The enveloping sh*t-fight to forge a career as a sucessful Australian lawyer became even harder overnight with the revelation that Australia’s most profitable top-tier firm – Mallesons Stephen Jaques – has agreed to outsource a substantial amount of its legal work to India. Brokered through LPO specialist Integreon, the deal will see due diligence, discovery and several other types of lower-level legal work redirected away from Mallesons lawyers and into the hands of 200 Indian-qualified lawyers based in Mumbai and Delhi.
It’s unnerving to think that the volume of work to be redirected under the deal requires the services of some 200 lawyers. That figure – 200 lawyers – is more than one quarter of Mallesons’ total non-partner fee-earner headcount. As at 1 January 2011, Mallesons was reported to employ 723 non-partner fee-earners. So, extrapolated out, roughly one quarter of Mallesons’ non-partner fee-earner legal work will soon apparently be flicked to the Subcontinent.
The Scoop
Despite the sense of foreboding we felt upon learning of this news, Lawyers Weekly, who broke the story, were characteristically accommodating of it (perhaps because CEP Robert Milliner is on the LW editorial board?). The publication faithfully devoured Managing Partner Tony O’Malley’s rhetoric that the agreement would not affect Mallesons graduate recruitment, publishing the following comments he made:
It’s a watershed moment … What we are hoping to do here is turn this into a growth story… it is about being more relevant to our core clients … [and] to provide an integrated solution across a broad range of services that clients need [so that] they are more likely, rather than less likely, to use you, so it is a growth question.
Yes, we too can see the “growth story”. By offshoring a quarter of non-partner fee-earner work to a jurisdiction where the average lawyers’ wage is less than AUD$20,000, Mallesons partners can look forward to considerable growth in profit. It’s true – there’s still room for Mallesons to increase its profitablity even further (estimated by the AFR (16/10/11) to currently be a “whopping” 47%), and LPO is how.
But the problem is, it’s a bit like that final scene out of The Goonies where the evil Fratelli Brothers, having followed the trail left by the Goonies to One-Eyed Willie’s lost ship and his lost treasure, feverishly set about lining their pockets with incredible riches, in the process failing to notice that they’re hoplessly, and perilously, caught on a sinking ship.
The Dangers of Offshoring
Immediately upon learning of the announcement, we wondered how junior Mallesons lawyers and prospective Mallesons graduates (unpeturbed by the Mallesons Symphony of Destruction) could hope to develop core legal skills when the precise work that so develops them will be sent overseas. We wondered whether the deal might foster the creation of an entire crop of juniors who lack the fundamentals of lawyering. And, once that crop lacking in the fundamentals ascends to the partnership, well, we found ourselves wondering how could they possibly hope to invigilate the work product derived through an LPO arrangement.
That’s how our thinking unfolded, so we put it to ALSA to see what Australia’s peak law student body had to say. The media spokespoerson responded to us:
Mallesons believes such a move will expose young lawyers to more diverse legal work. This is a goal that ALSA supports.
However, ALSA was also quick to highlight that:
The main concern for ALSA of the Mallesons outsourcing agreement is the effect such an agreement will have on recruitment and retention of young lawyers.
We share that concern and we said as much in an email to Mallesons. A spokesperson from the firm generously responded:
Our lawyers will be freed up to focus on delivering high quality, innovative legal advice for our clients. For less document intensive matters, we anticipate our junior lawyers will continue to provide traditional discovery and due diligence services. These skills will continue to be developed and used by our lawyers. In addition, our lawyers will be able to focus on the higher end, more complex legal advice that our clients expect and it will provide our young lawyers with a richer career experience. Integreon does not provide legal advice, but provide legal support such as document review and research.
Sounds good on paper, but where is all this “higher end” and “more complex” work going to materialise from? Certainly not the legal market, if informed commentators are to be believed.
The Dark Cloud Above
Many of you will have seen yesterday’s front-page AFR coverage of the redundancies at KPMG revealed exclusively by FS. In the excellent AFR report, it was stated:
…while investment banks have started culling staff … law firms are [also] reducing headcount.
The AFR then quoted KPMG CEO Geoff Wilson, who stated:
Top-end transaction activity has come off noticeably and quite suddenly. We’re not the only ones seeing that: investment banks and law firms are also experiencing it.
Which coincidentally gets us back to today’s revelation that Mallesons is sending about a quarter of its non-partner work over to India. We’re fearful that this revelation could in fact be the precipice of a darker chapter harking back to nadir of the GFC. That period where the unwelcome “starve-cycle” loomed large and junior lawyers were intentionally and capriciously deprived of work just so they would get “the hint” and leave.
