Sven Laacks, Director at Laurence Simons Search sat down with Markus Hauptmann*, previously a Partner at White & Case to discuss managing a law firm through crisis. With the current COVID19 pandemic and the impact it is having on the economy worldwide, Hauptmann shares with us his own experience of leading an international law firm through the global financial crisis back in 2008.
*Markus Hauptmann practised at White & Case and its German predecessor Feddersen Laule for 29 years, 25 of which were as a Partner until the end of 2019. He was also Managing Partner for Germany from 2008 until 2014.
Sven Laacks (S.L): What is your view on the current crisis? Are there parallels to the global financial crisis from an economic point of view?
Mark Hauptmann (M.H): We had regular partners’ meeting at the time the global financial crisis began so, I remember it very well. In 2008 the changes occurred abruptly and brought the financial and capital markets to a standstill within only a few days – an unprecedented economic effect. The suddenness of these changes meant a difficult and most of all unpredictable situation for all market actors. The circumstances we are currently in are very much alike; you could say the public and economic life was transformed overnight.
S.L: How did you react to the global financial crisis as Managing Partner at White & Case?
M.H: In 2008/2009 White & Case Germany was more independent with significantly less influence from the US management. This was an advantage allowing us to act autonomously as partners. Our first step was to immediately cut all benefits in kind and related costs wherever possible. Of course, this meant surrendering benefits we had cherished before. Looking back, however, the most important decision I had taken was not to let go of any of our personnel. A law firm is – much like the recruiting business – a people business and the employees are its heart. I am convinced that our loyalty towards our employees was important and their loyalty towards our firm meant that amidst the crisis, we were already able to build the foundation for a quick recovery after. In the end, this mindset has paid off commercially and has even been rewarded with the JUVE Award for ‘Law Firm of the Year’ in 2011.
S.L: What were the biggest challenges you faced?
M.H: The situation clearly was a challenge for everyone and I had just assumed office as Managing Partner for Germany in 2008. I had gathered prior experience in managing a law firm by acting as Executive Partner of single offices in Prague and later in Frankfurt, but the financial crisis was a whole new level. There have been occasions where I felt queasy, especially due to the uncertainty that we are facing again in these current times. Knowing that there is a big international law firm that has your back surely helps in these moments and one should be adamant to stay calm. It is important not to lose one’s head over what the media or analysts say and risk to rush to conclusions and actions. Instead, the German business focused on ourselves, our market and our clients and took this as the basis for the decisions we took.
S.L: Drawing from your experience, what went well during the financial crisis and what would you do differently today?
M.H: My summary would go as follows: Stay calm and steady and demonstrate this to your employees. Take people-focused actions, take your employees on this way with you and do not deal with challenges at their expense. Focus on your regional situation and do not get distracted by international issues. A problem that has arisen from the financial crisis and that is still affecting almost every law firm in Germany is the relatively low hourly rates compared to other leading jurisdictions. Most clients have pressed their consultants to offer significant discounts expecting them to “share the pain”. While this had no long-term effect on the markets in Great Britain or the US, the hourly rates have not gone up after the crisis in Germany as much and this fact accounts in part for the price differences between markets which we can see today. This time I would think twice about granting clients the extensive price cuts we granted them during the financial crisis.
S.L: What lies ahead of us? Please give us your estimations.
M.H: 10 or 11 years ago, the economic recovery set in quite quickly and was substantial. This time I believe that we are facing a much longer phase of recovery, but I may be wrong.
S.L: Thank you very much for this conversation and your insights, Mr. Hauptmann. Please stay healthy.