When Andrew Grech joined Australian firm Slater & Gordon in 1994, the firm was a quarter of its present size. Now, with some 60 offices around Australia, it handles around 20-25% of the national personal injury legal market, and Grech’s skills earned him the title of Managing Partner of the Year in the 2011 Lawyers Weekly Awards in Australia for being, in the words of the judges, ‘a truly outstanding’ leader. But it isn’t just growth that has defined Grech’s period at the helm of Slater & Gordon; in May 2007, the firm made international legal history when it became the first in the world to be publicly listed on a stock exchange.

Back when Grech first joined Slater & Gordon, the signs of innovation in the firm were already clear: to begin with, it had a non-lawyer as its general manager. ‘Geoff Shaw was a highly regarded chartered accountant with lots of experience in professional services, IT and business, and could think outside the partnership model. It demonstrated that lawyers don’t have a monopoly on what it takes to run a successful legal services firm,’ he explains.

Founded in 1935, Slater & Gordon became known for its trade union, workers’ compensation and medical claims work. Grech started in the firm’s class actions team, where he handled substantial Australia-wide cases until, in 1996, he became head of the firm’s Sydney office. He significantly expanded that office, before returning to Melbourne in 2000 to become the firm’s managing partner.

In 2001, the firm moved from being a partnership to a private company. This was driven by a number of factors, including tax. ‘In Australia, firms must fully distribute partners’ profits each year, so there are tax disincentives to reinvesting capital,’ he explains. ‘But we were also already developing an understanding that the professional services world would change, and were drawing a distinction between managers - who might happen to be lawyers - who could direct the firm, and lawyers who were providing professional services.’

The same proactive attitude led to the decision to list, six years later. The basis of that decision was the firm’s strategy. Unlike most Australian firms, Slater & Gordon chose not to pursue the few clients representing the lion’s share of the country’s spend on legal services - large and mid-tier corporations and government - but to continue to focus on consumers. As Grech puts it: ‘We want to provide good, equally professional services, effectively, and at affordable prices, in that market.’

However, meeting those clients’ needs had become more challenging since what he describes as the ‘huge awakening in clients’, leading to them becoming more sophisticated, and more demanding of their legal service providers. In addition, there were a number of legislative developments in the personal injury field which, Grech says, restricted the rights of individuals and made the law more complex; that offered a real opportunity for his firm to take on more clients, but only if it could find the capacity to do so.

The firm decided that expansion was the answer, and it also offered the chance to move into other fields. ‘There were more opportunities in other consumer legal services areas. But to provide a range of specialised consumer law services, you must be a firm of a certain size, and we realised that we needed to substantially extend our geographical reach. Clients now want to deal with specialists, and although the internet is increasingly important, they still want the option of meeting the person handling their work, even if they don’t do so often during the case.’

Even though listing appeared to be the best way for the firm to achieve its strategy, the decision prompted significant debate, especially about potential conflicts of interest. However, Grech contends that such concerns are often more theoretical than real. ‘Our first obligation is to the court, our second is to our clients, and the third to our shareholders. We’re clear on that in all our documents - including our mission statements and employment agreements. Our duty to our shareholders entails that we must protect their investment, and we do that by fulfilling our professional obligations, in much the same way that other professionals must honour their regulatory obligations.’ All of these issues were discussed fully with regulators before listing, he adds.

The flotation raised AUS$35m, and the firm immediately embarked on an ambitious expansion programme, acquiring over 20 firms and gaining 35 new offices. The expansion has been achieved almost equally between acquisition and organic growth. The two largest [before RJW] acquisitions - Keddies in New South Wales and Trilby Misso in Queensland - added 220 new people to the company. Keddies was fully integrated into Slater & Gordon’s business, while Trilby Misso was left as an independent brand, as it specialises in slightly different work (including motor vehicle cases) and is well-known in south-east Queensland, where Slater & Gordon is not so active. Some partners in acquired firms have stayed on to manage sites or focus on a legal speciality, while others have retired immediately or as part of a succession plan.

Grech and his team are now experienced at handling acquisitions and integrating new firms into the business.

