Transcript - Episode 3: Mark Rigotti, CEO Herbert Smith Freehills

Tony Hodgson, Partner, Consulting, PwC UK: Hello, I'm Tony Hodgson. Welcome to the latest episode in our business leaders podcast series. We're exploring how business leaders see the future, and how they are driving transformation to achieve that vision. Today, I'm joined by Mark Rigotti CEO of Herbert Smith Freehills. Welcome Mark, thank you very much for joining us.

Mark Rigotti, CEO Herbert Smith Freehills: Thank you Tony, thanks for having me here.

Tony: It's a pleasure, thank you. I'd love to hear about how you think the law sector will look in 20 to 30 years time.

Mark: It's interesting you picked 30 years, 'cause if I think back 30 years ago to when I first started, I remember my first day at the firm, in September, 1988, and I remember being shown around by the people partner. And he proudly showed off a couple of things. The first stop on the tour was to see the library. The second stop was then to see a huge big mainframe sitting in an air conditioned room with its own power source, and then the third stop on the tour was to see the fax room, where we had 42 fax machines going non stop, transmitting documents.

Fast forward 30 years, no libraries, no mainframes, no fax machines. So I sort of, in looking forward to the next 30 years, I think back about the changes I've sort of experienced over the past 30 years and I don't see any change. And in fact a little phrase we use at Herbert Smith Freehills is that tomorrow will not be the same as today. We might not know exactly what it looks like but we know it'll be different.

I think a couple of things that I see in the future, and which sort of shape the vision we have here in the firm: Clients are increasingly becoming sophisticated and are able to choose what they want. I think one of the things that we're very mindful of is that we all need to get better at defining what clients want and doing that with them. In the old days where clients would turn up to their lawyer, and the law firm would then give them the advice and it was very much a transactional arrangement, those days are over, and the future is going to be characterized by relationship. So I do see a lot more co creation between clients and providers like ourselves.

I think it will be interesting, too, when we're sitting here in 30 years time, hopefully with all of our teeth, and reflecting on the new products that have come to light. So climate change would be one, data would be another. They’re quite exciting areas. I don't know what's going to be involved in those things but it'll be different. I think the other side of the picture for us will be, if clients are interacting with us differently, what are we doing differently to deliver our services, our products to the clients. I'm absolutely clear that the way in which we deliver our services will become more varied. And the way I like to think about it, for the last 30 years there's been a pretty much a two course meal. It's been pretty limited ways that services are delivered by law firms. That's going to turn into a veritable smorgasbord.

And in our business we're already seeing it. We see technology playing a bigger role, we see nearshoring playing a bigger role. We see disciplines that might be familiar to a lot of listeners, like project management, becoming a much more integrated part of our offering. And I'll get to the last thing that I think that'll be different, which is interesting, will be around talent. So we're going to have to develop new ways of developing talent, and new ways of providing purpose and meaning to the talent that joins us.

So it's a brave new world out there. They'd be some of the elements that I see sort of intertwining.

Tony: Thanks for that Mark. That's fascinating. So change, in many ways is the only constant in the future. What do you foresee within that as being the major challenges for HSF in getting there?

Mark: I think one of the major challenges for us is becoming more than lawyers. If you think about those that are not familiar, lawyers go to law school, at law school you're taught to do two things. To follow precedent, and to squeeze out risk. And in a changing world, you don't want to follow what went before, and you need to be innovative, which means taking on board some risk. So our DNA has to adapt to that changing world. And I think we're well down the path of that.

At HSF we try and promote a culture of innovation, rather than innovation for its own sake, and so we are trying to weave an extra strand into the DNA.

That would be the biggest thing, I think, in terms of how our organization will need to shift to take advantage of the opportunities that the future will bring.

Tony: So what are you, within that, what are you actually implementing in order to prepare for the future?

Mark: So several things. It breaks down into some timeframes, and a good way to get your head around that is to think about the opportunities represented by technology, and in particular, Al. So there's some near term opportunities for us which involve a range of different things that we use in the business right now. So document automation, paper and pen are gone and it's the machine that produces first drafts of documents. An ability to process a lot of documents very quickly, so large scale discovery, those sorts of things. So those things, that's the immediate future. That immediate future is here now, it's just getting scaled and built out.

