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Q&A: Sam Nickless – “By 2025-26, it will become necessary for firms to have a good suite of AI that their lawyers and people are using. Otherwise, they will get left behind.”

From Gilbert + Tobin’s point of view, how would you describe the state of the Australian legal services market as the nation starts to put the pandemic behind it?

The market has been tumultuous in recent years, with the early stages of COVID-19 being especially alarming for all of us. At the back end of it, though, the demand for services – and particularly transactional legal work – was often outstripping supply and the big challenge became getting talent and trying to hold on to people. There was a lot of movement of staff overseas given the draw of moving to the United Kingdom and the United States.

The market has now settled into a reasonably good state for the large firms at the top end of the legal market. Thomson Reuters recently produced a report on the first half of this financial year and described it as an ongoing strong period for law firms – and we have seen that as well at G+T.  After a real slowdown last year, there has been a comeback in M&A transactions and corporate transactions and, of course, litigation has been very strong across the market. There are economic uncertainties that always make us a little bit worried about the next six months on, but each six-month period seems to have gone reasonably well lately.

You just identified recruitment and retention as a challenge for law firms. How is Gilbert + Tobin faring on this front?

That is still the No.1 challenge in law firm management – to attract, retain and develop the best talent. It is a competitive market among law firms for the best partners, the best legal practitioners and business professionals in all areas. We track our rolling 12-month attrition rate for lawyers and at the extreme peak in late 2021 and early 2022 it was getting close to 25%, so we were in effect almost turning over our entire lawyer base every four years, and that is unsustainable. That attrition rate is way down now, but for the very best people in specialist areas, we must be constantly looking for people and recruiting.

What is the firm doing to ensure it keeps the best people?

A few things are important. We have a longstanding policy, and our co-founder Danny Gilbert constantly reminds us of this, that we need to be making sure that we pay our best people at the top of the market, and we are very committed to that policy. Of course, there is a lot of subjectivity – who is the best and what is the market and what is the top? We are constantly looking at these factors. So, paying well and having competitive remuneration is vital, but it is not enough. That is the sort of thing that a competitor can match with the stroke of a pen if they really want to, especially strong overseas firms. So, retention needs to be built around people feeling like they have the best opportunities here, such as the opportunity to work on the best types of matters and to get opportunities to build their career. It is even about embracing things like people going overseas at some point in their career and not finding that as a negative, but thinking, okay, that is a positive for their development and helping and encouraging people to do that in a way that ensures they come back to us. A lot of work goes into this element.

Long-term success in the legal sector is tough and, since its launch in 1988, Gilbert + Tobin has been one of the standouts in the Australian corporate law market and now has almost 1000 staff with offices in Sydney, Melbourne and Perth. What are some of the key factors that have enabled the firm to survive and thrive?

This is something that we often ask ourselves because we do not want to lose it. The firm has done quite a remarkable job, coming from where Danny Gilbert and Tony Tobin started out in a niche way and then moving up to where we sit in the market now. Australia is an incredibly competitive professional services market. There is a lot of talent competing for not that many major clients.

One of the things that has worked very well for G+T has been entrepreneurial energy. There is a slide I use for the induction of new starters that I found from 1988 and it was in Danny's original memo to the firm, his practice plan. He said G+T’s service would be of a very high standard, prompt and less expensive than the larger firms. That was the positioning of the firm at that time – we wanted to do the top work and be at the highest standard, but somehow doing things a bit differently from the others.

That was how the firm started and that stays with us. We are bigger now, so we must have more of the things that a big law firm has when it comes to legal management and law firm management, but we still try to be a little bit different. One of the key things in that is a sense of personal opportunity and personal return. There is a lot of freedom for partners to pursue their own practices and really good rewards if they are successful – that has been a big part of our mantra. The key has been getting great people, incentivising them and then letting them find the opportunities, as opposed to necessarily having some master plan and defined opportunities to go after.

Given your technology and innovation background, we are interested in your view on the risks and opportunities for law firms that may arise from tech innovation, and especially GenAI. What impact do you see this having on law firms?

