Uli Kleinsteuber, who became Goodwin Procter’s first ever managing director of international operations when he joined the firm last month from Linklaters, didn’t plan on a career in law. Michael Caplan, who spent most of his career in legal operations from the client side, had never worked for a law firm until joining Goodwin four years ago as chief operations officer.
Now, as Goodwin works to expand its footprint across Europe and the world, the pair are applying experience garnered from the Magic Circle, from elsewhere in the professional services realm and from time in the clients’ seat to streamline and organize the 800-plus lawyer firm’s global operations.
After starting his career at Procter & Gamble and passing through Ernst & Young, Kleinsteuber spent nine years at Linklaters in various operational leadership roles, most recently as COO of the Emerging Europe, Middle East and Africa region. He remains based in London.
Caplan, based in New York, directed operations for Goldman Sachs’ corporate legal department, led a consulting practice on legal spending issues, and then worked for Marsh & McLennan Companies before arriving at Goodwin as COO in the summer of 2014.
ALM talked with them about the mechanics of competing on an international stage—and how law firms are adapting to their global clients’ evolving expectations.
What are the biggest challenges currently facing firms with global aspirations?
Michael Caplan: If you look in the industry, in 2017 there were close to 100 mergers and acquisitions among law firms, or groups of lawyers leaving to join other firms. Selling hours is a shrinking business. When you see the [growth in] law firm demand at close to 0 percent and with litigation specifically below 0 percent, there is a lot of pressure on the law firms to go out and get the right laterals—people in place with books of business—and find ways to differentiate. So when you’re pitching and doing your business development with your clients, you’re doing it in a way that you’re selling your firm differently than just saying, “We have good lawyers and we have smart people.”
A lot of law firms don’t necessarily understand today—but I think at Goodwin we do pretty well—that a law firm can’t be all things to all people. You have to have a strategy. You have to identify your key high growth areas, and you need to sell those areas as being experts in those specific areas. If you aren’t an expert in an area, you have to be willing to say so.
How did you go about deciding to create the new managing director of international operations position?
MC: As we’ve grown in the last two years into Europe, we went from having a small real estate [focused] London office—a very profitable, high-revenue driving group—to taking a group of lawyers from Ashurst and opening our Frankfurt office to expand our real estate practice, and then taking a group of lawyers from King & Wood Malleson and opening our Paris office to create a private equity arm with portfolio company business.
Our GO [Global Operations] team needed to be expanded and grown outside of London, so we have people in finance, technology, marketing, HR, you name it, in every office. I needed to have somebody lead and help me lead these groups of people.
What Uli and I are working on together is how we make sure that we continue to grow our European practice, which is expected to be a $100 million revenue group, while making sure that our GO team and our professional staff are aligned to making our partners successful.
Uli, you came from Linklaters. How do you find Magic Circle firms are managing their international operations differently from American firms?
Uli Kleinsteuber: Now that I’m with Goodwin, I recognize that the Magic Circle firms—I suspect by picking up large legacy European firms—actually started with a different spread of a large number of resources and functions, particularly in Europe.
My take is American firms tend to be leaner and will continue to be leaner because there is a little bit of competitive advantage in having your largest team in the U.S., which speaks one language and is one jurisdiction.
When you go to the European office of Magic Circle firms, you’ll see all functions repeated and highly staffed. Therein lies a competitive advantage. If you work with a clear strategy, as we are, and you work as one team globally, you can use those resources better.
My sense is that typically, Magic Circle firms are less commercial—not always as focused on clients as U.S. firms are. I think that might be a cultural thing: a habit of U.S. attorneys being more like business partners rather than lawyers.
Are there any lessons that U.S. firms can take from their U.K. counterparts?
UK: Pricing pressures were things that we saw in my days at Linklaters in Europe pick up a while ago. I think that may have been something that impacted the way that Magic Circle partners thought about how they could create more efficiencies.
They started investing a bit more earlier in some of the support functions: things like professional support lawyers, paralegals, or transaction lawyers as they call them in Germany, project managers—which we’re also starting to talk about investing in at Goodwin.
MC: Global clients’ billing is very different than it is here in the U.S. They don’t bill anything for transactions and international clients basically until the moment we expect to get paid.
Being a cash-based-accounting global firm—as you can imagine—there’s risk with that. But what we have found in Paris, specifically with our private-equity focus, is we’re close to 100 percent realization because they negotiate the bill at the time of the deal. It’s not just racking up hours and putting time in, it’s actually a true negotiation. That’s been a good lesson for us in the U.S., as we negotiate global deals and global transactions, to do different types of pricing models: fixed fees, caps and budgets. We can get more certainty not only for the client but for us in terms of how billing and collections will work. I think the international firms have a better handle on that.
The other thing that I’ve learned as global COO—the culture of the firm is something that is paramount to our success. The U.K. firms had to learn the hard way over the years as they integrated very local-jurisdictionally focused European law firms into their U.K. culture. That has been a battle and a fight for many years. We have a chance to give Goodwin—as we’ve just begun growing internationally—a way of doing that better than most firms have done before.
Is part of both your jobs trying to persuade lawyers to think more about business operations? Or do you shield lawyers from that responsibility and take it on for yourselves?
MC: I think if we shield our lawyers from that, we’ve failed. Our lawyers bring our pricing people to meetings, our lawyers bring our business development and practice management people to conferences and events to work with clients and help sell the business of law, because we are the experts in the business of law and our lawyers acknowledge that. But our lawyers, who are the experts in the practice of law and maintaining client relationships, see at Goodwin the value of true operational support and what that means to clients.
We’re sharing our business of law expertise in areas that [clients] also need help in operationally. It it just grows the relationship, so that they will utilize our lawyers for true revenue generating work.
Both of you came from professional service firms before working directly for law firms. What surprised you most about the shift?
MC: The biggest surprise that I found at Goodwin as COO was the size of the job. Coming from being a corporate chief operating officer with one general counsel to support, when you come to the partnership of a law firm the size of Goodwin and you have 800 professional staff under you and you’re on the management committee but you also have close to 300 partners, it’s almost like having 300 general counsels.
UK: The perception you have outside of law firms, in particular with other professional services firms, is that law firms are glacially slow in implementing change. And I know areas where that is the case and where I’ve seen it myself. At the same time partnerships in general, but in particular law firms, can get very excited about and really united around particular changes and can act on something very quickly, whether this is the opening of an office, the hiring of a particular lateral, a new position, or investing in technology.
What do you expect the landscape for global firms to look like 10 years in the future?
UK: There will be more big law firms globally through consolidation, I can’t see a way around that.
The demand driver around clients wanting more for less just means that we will continue to become more efficient. We will look more closely at doing things faster and better, with lower costs and the same output or with more output at the same cost.
I still see a lot of manual work in our law firm that could be done better, much better, with the right use of technology. And that’s something that applies to law firms globally: that there are areas we haven’t really looked at yet, that once we do properly, we will be looking at a very different process.
MC: What we have learned in this business is that law firm loyalty is very much tied to the individual lawyer or lawyers that clients have a relationship with.
We also see clients doing more RFPs, creating panels, and creating more competition through pricing. So as the consolidation occurs, you’re going to be put in buckets by clients. You’re going to one of the preferred firms for litigation, preferred firms for M&A, for ERISA, you may be the employment lawyer. And from there, you may not get any other business from a client. So as you create your strategy, you have to think about how the clients are changing their strategy.
This interview has been condensed and edited for clarity.