I guess the next thing we're thinking about is all what is it gonna look like in five years time? What part of our offering is going to be delivered with Al. And that's an untold chapter at this stage.

Tony: So Mark, how do you see Al impacting your business, both in the short term and in the longer term?

Mark: It's a good question and one we're asking ourselves. We don't know. We do think Al will be relevant. We're actually seeing some of it hit our business now. There's some products that are available that we're using, or we're trialing. To be honest, we're still in a bit of an exploration phase there to work out how scalable it is. Couple of learnings that we have sort of come across is that it tends to supplement what our lawyers do. It tends to deliver some efficiencies, which is great for clients in terms of speed and price. The slightly different things we discovered, which we hadn't expected, was that Al can augment risk. And a way to think about that if we're doing a due diligence, in a traditional way for a client, we've got a team of our lawyers looking at documents, they can get through so much stuff. If we turn the machine on and we feed the documents into the machine reading technology we have, you can read a hell of a lot more documents in the time available. And done well, that can de-risk the transaction for a client.

So I think in the short term, the way I see it, Al, it enables lawyers to do their job better. It doesn't necessarily displace lawyers per se, but it does beg the question of what does the longer term position look like. And the answer is we don't know. Having said that, I think it's exciting because, if as I look back on my past 30 years, there's tasks I did 30 years ago that we no longer do. So I don't see it as a threat, I see it as a natural evolution. As efficiency drives better outcomes for clients and drives law firms to do things differently, so will Al follow that trend and it's incumbent upon lawyers and law firm leaders like myself to be thinking about the issues so that we make sure we can direct our talent onto the right things.

Tony: So what skills will employees most need in an Al empowered organization?

Mark: The skills piece is ... it's gonna be a bit of a theme here. We don't know. But what are we experimenting with? Well, I guess the fundamental question we are trying to answer, is it another skill that all of our people have to have? Or do we have it in a stand alone group? And if I think back over my career, the sort of the extra skills that are taken for granted now that I had to pick up, for example was being commercial. Not just being a great lawyer, but being able to apply the advice to commercial needs. And then there was a piece around actually looking after clients and making sure the experience they had was good, not just that the advice was good. So I'm probably on the side of the debate where I see lawyers of the future will need to have extra skills which allow them to use Al. So the products that we would buy would be lawyer friendly, rather than trying to find an MIT PhD to use it.

There will be a piece on the top though which is much more sophisticated, which will require a higher level of technical skills. And again, I don't see that as threatening. Law firms, including HSF, have evolved where we have many non lawyers working with us to help us deliver our services to clients better. In an Al empowered world, we will still have a whole pile of lawyers who'll have some extra skills, they might have some coding skills for example. And then we'll have a SWAT team of experts who'll be able to provide the truly technically excellent advice that's required for the Al piece.

Tony: Great. Thank you, that's a very clear picture of how the future could be. I'm going to turn now to data. I'd be interested in whether the information that CEO's use to forecast the future will be the same in the future as it has been in the past.

Mark: Data is interesting, isn't it. Particularly for lawyers, 'cause we're very forensic. You know we like to follow precedent, evidence is important, so data is something we really like, which is perverse I guess. But data doesn't make decisions, people do. Or people with some help from technology might. I think the type of data that we'll be looking at will be broader.

So I do see us extending into more data which allows us to look at the health of the organization not just the fiscal performance. On the client side I think there's absolutely no doubt that access to data will help provide a better service to clients. So for example, if you come into us at the moment, you've got a big dispute, you want us to help. We'll understand the evidence, we'll understand the merits of the case and we'll be able to say, "Based on our experience we think your prospects are X or Y." What the future will look like, we'll be able to say, "Thanks for the evidence, put that into the machine", we'll be able to say, "What's the story behind it?" The machine will have 200 or 200 thousand, or two million cases, or similar precedents there, and it will be able to draw parallels and actually give a machine generated set of guidance. Now I don't think it'll ever replace the judgment piece that sort of sits on top. But we will be able to access the data in a far more kind of considered, efficient way than we currently do.

Tony: And are people good at understanding insight that comes from data and then acting on that?

