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 ….
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How much of the attachment to offices is to do with confidence – on both sides of the relationship?
A plush office is a signal of quality. Now, that might not be a rationale statement, but if you were going to sue News International for libel, would you want to meet the good folk of Carter Ruck at the nearest Cafe Nero? Or Travel Inn?
Like banks, a legal practice has nothing tangible to offer, so ‘presence’ counts for a lot…
You see, the problem with virtualisation of the practice is that it’s the start of a long slippery slope. Why not outsource your legal services offshore? Indeed, why not put all legal opinion on line, and do away with lawyers altogether?
You make some good points as usual Paul, and I think requires a response in two main areas.
The confidence point is an interesting angle, and my sense is the importance of this will depend very much on the buyer. For the big clients (investment banks, large listed companies), the majority of the buying will be done by inhouse lawyers who will invariably have been in private practice themselves. This means they will usually have a pretty understanding of the law firm market. Personal connections (which of course are another way of driving the confidence you mention) often play into the purchase decision, but I suspect at this level plush offices are not a huge factor.
The consumer market is an entirely different one, where with less knowledgeable consumers (which I think will change significantly over the next few years as the profession deregulates further) and individuals may well be impressed by an expensive office frontage.
In between the two is perhaps the most interesting area: the SME market, where perhaps the purchasers are senior business people, but not lawyers. Here perhaps the “IBM factor” is at its most significant.
However, the thrust of my post was about freeing law firms from the old property model of having the whole firm in one prestigious office. It maybe that for whatever reason, a suite of well appointed conference rooms is required at a central, accessible location. That’s not to say that all the secretaries, librarians, business development professionals or lawyers need to be in the same building. Many of them could work effectively remotely, some of them may need to be on-site. The challenge for law firms is to work out what the optimum footprint is: not easy as there are many factors beyond cost to consider (as your comment points out).
Finally, the slippery slope of virtualisation….. Offshoring legal work? Absolutely. Using technology to automate many of the more basic tasks done by expensive legal personnel? Definitely! Do away with lawyers all together? Fortunately I don’t think we’ll see that happening, but we will see the most successful firms and lawyers evolve to meet these structural challenges to the profession.
For those that have read this far, I highly recommend reading Susskind’s book “The End of Lawyers?”
I am reminded of a piece of advice passed onto me by a previous boss: the true measure of success is a small office and a big house.
Superb!
An executive of a large contruction firm once told me that he could never instruct a law firm that didn’t have an atrium. I took him to mean that he could not have confidence in a firm unless it was big enough to have a large hole in the middle. Lot’s of mid-sized law firms today have rather large holes in their middles quite often because they have aspired to have an atrium.
Time to grow up and fill in the holes.
As a temporary office and meeting place I can strongly recommend the foyer of the Royal Festival Hall: a great deal of elegant space, good cafe, good transport, by the river and handy for culcher at the end of it.
Great comment Julian. Perhaps the construction executive worked for a company that built plush, city centre offices! I’ve certainly stood in some law firm atria (marble pillars, waterfalls, I kid not!) and marvelled at the waste of space….
I’ll definitely try the Royal Festival Hall as a work space when I’m in the area.
It’s where Steve Punt and Hugh Dennis meet to write much of Radio 4’s “Now Show”. (Another deep insight into the legal world brought to you by Rutherblog)
Your comments are definitely welcome Paul; they add to the rich and varied tapestry we are weaving together 😉
Very thoughtful – the issue and the headline reminded me of a recent meeting I had with a client in the Starbucks in Ascot High Street. As a home-based, mobile lawyer I tend to rely on blackberry, laptop and 3G card. When I am asked to meetings, I make great virtue of the fact that I can travel to see clients at their offices – indeed I think that it is always better to travel to the client to fully understand their business.
On this particular occasion the client insisted on coming to see me. With four kids at home in the late afternoon, I suggested it might be better to meet at Starbucks to talk about the difficulties with his lease and obstructive landlord. The meeting went well and the client seemed happy. However, when he stood up and pulled out £300 in cash as a payment on account we drew considerable attention from the surprised Starbucks customers – who I am sure were convinced that some other sort of ‘deal’ was going on! I can laugh about it now but was a bot red-faced at the time.
Like you Mark, I have never been greatly impressed by modern or glamourous surroundings. There is, of course, a need for physical space to conduct some meetings and deals – but it is not beyond the wit of those involved to hire a conference room if needed.
My own clients seem to appreciate that I have an eye on costs – to my benefit and theirs.
As you say, there is balance to be struck between those matters that are essential to have in the office and those areas which can benefit from a degree of flexibility.
Great insight Robert, thanks. I hope you had done your money laundering checks before you took the cash 😉
I think you’ve hit the nail on the head when you mention flexibility; there are a lot of areas where the traditional law firm partnership struggles with flexibility (often for historic reasons) and property is just one facet of that.
Very interesting as usual Mr Smith. The thing that has always baffled me is why some firms have teams of lawyers in city centre locations who will almost certainly never have any client contact. Insurance claims handlers are a good example. There is an argument I guess that being in town makes it easier to recruit but I’m not sure that this is foremost in firms’ minds.
That’s another dimension I hadn’t thought of Chris: those lawyers that don’t have any client contact at all. Much like back office staff, you would have to say in many cases the cost/benefit of having them in top dollar premises doesn’t stack up.
There are plenty of law firms that have the opposite problem. They sit in decrepit old offices with musty leather books and dont realise that the world has moved on that it doesnt impress clients anymore. They need to heave themselves out of the stone age and get an office that looks like its capable of doing some modern work. I wouldnt want to work in that sort of place and I wouldnt trust a lawyer that worked in buildings like that how to run my business.
Hi Andrei, thanks for the comment. One of the issues implicit in your common is that the legal profession here in the UK is so diverse, and advice for the big commercial law firms (primarily the market I write for) is not necessarily applicable to the smaller law firm. While the lion’s share of revenue in the UK legal market goes to the big commercial firms, when you look at the number of lawyers employed, there are a far greater number who work in other environments (whether that be in smaller law firms, in the public sector, for not-for-profit organisations as well as in corporates). I suspect I need another blog or two to address those markets!
A great original article and great responses, thank you all!
I think that value is the main issue here and is well covered in the main. One point about recruitment could be elaborated on.
Lawyers and clients alike appreciate pleasant surroundings and a slick HQ can add value to recruiting top candidates and clients. It is important that these top lawyers don’t ‘buy in’ to a nice HQ and then get re-routed to the ‘back office’ as this could cause problems. People do like being in smart locations, which are indicative of profile either for their own interests or the perception of their peers. A lot of the hard work in law isn’t particularly glamorous, so a ‘cool’ working environment can make a difference.
I think the point about flexibility is excellent and points towards balance, which asks: what are lawyers and clients looking for? Clients can then get the services that reassure them without the price tag to pay for it and lawyers get a certain amount of prestige to sweeten a demanding job whilst being able to do some of the work from home where the comfort negates the need for glamour.
I have repeated a few points here, but I hope this adds another angle.
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