A shiny new law firm

30 06 2011

With deregulation of the market looming here in the UK, opinion varies wildly over what the likely impact will be.

  • Some speak of decimation of the high street, and the end of the traditional law firm as we know it.
  • Others are more conservative and see a simple acceleration of the move from a traditional profession to a collection of more business orientated organisations.
  • Some see different changes in different market segments, underpinned by core drivers such as the increasing role of technology, globalisation, vertical market focus and more specialisation driven by a need to differentiate.
  • Finally, some bury their heads in the sand, unwilling or unable to contemplate large scale change in a profession that once was conservative and safe.

Simon paused a second to consider a future without his office in the most prestigious street in the City. Then he went back to work because the thought was just too horrible

So, against that backdrop, the question I ask you today looks at the changing market from a different perspective. If you were a new market entrant, free from the constraints and history of existing law firms, what would you do differently to build a successful legal service provider?

Here are some thoughts to get you started….

1. Real Estate

For a start, I wouldn’t invest vast amounts of capital in plush, city-centre offices. Sure, there’s definitely a need for an accessible meeting place both for internal and client meetings, and the space should be highly functional and consistent with the brand. But no massive atrium, no marble or fountains, and definitely not hundreds of expensive people crammed into premium real estate with the sort of eye watering rent that causes agonised soul searching within two years of every rent review.

I’m not saying all law firms should be virtual, and I’m not saying that firms should be central, but there are plenty of big, impressive organisations that work just fine without all their people in a building in a premium post code. A firm’s cost base matters, and people and property make up a pretty hefty chunk of a law firm’s cost base – avoiding the big numbers here could make a huge difference to long term profitability.

2. Technology infrastructure

Often years of under-investment, and a patchwork of applications and networking have meant maintaining and upgrading law firm systems is a nightmare. The ability to add a new application, device or method of access can be hugely time consuming and expensive. Being free of that legacy a new law firm could start afresh with proven, enterprise class software platform, that had an open architecture to allow maximum interoperability and future proofing.

The march to the cloud seems unstoppable at the moment, despite the fact that within the profession questions remain around resilience and security. Whatever the choice, a new entrant could have a fully functioning platform and a clean set of data to reside within it, all without the pain of a huge data cleanse and migration project.

3. Resource profile

Freed from the current business model of gearing and billable hours, a new law firm could sit back and work out what resources it really needed to service the work it was planning to generate.

How many partner level people does the firm really need? Are they managing client relationships, project managing or providing complex/strategic advice? If they are not doing the high grade legal work, are their other professionals who could do the work better or to a similar standard but cheaper? What is the right blend of junior lawyers? Would supervision and quality control be a separate function? What about training? What other skills would you bring to the organisation? Project management? Process expertise? Social media and digital marketing experience? Lower cost legal resource?

There are so many options, and the right combination would of course depend on the firm and the type and volume of work, but I think it’s fair to say that not many firms would start with a large number of equity partners, add a bunch of assistant lawyers and trainees to generate the fees to pay them, and then add a support infrastructure around them.

4. Corporate structure

The benefits of the partnership are clear. Consensual decision making, meaning everyone (well, the partners anyway) has a voice and feels heard. Sharing the profits gives not just a built in performance incentive, but a shared sense of ownership and responsibility. All this builds a tremendous sense of trust and an atmosphere that fosters collaboration.

What?

Your law firm doesn’t work like that?

Really?

Particularly as firms have got bigger and the pace of business has increased, the partnership model has begun to creak a little. Granted, some firms have it cracked, but I’d wager a lot more struggle. Slow decision making, turf wars, those at the top of the lockstep enjoying rewards that they perhaps haven’t fully contributed to and difficulties removing underperformers are not uncommon.

For a new firm I’d think very hard about keeping ownership and management separate, and use a structure that encouraged fast decisions and business agility. Incentives would follow the corporate model, and be performance based (which of course offers a huge amount of options, and can be tailored depending on what behaviours management wish to drive).

5. Sales force

Some lawyers can sell. They are really, really good at it. A great many however cannot.

I’m a huge fan of sales professionals – they generate the revenue that drives the business. Yes I know that other people do the delivery (lawyers in law firms), but first things first, you have to win work to do it.

Now other than the best of the best, the chances are that a lawyer is not as good at selling as a salesperson – and why would they be? The salesperson wouldn’t likely do much of a job advising on the TUPE provisions of an outsourcing deal. So surely if you accept the need to sell legal services, you’d get the best people to do it. It’s likely as well that not only might a salesperson have a lower base salary (although if good can more than make up for it through commission), but it would also free up the lawyers to do what they are best at, and generate the fees from the work that the sales people have won.

A law firm with a professional, well trained and motivated sales force would be a serious force to be reckoned with.

So what?

I know, I know – you’ve already got a law firm thank you very much. And you can’t relocate, rip out the IT and employ an awesome sales force. But, that doesn’t mean you can’t pause a minute to think about these issues, not just in terms of your own firm, but in relation to changes your competitors may make, or crucially what impact a well capitalised competitor might have if they adopted some of these ideas…..


