The champagne days are over as firms cut costs
ONE OF THE less visible casualties of the credit crunch has been the corporate and press hospitality industry. Legal journalists wistfully recall the days, now gone, in which they were magically whisked away by a fleet of chauffeur-driven cars to take first class transatlantic flights to check out Linklaters’ New York office or when they had their burgers tossed on to the barbeque by Michelin-starred chef Richard Corrigan on Allen & Overy’s terrace at its summer bash.
“Firms are really trying to play things down,” reports James Baxter, editor of Legal Business. When A&O’s annual report arrived last year at his office it came with fresh orange juice, croissants and jam courtesy of the law firm giant. It’s unlikely there will be such cheery accompaniment this year. Or as Baxter notes: “There’s no way they’re going to get a Michelin chef in this year because they have just got rid of God knows how many partners. The perception would be really bad.” Earlier in the year it was reported that A&O planned to axe some 47 partners and almost 200 fee-earners.
YOU THINK TWICE
The Royal Bank of Scotland provided a dramatic cautionary tale illustrating the potential for cataclysmic PR when the bailed out bank spent £300,000 of (as nearly every newspaper in the land pointed out) “taxpayers’ money” on a luxury corporate hospitality suite at Wimbledon.
The legal sector has always been, with rare exceptions, relatively modest in its entertainment spend. “Lawyers aren’t like bankers,” reflects Matthew Rhodes of the legal community website RollOnFriday. “They suddenly find themselves earning huge sums of money and are slightly embarrassed about it. You don’t find lawyers driving around in their Ferraris, getting tanked on Cristale every night. They just aren’t like that.” He reckons there is “still as much entertaining going on – but it’s being done on a much lower scale”.
We were never as lavish as the banks in terms of organising events,” agrees Dee O’Shaughnessy, Lovells’ corporate hospitality and events manager. She insists that the firm has never spent a huge amount on events and a client survey 18 months ago revealed that clients primarily wanted “learning events”. The client parties that Lovells does put on have been scaled down. O’Shaughnessy points to a recent event at the Royal Exchange. “In previous years it would have been a champagne reception and now it’s just a drinks reception. Our clients are suffering and we cannot be seen to be spending their money on things which are perceived as ‘jollies’.” There is, as she puts it, “a perception issue”.
Laura Shumiloff, head of business development at Norton Rose, insists her firm has “always taken a conservative attitude towards corporate hospitality”.
“But now I think you’ll see from all the firms a need for people to see a concrete return on investment. In current circumstances, you think twice. You think of how it’s going to be perceived both by the market and internally.”
Unsurprisingly, this new age of austerity has had a dire impact on the entertainment and events industry which, reflects Dee O’Shaughnessy, is “probably bigger than the automotive industry in the UK”.
Claire Pasquill is sales director of Mask Event and Design Production, which has many law firms on its books. The size and scale of the events industry across Great Britain is “utterly enormous”, she says. “The trouble now is that firms don’t want to be seen to be lavish,” she continues. “They struggle with the fact that if they do things which seem to be obvious, whether they be client or staff events, the press find out and they’ll be taken to task.”
EXCESSIVE HOSPITALITY
Pasquill is hoping to launch a campaign to provide a platform for clients across the industry to talk about the value of events because, as she puts it, at the moment there is “a silence” about events. “A retraction by 20 to 30 per cent across the industry will hit very hard across the country. We want our clients to talk about the benefits. There is a little guy who is being hit here – the waiters and the chefs who support the industry.”
That said, some law firms’ clients believe that this recent show of restraint is long overdue. Paul Gilbert, chief executive of LBC Wise Counsel, reports that “excessive hospitality” has been much less common in recent months and, in his view, rightly so. “I have been uneasy about the way that law firms have been entertaining clients in the past – as have a number of general counsel,” says Gilbert, a former head of legal at United Assurance and Cheltenham & Gloucester.
ASKING FOR TROUBLE
When Gilbert was general counsel, he took the view that hospitality was “excellent and welcome providing it was proportionate to the activity and to the relationship’’. In other words, it would be acceptable to “share social time together at the theatre or over dinner”, he says. “But, by the same token if you’re going to be flown by private jet to Marseille to watch Rugby World Cup, that’s asking for trouble. In better times there has been quite a lot of that and I think many general counsel have found that rather unsettling.”
Gilbert says that the present economic downturn means there is much more focus on lowering fees and demonstrating value, “neither of which is easily supported by a night at the opera”. He also reports that in-house lawyers need to be “much more circumspect” as companies’ procurement policies increasingly require them to be objective and transparent in their appointment of external lawyers.
RollOnFriday’s Matt Rhodes offers an alternative view. He takes firms’ economising with a hefty pinch of salt. “Clearly cutting anything other than jobs during a recession has got to be a good thing,” he says. “However, given the outstanding year that many firms have announced, much of the recent corporate hospitality cutbacks looked to be nothing more than window-dressing.”