Indeed, it all sounds like a frightfully precarious proposition to us. You see, if higher-level legal work doesn’t land on the footstep of Mallesons, which it won’t, then all of a sudden we have a couple of hundred under-utilised junior lawyers watching their bread and butter discovery/DD work syphoned off to a tottering Ganges River rampart. Will they sit quietly in their offices, deflecting the competitive stares of colleagues in an abyss of utilisation? Or will they see the forrest from the trees and hasten to leave? Certainly we think the latter, especially if given the appropriate partnership nudge that we all know so dangerously conspires against the mentally challenged among us. It’s a sinister plot and we’re cynical enough to believe it.
How LPO Cannot Turn Into a Growth Story
“no appetite for rate increases [and, in order to grow] what you’re really fighting over is larger peices of the same pie”.
Mr Denton’s observations are consistent with the predictions of legal market analysts who expect stunted growth in the legal sector for the next few years. Succinctly put, if firms can’t increase fees or levereage off increased workloads, revenue stagnates and margins erode. But when that pressure on the margins can be alleviated by creating a much cheaper a slice of the ”pie”, everyone eventually loses. Client fee expectations plummet, all other firms face competitive pressure to offshore Australian legal jobs, and, crucially for the farcical growth paradigm promulgated by offshoring partners, a whole strata of junior Mallesons lawyers will see their utilisation evaporate.
So, we naturally asked Mallesons how the LPO scheme might affect graduate recruitment. We asked how many graduates the firm hired this year, last year and what number it expected to hire in 2012. The media spokesperson conceded that graduate recruitment fell by 6.8% between 2010 and 2011 but refused to divulge the number of graduates it expects to hire next year.
Reverse Redundancies
We now know that to shave headcount, a variety of means can be utilised. You can use:
- Redundancies to sack 200 junior lawyers;
- Voluntary Redundancies to cunningly encourage under-utilised staff to leave; or
- Reverse Redundancies which can be carefully engineered to appear as a “growth story” that, if even marginally misconceived, will probably achieve the same end as (1) or (2), just with the comparatively meagre exposure of a wage to 200 Indians.
And that, ladies and gentlemen, is how to make Chunk’s Ice Cream out of cow sh*t.
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As a client of mallies I am not going to allow my files to be worked on from India. If they don’t have the lawyers to do the work here I’ll find another firm.
Typical overblown nonsense on FS.
There is no reason to believe the work of 200 lawyers will be sent offshore just because the LPO in question has 200 lawyers. This LPO undertakes work for a number of firms around the world and will not be dedicAting these staff to being at Malles beck and call.
That being said the LPOs I dealt with while working overseas were all crap.
The things Mallesons partners are prepared to do in the name of profit never ceases to amaze.
excellent covert work by MSJ HR posing as the “non-believer” above. As a Mallesons junior likely to be affected by this scheme, I can honestly say that while the fact of chasing profit is not altogether new or surprising, the fact of it being sold as an opportunity for “growth” is truly upsetting. It is like partners are staring us in the eye, straight-faced, and lying to us. It reminds me of all those stories I hear from the GFC when Mallesons told lawyers whose pay had been frozen to “have faith” and “continue working hard” with the representation that they would “be rewarded” in their subsequent salary review. Nothing could have been further from the truth and the utter rubbish being spouted here is no different.
Totally agree with Believer and broadly agree with the FS article. I’m one of the Mallesons lawyers who indeed put my head down during the frozen-pay period with the expectation of a form of indemnification from the partnership when new pay packets were handed out. It was an expectation I was readily drawn into by my supervising partner, but deflected by the staff partner who did the job of delivering salary review notifications.
I also watched several lawyers starved of work and ultimately “nudged” to leave either through the VRP or of their own accord. I heard of others signing confidentiality deeds to leave with a payout, but to do so silently.
When we see such unscrupulous behaviour from the very people who now ask us to have faith that an outsourcing agreement will result in a “richer” junior lawyer experience, it is a blessing we can turn to FS to expose what is really going on.
Wasn’t it reported a few weeks ago that top Mallesons partners earned over 2million last year? Being so greedy is just unaustralian. Perhaps the partners should f*** off to India too?
“hey, you guys!!!”
“HEY, YOU GUYS!!!!!”
Well on the plus side when things go pear shaped and they have to lay off staff – it won’t technically be “Aussie” staff getting the axe.
Surely only the parts of discovery and due diligence that a paralegal could/should be doing will be outsourced. Otherwise, it doesn’t make any sense. There is a lot of low level work that is below junior lawyers (indexing documents etc.) which someone with good enough marks to get into MSJ should not be forced to do anyway…
If it is not just that kind of work, then it will 1) make clients nervous about the quality of work, although they may be happier about this if it reduces fees 2) why would MSJ actually want to charge this work out at a cheaper rate…won’t it hurt their bottom line – better to charge out a graduate at $250 per hour to photocopy documents than outsource it at $100 per hour….??
Your analogy of this MSJ greed monstrosity to the genius that is the Goonies pleases me!
