.
“It’s been really successful for us and what’s been interesting about Asia is that we haven’t really had to adapt the business model too much. There are regulatory differences, but beyond that the business model is pretty much the same. We’re targeting mostly western corporates who have head offices in Singapore or Hong Kong but do business more broadly in the region. So they’re facing the same sorts of challenges as the larger corporates in Australia. In fact, they are facing those challenges in some cases with fewer resources than they might have in their home port. So in that respect it’s a really interesting market for us. They tend to have smaller in-house legal teams than if they were based in Sydney, for instance. So we haven’t found much difference in terms of the delivery of our services in Asia. We think it’s a great market for us – we are really just following our clients. If they’re operating in Asia then we want to sit alongside them and help them out. So we are very optimistic about those two offices and the region more generally.”

You are a former partner at a large firm. Can you tell us what it is like moving from such a big firm with so many resources to setting up a new firm?
“I went from being a partner of Freehills, where I was one of more than 200 partners with quite significant resources at my disposal, to a complete start-up where you are answering the phone yourself. It was great fun, but it’s a huge challenge to go from that corporate sphere to a start-up. Of course, if you make a decision in a firm like mine you can see it implemented immediately and you can see the impact immediately and work out whether it was a good or bad call. This isn’t a criticism of law firms, it’s just a comment about large corporates generally – you can’t operate a large law firm in that way. You have to have a management structure and a board and individual partners don’t have very much influence any more, to be honest. It’s been refreshing (having more control) but you wear your own mistakes as well.”

New IT innovations are rapidly transforming the way professional services firms operate. How is your firm responding to such changes?
“I often think that our business wouldn’t have been possible until quite recently. All our lawyers are out with our clients. Without the technology tools we now have, it would be almost impossible to run a dispersed business like that without cloud computing. Technology is a big part of what makes our business tick.”

So is cloud computing the big enabler?
“Well, it’s about accessibility. We need our lawyers to be able to switch on their laptops anywhere and have access to us and to each other and the resources we have in place for them to use. Then there are things like monthly newsletters, and we’ve introduced Yammer to allow people to stay in touch with each other. We’re able to put our lawyers in touch with each other, even if they don’t know each other personally, if they need particular expertise. All of that’s been made possible in the past few years.”

Outside of the law, you have a keen interest in the disability sector through your board role for Workpower Inc. How did you get involved and what satisfaction does such an involvement bring?
“Workpower is a tremendous organisation. I got involved with them in about 2006 when their CEO asked me to help out as they needed some corporate and legal experience on their board. It’s been an absolute privilege to work with that organisation. It’s a disability services organisation, so we find employment for people with disabilities. But even more challenging, we actually have our own businesses which provide employment to people with disabilities – everything from packaging and manufacturing businesses to website design and cafes. It’s been really rewarding being involved in that sector and bringing some of those legal and corporate skills to bear on something really worthwhile. You get way more out of it than you put in.”

Can such an experience bring lessons back to law firms?
“Absolutely. Getting exposed to people who work in this sector is a real eye opener. The passion and commitment for sometimes very little reward is quite inspiring. There’s a lot to be learnt.”

Outside of work, do you have any particular passions that help you take your mind off the stresses of running a law firm?
“I have a youngish family, so I try to spend most of my time outside AdventBalance with them. And when I have dropped them off to their various weekend and weekday events I try to get out and do the occasional surf, which I do very poorly. The mind is willing, but the body is starting to let me down, I’m afraid.”

Do you have any final comments for other law firm leaders?
“Just a general comment. Change has taken a long time to come to the legal sector and in the past two years it has really accelerated. I think in the next two or three years we are going to see the pace of change go up another cog or two. It’s an exciting time for the sector. We won’t recognise the sector in three years. Law firms are on to it as well and they are going to restructure and change. And there are going to be a lot of new entrants, which will again change the sector. I’m looking forward to seeing how it pans out and I hope we can continue to be small part of the solution.”

Ken Jagger is the co-founder and chief executive officer of AdventBalance, a law firm with offices in Sydney, Melbourne, Perth, Brisbane, Singapore and Hong Kong. Prior to establishing AdventBalance, he was a partner of Freehills (now Herbert Smith Freehills) for eight years, practising in the Projects Division, and has extensive experience in the mining, oil and gas sectors. Jagger also has a keen interest in the disability sector and currently serves on the board of not-for-profit organisation Workpower Inc.