It is a really important moment for us. When I came back into the legal industry in 2015, one of the things I looked at was, with that beauty of a blank sheet of paper and an empty diary, where is the money coming from? What is happening in the industry? You could see even then that there were significant amounts of venture capital going into legal tech and looking at the profit pools that law firms had and trying to go after those. Over that period, I have had the view that we are in this shift from the legal industry being a labour-only industry. The only factor of production that really mattered in the past was labour, and that has all sorts of implications for how we price – we price on the scarcity of labour, being time. It is how we own the firm, which we own through partnerships, and so the key labour owns the major players. We are now moving to a labour-plus capital model and we are in the early stages of the transition and there have been stops along the way where it has been happening, but generative AI and the next wave of AI has been the tipping point where we start to see capital really playing out. Now, has it completely landed and changed the sector yet? No, late 2022 saw a burst of excitement. By 2023, we were all grappling with how can we use it and what are the rules. With 2024, we are going to start to see use cases deployed, people getting confidence, taking a bit of risk on it and starting to see it being useful. By 2025-26, it will become necessary for firms to have a good suite of AI that their lawyers and people are using. Otherwise, they will get left behind.

What is Gilbert + Tobin doing in this tech-AI space?

One of the things we have reflected on in getting ready for AI is that if AI does what it is going to do, the pivot to AI that we will need to do across our businesses will be in a lot of different areas. It will change the way we think about recruitment. It will change the way we think about performance management. It will change the way we think about knowledge. It will change the way we think about client service delivery. It will change how we think about pricing as well because the billable hour and pricing based on time may not make sense anymore.

So, there is a retooling that is going to have to happen and it is going to be quite significant, but it is not, in my view, going to take away all lawyers' jobs. Lawyers’ roles will continue to be crucial, but working with AI is going to play a big role. So, it is not a shift from labour to capital, it is labour plus capital.

Does that mean that firms could one day be recruiting the best tech specialists, rather than the best young lawyers?

We will still be wanting the very best lawyers that we can get. The very best lawyers almost by definition will also be pretty tech-savvy. Whether they will need to be developers and have that level of tech, I think is debatable, but we will need to augment that with some more pure tech skills, and people who are able to walk in those two worlds are going to be very valuable. The strengths of good legal reasoning, legal analysis and the smarts around that will still be crucial, as well as the human skills that technology cannot do as well. But we may recruit through different streams for certain technology roles, or we are going to be looking for that amalgam as well. We will definitely change the outlook for where we are looking.

We hear on the grapevine that Gilbert + Tobin offered a $20,000 bonus for the employee who came up with the best AI idea for the firm. Can you tell us about that?

That is correct. We did the AI Bounty in 2023 and it was a really good way of getting things started on AI. We thought, well, if it is going to revolutionise the way people work, but we cannot really look at everything they do in their work, let us let them try it. So, the idea was to raise awareness quickly, but also to say to our people, you do work every day, if you see things that you think that AI could fix, tell us about it and we will see what we can do about it. We got some great ideas. We put $20,000 out there and we ended up giving out a few big prizes.

We were very pleased with the ideas from the AI Bounty. Many are being tested through prototypes. There are some we have saved in a database that we cannot do yet, but they are on the list for future exploration. Once we can find a way to make the technology, we will pull them off the list and have a go at them.

On a personal level, you had an impressive career pre-Gilbert + Tobin. What lessons do you bring to your current role from earlier positions at the likes of McKinsey, GPT Group and Aristocrat Leisure?

Well, it has been an interesting journey. I did a law degree and got myself admitted, but did not end up practising. Then I went to McKinsey and spent time there and then in industry and then got the opportunity to come to G+T as the chief operating officer. So that was my journey and I ended up becoming a partner of the law firm, which is what I thought I would be when I was 22.