‘The key thing is to get to know the people in the firm that has been acquired and its clients. You need to understand the local market. What Slater & Gordon means in Sydney is not the same as what it means in Broken Hill,’ Grech explains. Handling the expansion into new practice areas is also a challenge. ‘You have to learn what clients want in each area, and develop systems that deliver the services more effectively,’ he says. ‘That means investing in technology, and while the software isn’t all that costly, a significant investment in time and effort is required to tailor it to your needs. Once that’s done, you have the foundation for establishing a competitive advantage.’

Apart from personal injury and other litigation work, the firm now handles wills and probate, and family, commercial, criminal defence and conveyancing work. It has established national standards in various practice areas, and staff follow a rigorous self-assessment audit process to ensure those standards are met. The recent acquisition of Queensland conveyancing specialist Conveyancing Works has provided a base for expansion into the domestic conveyancing market in Queensland, New South Wales and Victoria. Slater & Gordon also expects its family law practice to treble in three years through innovations like the use of fixed-fee models. The firm now provides an online will-writing service, and its National Legal Helpline had more than 70,000 calls in 2011.

Today, the firm has over 1,000 employees, excluding those who will join when RJW comes on board; and its corporate status has prompted the development of a different staff structure. All the firm’s lawyers are senior practitioners, and are split into ‘practice group leaders’ and ‘principal lawyers’. ‘Practice group leaders manage an office or a group, and generally have some direct client responsibility, but are also responsible for the client work of their teams. Principal lawyers are specialists in certain fields, who work for clients and also help educate others, and for whom there is less emphasis on the direct supervision of the work of others. We pay market salaries, bonuses, and allocate shares to some employees,’ Grech explains.

About 40% of the firm’s equity is held by in-house managers and others. It often takes 10-12 years for a lawyer to become a partner in an Australian law firm, says Grech, but an employee in Slater & Gordon may be allocated shares within a shorter period. Shares are issued at the then market price, and usually allocated to more senior staff - lawyers and non-lawyers - based on the contribution the person makes to the firm. ‘We focus on what people can contribute over a three-year period. They must hit targets to get shares - in the financial, marketing, HR or pro bono work area. We issue about one to two million shares a year,’ Grech notes. Issued at AUS$1 on listing, shares now trade at around AUS$1.80.

In any event, not all lawyers now aspire to partnership, he argues. ‘More people are focused on good work, professional development and flexibility. Our ownership structure allows us to respond better to that. We can use our share plan to reward and incentivise people. We have good retention rates. About 40% of the people in the employee ownership plan are women. Also, at the end of your partnership, you usually get your initial contribution back. In our business, you hope the capital will increase, and this encourages a more collegiate culture.’

The firm’s board of directors has an interesting array of talent and shows its commitment to diversity: two members are women, including chair Anna Booth, who has had an impressive career in trade unions and as non-executive director of the Commonwealth Bank of Australia and insurers NRMA. ‘It’s very unusual for a listed company in Australia to have a female chair,’ explains Grech. ‘The best way to access talent is to have good role models, and our female directors are.’ (One former partner, Julia Gillard, is now Australia’s prime minister.)

Grech is clear that reacting to change in the legal market isn’t an option for law firms, but a necessity: ‘Just raising hourly rates isn’t sustainable. Firms that want to survive and thrive must develop a deeper understanding of what clients want.’ This is ever more important in light of the increasing pressures on capital. ‘Once, banks considered law firms a good risk. Now, to lend to a business, it must have a sustainable model, and the view of many is that the partnership model isn’t sustainable. Few partners have a strategy beyond maintaining and increasing their compensation, and the idea that clients will continue to finance this isn’t realistic,’ he insists. His firm, meanwhile, is reaping the benefits of making changes. And Grech adds: ‘The transparency and accountability that come with a public listing can only be a good thing in the legal profession.’

Diana Bentley is a freelance journalist.

  • This is an edited version of an article that first appeared in the February edition of Managing for Success, the magazine of the Law Society’s Law Management Section. The section is dedicated to providing members with the best available advice, information and support on the leadership and management issues of the day, enabling their businesses to perform better and more profitably. For joining details see the Law Society site