A New Beginning
2010 yields an optimistic outlook for the legal field in Tokyo
Legal Future's Damion Way
Last year was terrible for our clients, no doubt about it, but we are seeing signs that we have all turned the corner. It is easy to interpret signs of growth too positively of course, given that few people expected 2010 to be anything other than an improvement considering the starting point was so low. However, in speaking to our clients across multiple industries it is clear that the hiring freezes so prevalent in 2009 are well on the way to thawing and that the deep staffing cuts have come to an end.
There is also a palpable sense of a “survivors bonus,” that those who had to make difficult decisions and either cut staff or reduce salaries and bonuses in order to survive, will be there to pick up new business in a less crowded market given that some of their less nimble competitors are no longer around.
Private Practice Sector
Aragon St-Charles, Manager of the Private Practice Division, reports that the sector experienced a difficult year in 2009 as many of the international law firms struggled to find that all-elusive deal flow in a market that saw a significant downturn in the number of corporate and financial transactions. For many firms it was a year of trimming costs and making necessary restructurings, but the firms that we see moving into a more positive 2010 are more cost efficient, more streamlined, but still capable of delivering exceptional services to their clients. Managing Partners of all the firms are reporting increased optimism for the year ahead and are beginning to feel more confident that this period of recovery will continue to strengthen.
Concerns of potential ongoing market instabilities and corrections are certainly making firms cautious about their hiring needs for this year, but most Partners feel that any such market downturns will be eventually remedied by a more confident financial outlook and robust efforts on the part of governments and regulators to ensure that we do not see a repeat of the events of the last 18 months. Tokyo continues to develop as a legal market, and whilst we have seen some smaller international firms withdraw from Japan, the last couple of years have seen at least 3 major international firms, and a handful of smaller firms set up here, with a number of other firms already working with Legal Futures to open offices in Japan in 2010.
In summary, despite a difficult 18 months and some painful decisions by many firms, 2010 seems to be providing more optimism and confidence amongst legal practitioners that the worst is behind us and that new opportunities are to be found this year.
Corporate Legal Sector
Takeshi Kobayashi, a Principal Consultant in the Corporate Legal Division, reports that the corporate legal sector also experienced a very tough 2009. Most domestic companies froze all their hiring process and even some major companies could not find the budget to focus on hiring. As a result of this many candidates who were laid off could not find a new job for a long time, some have been unemployed for more than a year. However, the wind started to change direction towards the end of 2009, and more and more companies gradually re-opened their hiring process or are planning to hire more people in 2010 when they start their new fiscal year.
On the candidate side, we continue to see some movements in the market; however some senior candidates who have held onto their jobs are very wary of moving to a new company, there is a definite wait -and-see mood among many candidates.
In any rate, we believe that the market will gradually come back to pre-Lehman levels when more companies start to hire and candidates can feel that changing jobs is once again safe. If we score pre-Lehman time as 100, the current situation is around 70-80 in the Corporate Legal sector.
Banking & Finance Sector
Matt Anderson, Manager of the Banking & Finance Division reports that when looking at the financial sector in Japan (foreign and domestic), one can argue there is no greater indicator of how deep and long the recession is than the drastic reductions in staffing levels in the hitherto “recession proof” area of corporate governance (legal, compliance, audit, accounting and risk management). Corporate governance not only weathered the previous storms generated by the previous financial implosions of the past 60 years, but in fact profited by them. Each time a new scandal burst forth “weak corporate governance” was cited as the catalyst and staff levels increased over the following years. But not this time.
From October 2008 corporate governance suffered through a long and painful year of initial lay-offs, followed by secondary and, in some cases, tertiary lay-offs. Although many companies were wary of laying off too many corporate governance professionals out of fear of angering their shareholders, government regulators, and investors, in the end nothing was sacred and even senior Japanese and foreign Partners/Executive Directors were shown the pink slip right across the investment banks, accounting firms and securities firms.
Admittedly, these lay-offs were not as deep as those found in other areas such as front office, middle office and in particular the IT sector (which suffered up to 50% lay-offs), and in fact many of the so-called “lay-offs” in corporate governance were a smokescreen for senior management to use the crisis as a convenient vehicle for “upgrading” existing staff and reducing costs by hiring younger, keener and cheaper people. Nevertheless, for those made redundant it was a tough slap in the face, particularly Japanese Bengoshi, and there were several popular rumors of nasty lawsuits.
In any event, the size of the average legal or compliance team at the large global players has decreased by about 15 to 20% so downsizing has definitely occurred.
