Monthly Archives: June 2010

Starbucks, the prestigious offices of the modern law firm?

Reading in the legal press about the financial difficulties of UK law firm Halliwells, with many reports citing high property costs as the factor at the heart of their demise, I started thinking this morning about law firms’ property assets. My thinking was compounded by a meeting with Axiom, a pretty cool company, which has stripped out significant property costs from its operational model, and makes this reduced cost a core part of its value proposition by offering legal services to corporate clients at significantly lower prices than many City firms.

Smith & Smith Legal Advisors: would you like legal advice with that?

In my time as a client of law firms, although office based, I was free to work at home whenever I wanted. Law firms I’d worked at had certainly embraced remote working by this time, but there definitely remained an expectation by many partners that lawyers would spend the vast majority of their time in the office (when not out with clients).

However, my in-house time was genuinely virtual: my team was based across Europe and Asia, our stakeholders were there, plus the Middle East and Latim America, the General Counsel and our peers were  in the US, and our external clients were spread across the globe.

Aside from internal and external client meetings (which would be more frequent on deals than otherwise), all the team needed was a phone, blackberry, laptop and bandwidth. As with many other businesses, the offices were set up for hot desking, and with a very mobile workforce, there was no culture of “presenteeism”. Critically, this way of operating worked. Well.

When I instructed external lawyers, the majority of the time this was remote. Face to face contact was usually only on deals or  relationship meetings (one area where face-time is very valuable).  Aside from biscuit quality (an important factor in law firm selection),  the location and amount of marble and chrome never really made much on an impact on me as a client, not least because I was always acutely aware that clients were paying for the bells and whistles.

Since moving back into a corporate environment, and now being truly mobile (home based, for an off-shore outsourcer that practices what it preaches) I have embraced a new way of working which is more virtual still. Travelling to meetings, and with a 3g data card and laptop, and a good knowledge of where appropriate working spaces can be found (quiet coffee bars, hotels, friendly client/partner sites) able to work effectively in-between meetings; the new model works well. True, conference calls require a little more planning and an appropriate environment, and above all confidentiality must be considered and protected (both in voice and data communications), but with the right technology, awareness and training, this is a factor that can be managed.

Having worked outside the traditional law firm office environment now for nearly seven years, I do look at the hugely expensive property assets (often with one desk for every lawyer, plus all the support infrastructure) and wonder how much cash law firms could free up by rationalising them.

Of course team meetings, mentoring, supervision and training all need to be factored in (and for the majority of law firms at present, a fully virtual firm is probably not the answer either), but at the same time the old model of a super-plush office in a premium city centre location, with space for all lawyers and support functions, plus huge meeting rooms etc is unlikely to be the best fit for many law firms either.

Look around at your working environment. Does it work for you? What are the costs and benefits. If you were starting your business today, what would the property footprint look like?

If you want to chat through any of the points in this post, you’ll find me in the lounge area of the Landmark hotel in Marylebone ….

You’re working hard, but are you making money?

Holidays with the family are great fun, but relaxing they’re not. However, while soaking up the sun my mind did (very briefly) wander to those hard working lawyers who are slaving away without actually making much money for their firms. The recession has exposed the myth that all lawyers are making stacks of money, and aside from the efficiency savings that have been made, conversations I have had recently suggest there are many firms (or particular teams within law firms) that are still struggling. What surprises many of the people in these teams is that their viability is questioned when they are working harder than ever.

The mysteries of profitability

Much individual and departmental management information in law firms is often still centred on time as the primary unit of measurement: how many hours? utilisation rate? balance of chargeable and non-chargeable time? Ask a fee earner to talk about a particular work type or project and ask them what their profit margin is on it, and you will often be met with silence. Ask for more granular information such as the cost of sale, and the furrows in brows deepen. For many hard-nosed commercial operators, not only would they have this information about their products and accounts at their finger tips, many would know it off by heart. Indeed if these measures are linked to the performance management system and incentivisation scheme in place, they are more likely get the focus they deserve (because profit is a pretty important part of creating value for the business!).

Thinking about profit can take the lawyer down a  number of different paths. For example, what does it actually cost me to deliver the service? What’s the cost of opening the file, doing all the client UD checks etc? What about time taken with billing, agreeing fees etc? How about internal time spent briefing a team or research that is not charged for example? How do we allocate the cost of sale, in fact do we even know what it is? If money has been spent to win a particular client (for example £100k on a pitch process or £50k on promoting a new product) how long before the returns have paid for this cost?

Looking at costs can then also prompt a discussion about efficiency: how can we deliver this service smarter? Are we re-inventing the wheel each time? Are we sharing knowledge effectively? Does fee earner A always do the work at a lower cost than fee earner B? If so, why?

The other component is of course price, and pricing mechanisms are very much on law firm agendas at the moment. Is the service at a fixed price? If so, how is that price set? What’s the market price for the service (if there is one)? What are the aspects of the firm’s service that would mean the price should be above or below market price? Are there typically write offs with a particular service or client?  If so, what causes them?

The output of all this investigation may be surprising. maybe some work just doesn’t make money. If so, can the firm stop doing it? Could the firm partner with someone else for that area of work? Can the process be re-engineered or the work done by different resources (or automation) to make it profitable?

Now’s a great time to be asking these questions. It may be tempting to work harder, and often that’s needed, but sometimes you need to work smarter. To do that, you need good management information that can deliver real insight.