Business Interview: David Childs - Managing Partner, Clifford Chance

The axeman came. Now he's executing a strategy for growth The head of the world's largest legal practice talks about his fearless approach to cost-cutting, and his plan for staying ahead of the pack
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The Independent Online

In 2003, when David Childs was appointed chief operating officer at Clifford Chance, the world's biggest law firm, he was immediately dubbed an executioner and caricatured wielding an axe by trade magazine The Lawyer. That is not the typical image of a corporate solicitor, but Childs had the brief of shaving £40m from the firm's cost base to reverse a three-year profit decline, and it required some tough decisions.

He delivered, and in May this year was rewarded with the role of global managing partner - the equivalent of chief executive - at the only law firm on the planet generating more than £1bn in revenues. He makes no apologies for the redundancies: "It is clearly important we keep our costs under control. We can't simply expect to pass our costs down to clients. They are commercial in their businesses, and there is mounting pressure on us to move more mundane tasks to lower-cost locations."

Clifford Chance announced last month it would be transferring 300 accounting and IT jobs to a shared-service centre in Delhi. Such initiatives remain rare in the legal profession, but the £10m in anticipated cost savings convinced the doubters.

Aged 55, Childs has spent his whole career at Clifford Chance, becoming a partner in 1981. He is a mergers and acquisitions specialist, and was head of the corporate practice before being made chief operating officer.

"When I was a young partner, I came to the conclusion that the last thing you should do is agree to manage a law firm. Four years ago, if you had told me I would end up as managing partner, I wouldn't have believed it."

Being the boss of more than 380 fiercely ambitious partners isn't easy, but the legal profession is one of this country's greatest exports, Childs points out, with five of the world's top 10 firms based in London. Clifford Chance, with 3,000 lawyers in 20 countries, sits at the top.

But while UK firms have done better than their American rivals at growing internationally, their profits languish some way behind as a result. On average, each Clifford Chance partner generates a profit of £810,000 a year, some way south of the £1.5m-plus pulled in by New York's finest.

Partners are compensated according to seniority, so Childs takes home around £920,000 and his youngest colleagues return £370,000. His aim is to raise all these figures, not least because aggressive rivals continue to pursue his partners for better-paid jobs elsewhere.

He says: "The main issue for us is that there is a pack of leading international law firms. And while we are different because we have real depth of resource in the US, Europe and Asia, we know that will go over time. So the question is how one positions oneself ahead of the pack."

The answer, he believes, lies in continuing to build a global network that can help clients wherever they do business. Clifford Chance has made its name advising financial institutions worldwide, with the likes of Barclays, Merrill Lynch and JPMorgan delivering millions in fees.

At the moment, the biggest problem in servicing these clients is posed by India, where it is illegal for international law firms to practise. Childs was at Downing Street when Tony Blair entertained the Indian Prime Minister, Manmohan Singh, last month. "We are hopeful we will be able to open in India soon."

Running the firm means he has had to hand over work for his biggest clients to other partners. These include Philip Morris and Kraft Foods. He also advised the government on water privatisation in the 1980s, acted for British Energy in its 1996 flotation, and advised SBC on its acquisition of SG Warburg in 1995.

"I intend to carry on doing some client work," says Childs. "I've been an M&A lawyer for a long time. The great thing about it is that clients are different and deals are different. It is interesting working on these often ground-breaking transactions. A lot of us are deal junkies."

Nowadays, his conversations with chief executives are more likely to concern political issues than the next takeover. In the UK, he says, senior management are increasingly fearful of the personal liabilities to which they are exposed. The Government is making the business environment unpredictable, he adds.

Elsewhere, Clifford Chance recently advised Spain's Endesa on its €27bn (£18bn) takeover by German energy group E.ON. But Childs says similar cross-border deals have been thwarted by the protectionists: "We have worked on potential takeovers that haven't gone further because of concerns about a government's position."

Then there is the US, where the extradition of three NatWest bankers on Enron charges and the conviction for bribery of Nigel Potter, former managing director of the Wembley leisure group, have scared Brits looking to America for opportunities.

"It is a big worry for clients, especially when they don't think UK politicians are giving particular weight to their concerns," says Childs. "People don't believe our politicians are sym-pathetic. When we talk to ministers, we raise it as an issue."

Lobbying for British business is a part of the new job that Childs has taken to. He will keep the axe-wielding as a sideline.

BIOGRAPHY: David Childs

BORN: 1951.

EDUCATION: Sheffield University; University College, London.

CAREER:

1976: qualified as a lawyer at Clifford Chance.

1981: made a partner at the firm.

2000-05: global head of Clifford Chance's corporate practice.

2003: global chief operating officer.

2006: managing partner.

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