I took a while to get there and went the long route. I picked up quite a bit along the way. McKinsey was very formative for me. It teaches you a lot about problem solving and thinking through issues. The other thing that was a very helpful to me even now is the breadth of topics that you work on, and the industries you work in at McKinsey. In Australia, you did not specialise like the McKinsey colleagues we had in the bigger markets who would, after two years, become a telecoms marketing consultant, for example. Well, we could not do that in Australia. You would not have had enough work. So, we were doing everything and that has helped me to form myself as a generalist and I am proud to say I know I can work across a lot of different things. Maybe sometimes I go mile wide, inch deep, but that is the thing that I have taken from that experience – being able to relate to different functions and different industries and sectors.

ALMJ is very much targeted at a management and leadership audience, so we are interested in your management style. How do you operate as a leader?

I describe my style as ‘empowering’. I try to set a vision and put a framework around what we are trying to achieve, without being all that directive on everything in terms of management to give people a fair bit of freedom to run their own race and show their own way and utilise their own talents. That is certainly my intention. I also do quite a lot of ‘real work’. I am not a manager who just sees everyone one-on-one and delegates everything. I do like to open up a blank spreadsheet or a blank PowerPoint and put a few thoughts together, and at times I need to play with the data and understand it myself to draw insights out of it. I like to be into the detail, but also give my people enough room for them to really own that aspect of their job.

It must be a tough balancing act for a CEO at a big firm, with big brains and sometimes big egos and managing all of that.

That is right. We have got an incredibly talented group of people across the whole firm and lots of strong opinions and our partners, in particular, who are the owners of the business can have very strong opinions. I have not done much work in other law firms, but I hear about them from my colleagues. I think we are in a good position with our firm and particularly our partners in that most partners will have views on things and they express them strongly, but there is a good trust in the management team to make decisions on their behalf – and I think that is the way that it works best. Obviously, the respect that Danny's had and Danny's strong leadership has created that position for the management of this firm, which I think is one of the keys to our success. We just get on with it.

We are interested in the notion that your firm wants to contribute to ‘outstanding citizenship’, whether that be through pro bono work, or whether that be through championing social causes. Why is this so important to the firm?

Giving back to the community is the starting point. There is a professional duty aspect as well, and a people engagement aspect, too, because it makes our people feel proud of the firm and also gives them opportunities to apply their skills to those important aspects.

Being a good corporate citizen is also important as part of the client-facing business strategy because business is under increasing scrutiny from regulators and from the public. Trust in business has been eroded, and clients will want advisors who are meeting the test. So, appreciating good citizenship and how we need to respond as a firm is really helpful in how we advise clients about their responses as well. A lot of people at G+T are involved in this area and we are very proud of what we are doing.

On other matters, Gilbert + Tobin has a high proportion of female partners within the firm. What impact has this delivered for the firm?

From an early stage we had a significant proportion of women partners. I say ‘significant’ with a big asterisk because it is in the context of the legal industry and it is less than 50% and it should be getting close to 50% and that is where we are pushing it towards. But I guess compared to other firms in the market, we had a number of very strong women partners and a larger number of women partners, and that helps us to this day because there have been role models within the firm. There is still a gender pay gap in favour of men when we add up all of our people, but it is smaller than at other firms. We can attract and help women to stay in our firm because we can leverage the presence and influence of current and past female partners, and that is a real benefit to us.

We recently hit the target that we set to have 40% of our partners being women, and we then had to say, okay, we have hit that target. We have now reset the target at 45%. We want to get to 50%. But I think we have a strong amount of diversity. This is important to our clients and they want to see that they are working with diverse teams. Increasingly, we are actually seeing clients ask for specific data about this.

Thanks for your time, Sam. Are there any messages that you want to get across to your peers?

My message is that being in a management role in a law firm is a great job. It is very rewarding and they are terrific places to work, even though sometimes fellow managers and leaders may get together and joke about what it is like. The ‘herding cats’ and dealing with your partners can sometimes be frustrating, but I think law firms are really good businesses and you should enjoy it and look for the best ways to really add value to the places where you work. There is room for lots of rewards and accomplishments.