As for 2010, it is anyone’s guess given the volatility of this sector. Our clients are being tight-lipped on back & middle office hiring while the front side continued to hire aggressively in Q4/09 and so far in 2010. Most observers agree that hiring in infrastructure and corporate governance will be delayed as late as possible until real and sustained front side growth is sustained.
Accounting Sector
Ross Pirie and Iichi Watanabe, both Consultants in the Professional Services Division, report that replacement recruiting in accounting and finance remains steady and prospects are that with signs of an improving economy, demand will increase. Roles across such areas as Financial Planning and Analysis (FP&A) and taxation still prove difficult to fill as there are two forces working in opposition; the lack of a broad pool of quality candidates and the increased requirements clients have for hiring staff in these areas.
Looking longer term, within 5 years, the International Financial Reporting Standards (IFRS) system will be the necessary standard for corporate accounting and financing duties, furthermore, the Accounting Standards Board of Japan has agreed to resolve all inconsistencies between the current J-GAAP and IFRS wholly by 2011. Given this, domestic accountants with only J-GAAP experience will inevitably fall out of favour. Accountants with good English ability will soon become a necessary requirement for professionals in this field to develop a successful career in global corporations in the near future in Japan.
Advertising, Marketing & PR Sector
Andrew Coey, a Consultant in the Advertising, Marketing & PR Division is of the opinion that few sectors have experienced change more dramatically than marketing & communications. A whole new consumer will emerge from this down-turn, not only in terms of more digital and “bloggy” decision-making behaviour, but in the way brands will be influenced and will evolve. Now customers are not only at the centre, they are in charge. The customer now functions as the advertiser did last century, controlling, influencing, developing, and holding accountable most products and services. Great marketers and advertisers often play a more facilitative and passive-looking role now, focusing on education and allowing consumers to engage and interact with brands directly – analogous to a good match-maker removing boundaries between two friends who should get together.
We are clearly entering the age of PR, the age of free coverage, insights, and consumer-driven sales performance. Thus, as you can imagine, the actual PR industry itself has not really experienced collapse of any great magnitude, and isn’t likely to at any point this decade we believe. What all disciplines are experiencing equally is a lot of cross-over, and increasingly blurred boundaries between what we define as “advertising”, “marketing”, “public relations” and “communications” per se.
On the agency side, agencies are eager to become fully integrated suppliers of holistic solutions as the increasingly convoluted media mix continues to baffle clients. Within the agency space the Strategic Planners can in some ways be considered “the new Creatives”, as business ideas begin to become more important than clever visual imagery. This is not to suggest that Creatives or creativity would be less important, but that a new additional kind of agency position is definitely emerging – the Creative Strategist. In addition, Consultancy is starting to appear as more effective than simple Account Service and data delivery – thus we see that solid young Account Service executives are also becoming good at strategy and business advisory.
On the in-house side, marketing along with pay-roll and other service-related disciplines will remain under continual threat of becoming outsourced. In addition, in-house team sizes have been getting smaller and/or more cross-functional. Some marketing roles are now also becoming more regional and inter-cultural in terms of daily communication – so perhaps your team didn’t shrink from 5 to 2, instead it just became a team of 5 positioned in 3 different countries. One thing is for certain, English fluency and more aggressive communication in general will now start to show the full extent of its value for Japan-based executives able to rise to that challenge.
In almost all companies one of the focuses of hiring seems to be the hunt for energetic all-rounders. For example, people who can be both entrepreneurial AND be great team-players, people who are determined AND don’t get over-focused, logical AND creatively open-minded, and people who can multi-task AND produce top quality output, etc – and all done at a reduced budget in less time of course!
From the candidate side, young employees are hoping for a more open, free, flat management and working culture which in Andrew’s view is the best piece of advice for a company to heed if it hopes to succeed in the new age. He thinks right now is the time to be a good conductor not a great puppeteer, as no matter what it is that you do or manage, the encouragement of autonomy is by far the best game in town.
Logistics Sector
Hiroaki Hara, a Consultant in the Logistics, Transport & Supply Chain Division reports that the logistics industry has just faced some of the most difficult market conditions in its history. In terms of human resources, the industry is still struggling to hire new people after the big cost saving efforts that took place during 2009. Well paid senior staffs were re-structured out and the focus for new hires is on younger candidates with only 5 to10 year’s experience. The recruiting market is still hard but we saw an increase in sales and business development positions that are necessary to beef up the depleted bottom lines in this industry.
To read more about Legal Futures and Way Simmons Partnership please visit www.legalfutures.com and www.waysimmons.com
For more information contact:
Legal Futures Japan K.K. / Way Simmons Partnership.
tel: 03-3580-3101 / 03-3580-3102
email: japan@legalfutures.com
japan@waysimmons.com