Mark: Mixed, if I'm honest. One of the things I struggle with there is there's just so much data. What's good data? What's bad data? How do you organize the data? And it reminds me the story doing a deal many years ago where the client asked the investment banker, what does the model say? The investment banker said, "What do you want the model to say?" It's a little bit the same with data. So I think we are trying to discern what's good data, what's bad data, and then to organize it in a way which gives us sensible insight. But that's a work in progress at the moment, I have to say.

Tony: Okay, thanks Mark. I'm going to change the topic now to the people agenda. And start with asking, what hiring challenges around skills are CEO's facing compared to the past?

Mark: Some of the hiring challenges include technology skills. Everyone wants data, so those people are in high demand and if I bring it back to our business to give you a feel for it, ten years ago all billing was done in paper form. Fast forward to today, increasingly all of our billing is done through e-billing systems. There is no common platform, there is no Microsoft solution. There are literally dozens and dozens of solutions. So one of our problems there in terms of talent is finding people with the experience. But guess what, everyone wants those people. So congestion around highly sought after skills, particularly in the technology area, is one challenge we face.

I think the second challenge we face is around why do people show up? Why do they stay? And a lot has been written around purpose. I guess my own view has been people fundamentally join us and stay with us for three reasons. The first reason is they find some meaning in what they do. A second reason they stay is that they feel part of something. They feel part of a community, and again that was probably simpler in past days where organizations were smaller. Certainly we were much smaller. We have 480 partners now, when I joined there were 80. And people didn't work in different places, they all worked in the one place, so community is becoming harder to maintain. And then there's a bit of fun. And I do worry that the fun gets squeezed out of work. With economic rationalism and the competitive forces, it drives a little bit of the fun out.

So a second challenge I think on talent is actually working out why people will want to join you, and then working out what you need to provide to have them stay.

Tony: Okay, Mark, just sticking with talent and thinking about the way in which you as a firm need to continue to develop that talent, what things will HSF be putting in place in future to develop their talent and to help people in managing their workloads in what is an ever increasing faster paced economy in which we operate?

Mark: They’re things that worry me, actually, because it's a little bit, we would say back in Sydney, "It's like painting the harbor bridge." It takes three years to paint the harbor bridge in Sydney and as soon they finish they go back to the start and start again. So I think in terms of developing our people, we look around for what they want, what we think they need, and certainly what clients want. Over the years we've layered different things into that, so more training around financial acumen, more training around commerciality, increasingly technology skills, probably the big one at the moment is leadership skills. Trying to teach people to be aware of their own strengths and weaknesses. How they can leverage their strengths, how they can supplement things that they might not be as strong on. How they can influence people. Those sorts of leadership skills. So there's a big push on that from our side.

In terms of manage workload, again we don't have the answer there. We serve at our clients' pleasure, so we don't always set the pace and the tone of that. A couple of things though, that we have found make a difference, coming back to a keyword I used before is flexibility. So we have a global policy on agile working, up to a day a week, people can elect to work agilely. Agilely means different hours or in a different place. At home, at a ‘we work’ center, whatever it might be. So that has been fantastic. We've actually found that's been very empowering and very popular.

I have to say the agile working has been the breakthrough on workflow management for us.

Tony: Mark, thinking about innovation, could you describe maybe an example in which your operating model has changed in recent times?

Mark: Sure. Well one thing that we're stepping into quite a bit at the moment is what we call legal operations. In thinking about that, you need to think about our business as a bunch of lawyers who provide services to clients, it's the front of house. And then a business services team which supports that. We've found that in an increasingly complex world we've needed to apply some very advanced project management skills, so we have project managers, and so on. What we have done is we've put them together in one team. And why I think that's innovative, it actually creates a self reinforcing ecosystem. It's much more efficient, which is good for clients, it's good for the business, for our business. It also faces the way the clients are starting to organize themselves. Their lawyers inside the organization quite often are supported by an operations group as well. So it's innovative in terms of service delivery. Why I'm excited about it is I think it's very client led. It's really there to make the clients' lives better.

Tony: Thank you. Mark thank you very much indeed for joining us today. I've certainly found your insights very illuminating to what we can expect for the future, particularly in the legal sector. I would like to thank everybody for listening to this podcast, and I hope you've enjoyed it too. Thank you.

Mark: Thank you very much.

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Chairman and Senior Partner, PwC United Kingdom

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