 "We will cap family equity dilution at 40 per cent: Shardul S Shroff & Pallavi S Shroff")
It has been a year since the Shroff brothers, Shardul and Cyril, split one of the oldest law firms in the country to launch their eponymous firms, Shardul Amarchand Mangaldas and Cyril Amarchand Mangaldas. In an interaction with Sudipto Dey, Shardul S Shroff, executive chairman, Shardul Amarchand Mangaldas, and the firm's managing partner, Pallavi S Shroff, share their experience of the year-old journey of starting afresh. Edited excerpts:
How has the journey been over the past one year?
Shardul: It has been a good year. In some sense we have got over the pangs of being a 'start-up' in Mumbai. We are now working on the Bengaluru, Chennai legs. (Shardul Amarchand Mangaldas has offices in Delhi, Gurgaon, Mumbai, Ahmedabad, Kolkata and Bengaluru.)
Shardul: Actually, that was about changing some of the issues we had in the old firm (Amarchand & Mangaldas & Suresh A Shroff & Co) and the lessons learnt from there.
Anything specific?
Shardul: One of the problems in the old firm was the 'siloed' approach…there were two firms within a firm. That is not conducive to one-firm cohesive approach. We are now far more linked; communicating between the various offices. There is also a lot more inclusion of senior people in the management. We are among a few firms that have a non-lawyer on the management board - former Sebi chairman M Damodaran.
Pallavi: We have re-organised ourselves according to national practice areas. So, irrespective of location we work as one team. This is part of our learning to be one firm: be collaborative and inclusive.
Where do you see yourself in a transition from a family-run firm to one managed by professionals?
Shardul: We are way past the family concept. In a firm of 430-plus lawyers, we have only five members from the family. In fact, only two of us (Shardul and Pallavi) are there on the seven-member board. The rest of the family is only doing commercial and professional jobs. There has consciously been a diminution of the family role. However, we have made a distinction between the ownership and management roles. In fact, we have made the firm more entrepreneurial, and spread this across the partnership and the practice areas. Both administration of the firm and administration of the practices have effectively moved onto professionals. This is an ongoing process, and we are over 70 per cent already in place. We have a chief operating officer of Australian origin to oversee the daily operating issues. In the managing partner roles we have Pallavi in Delhi, and Akshay Chudasama in Mumbai, with regional responsibilities.
Pallavi: Effectively, Akshay and I run the firm jointly, even we have regional responsibilities.
How much of an equity dilution has this transition meant for the family?
Shardul: We have given away 48 per cent of the equity and will dilute further as new partners get added.
Is there a limit below which the family will not dilute equity?
Shardul: We will cap it at 40 per cent for the family, while the rest will be with others. This will also demonstrate that outsiders will have more equity and profit share than the family.
What will be your focus going forward?
Pallavi: We will consolidate and build the practices, help the locations grow and get the right people.
Shardul: Now, a lot of law firms have in-house legal process outsourcing units. Some of the growth in these firms is coming from transaction advisory services from within the organisation. These are at a very different wage scale. We have consciously chosen not to do that. That will distort the fee structure the firm is used to. But, the proposition I am working on is that legal services must be value-for-money. This is not about doing the least cost work but cost that is appropriate to end results that we are asked to deliver. That is where the clients are moving. They want to see solutions that give value-for-money.
So, do you expect more pressure on margins in law firms?
Shardul: That is already happening. Work which is repetitive is getting into the low-cost model. So, we have to focus on innovation, offer quick solutions and anticipate a client's problem - which is what value-for-money means.
How has the journey been over the past one year?
Shardul: It has been a good year. In some sense we have got over the pangs of being a 'start-up' in Mumbai. We are now working on the Bengaluru, Chennai legs. (Shardul Amarchand Mangaldas has offices in Delhi, Gurgaon, Mumbai, Ahmedabad, Kolkata and Bengaluru.)
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Pallavi: We started afresh and built on the legacy. We had a lot of internal re-organisations, with a lot of focus on governance. This is part of our plan to make ourselves world-class.
Shardul: Actually, that was about changing some of the issues we had in the old firm (Amarchand & Mangaldas & Suresh A Shroff & Co) and the lessons learnt from there.
Anything specific?
Shardul: One of the problems in the old firm was the 'siloed' approach…there were two firms within a firm. That is not conducive to one-firm cohesive approach. We are now far more linked; communicating between the various offices. There is also a lot more inclusion of senior people in the management. We are among a few firms that have a non-lawyer on the management board - former Sebi chairman M Damodaran.
Pallavi: We have re-organised ourselves according to national practice areas. So, irrespective of location we work as one team. This is part of our learning to be one firm: be collaborative and inclusive.
Where do you see yourself in a transition from a family-run firm to one managed by professionals?
Shardul: We are way past the family concept. In a firm of 430-plus lawyers, we have only five members from the family. In fact, only two of us (Shardul and Pallavi) are there on the seven-member board. The rest of the family is only doing commercial and professional jobs. There has consciously been a diminution of the family role. However, we have made a distinction between the ownership and management roles. In fact, we have made the firm more entrepreneurial, and spread this across the partnership and the practice areas. Both administration of the firm and administration of the practices have effectively moved onto professionals. This is an ongoing process, and we are over 70 per cent already in place. We have a chief operating officer of Australian origin to oversee the daily operating issues. In the managing partner roles we have Pallavi in Delhi, and Akshay Chudasama in Mumbai, with regional responsibilities.
Pallavi: Effectively, Akshay and I run the firm jointly, even we have regional responsibilities.
How much of an equity dilution has this transition meant for the family?
Shardul: We have given away 48 per cent of the equity and will dilute further as new partners get added.
Is there a limit below which the family will not dilute equity?
Shardul: We will cap it at 40 per cent for the family, while the rest will be with others. This will also demonstrate that outsiders will have more equity and profit share than the family.
What will be your focus going forward?
Pallavi: We will consolidate and build the practices, help the locations grow and get the right people.
Shardul: Now, a lot of law firms have in-house legal process outsourcing units. Some of the growth in these firms is coming from transaction advisory services from within the organisation. These are at a very different wage scale. We have consciously chosen not to do that. That will distort the fee structure the firm is used to. But, the proposition I am working on is that legal services must be value-for-money. This is not about doing the least cost work but cost that is appropriate to end results that we are asked to deliver. That is where the clients are moving. They want to see solutions that give value-for-money.
So, do you expect more pressure on margins in law firms?
Shardul: That is already happening. Work which is repetitive is getting into the low-cost model. So, we have to focus on innovation, offer quick solutions and anticipate a client's problem - which is what value-for-money means.