Wait until you start to get outsourced training (see Olswang and Acculaw in the UK) and then realise how to really screw trainees. UK experience of outsourcing is that there is a LOT of noise from Integreon et al everytime they get a new customer but the majority of the outsourced work is actually admin and IT with some research but very little doc review. This is generally driven by clients who don’t want their stuff shipped half way roudn the world and also the the partners who get sick of inconsistent work and/or don’t feel in control of the process. So in short there is a lot of noise now but once it has calmed down not much will actually change.
Couldn’t agree more with Non-Believer and, no, I’m not an MSJ or Integreon stooge. You know what type of work you typically send to an LPO? Discovery and contract reviews – the most commodified, lowest level and most utterly mind-numbing jobs you’re forced to do as a junior lawyer. You don’t learn much from those jobs, except that they are easy money.
Firms all around the world use LPOs. Has it stopped grad recruitment at the likes of CC? Links? Of course not. Some clients will understandably hate the idea of their work being sent to an LPO, leaving those poor Mallies grads to continue to suffer through months on end of discovery and the partners’ pockets being lined with free money for the exercise.
On the other hand, there will be some clients who welcome this move, faced with the prospect of their discovery bills dropping by 4/5ths. That’s surely a good thing for everyone – clients (who benefit from greater efficiency), Mallies juniors (who avoid said mind-numbing tasks) and Mallies (who can show they are offering the same services as their global counterparts).
You’ve previously noted the trend of globalisation, FS, and wondered how Aussie firms will hope to compete. Taking on LPO seems like a good way to do that and like a good thing for clients. So it’s pretty rubbish to publish an article like this, laden with evident inaccuracies (eg the 200 lawyers will not be dedicated to MSJ, as is plain from the press release). Won’t be much for those poor grads to do if all their work disappears to the global giants, will there?
Client’s do not want to pay $200 per hour for grads or paralegals to scan, code and sort documents between dates. Anybody can do that. LPO’s can do that cheaper and are usually prepared to take some risk/reward on quality outcomes. Firms that realise this and go with the LPO phenomenon will keep their clients – those that don’t won’t (and therefore there will be further job losses). Lawyers should focus on designing discovery processes and letting document monkeys do the document monkey work. No client discovering thousands of documents is prepared to be pillaged anymore. Get with it – or someone else will do it. Clients are too sophisticated these days to be hoodwinked.
IT’s funny seeing all these australian lawyers crying about having their jobs outsourced to India. I’m a young australian lawyer who has just returned after 4 years working in the U.S to become a partner here and I can tell you that this is fairly common overseas and the quality is just as good if not better. Move with the times people your job is just that and if someone can do the same work at a cheaper rate then you have just become a liability on the firms balance sheet.
I feel Dawson’s Creek should be careful using the term “monkey” in a discussion regarding India. You may offend people….
You know, I was thinking of coming across to Mallesons. This sort of story convinces me that to do so would be utterly idiotic. There is only one consideration for MSJ’s partnership when making decision: $.
@ I call BS
“Discovery and contract reviews – the most commodified, lowest level and most utterly mind-numbing jobs you’re forced to do as a junior lawyer. You don’t learn much from those jobs, except that they are easy money.”
Absolute rubbish – junior lawyers learn heaps from contract reviews.
@ Reg
You sure seem to have a lot of work available as im sure you posted an almost identical response on the KPMG story…
I don’t see how an Australian solicitor could honestly depose to an affidavit of documents that has been prepared by paralegals overseas.
@ Franklin: not when they do basic DD it for weeks on end, looking for prohibitions on assignment and change of control. that’s the level of review we’re talking about here.
Prohibitions on change of control are important shit…what if there are prohibitions and you go through with a change of control….think of the children!
@bs – you clown – a person doing dd doesn’t just have to check whether there are clauses etc about assignment they should, if they are doing their job correctly, turn their mind to the legal effect and enforceability of those clauses
@G – do you think a junior lawyer learns “heaps” (or anything at all?) from that exercise after the first few days, given the very limited confines of any vaguely efficient and not-overblown DD process? If so, why?
What a hilarious article. Outsourcing to India is incredibly funny given the reputation that they are trying to protect. If I was lawyer working for them I would definitely be looking over my shoulder and looking for something else. I don’t believe they will do redundancies as happened in the GFC. It will be the squeeze out.
All practices are sporadically busy, but the firm is very quiet over all. If I was a client, I would be looking very closely at my bills and perhaps it’s time to find another firm.
@ I call bs – read my post again
It’s suspiciously remarkable that every comment on this page has exactly neutral feedback.
So, can anyone offer an explanation for the neutral feedback other than Mallies HR?
Perhaps it’s an “ouija board” effect where readers of FS have become so profoundly cynical that there is a sort of collective consciousness through which we confirm our own paranoia.