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7 responses

1 07 2011
Mark Brandon, Motive Legal Consulting

A thought-provoking post (as usual). I’d offer one thought, as regards location, in terms of how that impacts on recruitment. One of the main challenges facing any new law firm is recruitment, and location has a major impact on the ability to recruit quality candidates. With a relatively small and highly-specialist candidate-pool, choosing the right location could be the difference between success and failure, assuming you don’t go down the entirely-virtual route.

Regional candidate pools outside London are very small, as any regional recruiter will tell you, and there is already fierce competition between local firms. London, meanwhile, creates its own ‘gravity well’, meaning that if you live near London, you may as well commute in to London to earn a much higher salary than you can get in the Home Counties, meaning that locating around the M25, for instance, could be surprisingly challenging.

Added to this, lawyers are quite conservative as candidates, and won’t readily relocate to some obscure location to save you a bit of cash on the rent in case it impacts adversely on their cv; for many, take them away from the beating heart of the legal profession (London) and they can almost feel their career prospects ebbing away. And they’re right.

Intriguingly, there is some evidence for how law firm location affects success. In a study in the US, academic Jonathan Jaffee looked at the failure rates of law firms in Silicon Valley from 1969-1998. He found that the failure rate outside two key locations in that relatively large geographical area were much greater than in the two legal ‘hubs’ in the Valley. In particular, the proximity of a firm to ‘mutualistic’ firms created a large, joint labour pool, the effect more pronounced the more firms there were. Put simply, firms outside these hubs struggled to recruit. Observation would seem to indicate that holds true in the UK as well.

So if you are thinking of setting up a new law firm, be very, very careful where you decide to site it…

1 07 2011
Richard Parnham

Let me throw another idea at you.

Until now, law firms existed because that was the only realistic business model open to law practitioners. Helpfully, the partnership structure allowed lawyers to share overheads (an office to serve the local market, research subscriptions, support staff etc). There was also the social aspect – lawyers handing out with other lawyers.

But consider this – especially in relation to High Street firms. Most personal customers are not repeat clients. There is probably very little cross-selling within a practice on a scale that’s applicable to the mega firms (two property transactions and a will over a 20 year period really doesn’t count!)

So, if there’s no inherent inevitability that a disparate group of lawyers to work together any more, then will they continue to do so? Will we instead see the emergence of single-product line law firms? We’re not talking about some claims farm-type entity sending work out to a bunch of traditional law practices. We’re talking about new providers who just offer one service: wills, conveyancing, divorce, employment advice, etc?

You’d bet your boots that such a service would not be operated along the same lines as a traditional law practice. It would be highly commodised, possibly runs from a business park on the outskirts of town, mainly staffed by paralegals from the “university of not very well regarded”, and the clients’ main point of contact would be the website or telephone – lawyers with huge egos need not apply. But the sheer volume of similar work would mean that such firms could rapidly move to towards a fixed price model – on the assumption that they’d “win” more than they’d “lose”.

Crucially, with oodles of cash behind it, and low overheads, it would have funds to build a recognisable brand that would then go onto obliterate the competition.

3 07 2011
Julian Summerhayes

Mark

I really worry for law firm partners. They simply don’t get *it* and if they do they are not moving quick enough to stay ahead of the (market) curve. Change management is incremental. The investment should be placed in the mindset. All the things you posit are areas to work on but how do you win over people to the benefits? Most partners are driving the firm by looking in the rear view mirror. Also the other fundamental is to see each client in a completely different way. Having just read Derek Sivers book, Anything you Want he makes it clear the point over and over that “business is not about money. It is about making dreams come true for others and for yourself”. How many clients can honestly say that their lawyer did that for them?

Julian

24 07 2011
car repos

Could you please share the theme that you are using for this blog? It looks quite unique, simple, but attractive. I am looking for somthing just like that.

25 07 2011
Intelligent Challenge

Hi, It’s called Freshy and it’s a standard WordPress theme

12 08 2011
botzarelli

The model you have described sounds a lot like Axiom – small back office in Clerkenwell (all lawyers work on client site or, like me, remotely), minimal shared technology (use client systems, upgrade client systems to their needs), fee earners earn fees, sales/bd people win work (lawyers who love and are great at that side of things), Ownership and management distinct.

As you say, lawyers become lawyers because they like and are good at law. Some might be good at sales or management but, in my experience from a top City firm, regional practice of an international firm and a large regional firm, the proportion with these skills developed to a comparable degree to specialists is small. To then narrow the pool further to those who happen to have met particular billing targets over a number of years and have therefore made the grade for partnership is incredibly inefficient. Even within a law firm there are likely to be great sales people, imaginative marketeers, excellent people managers, etc who are weak fee earners, just as there will be excellent fee earners who have the personal skills of a Rhino. A model which makes the latter more likely to end up running the firm than the former makes absolutely no sense.

12 08 2011
Intelligent Challenge

Thanks for your comment Angelo – I spent some time talking to Axiom last year and was really impressed. I think the consulting-led approach can really add value too – adding new skill sets to classic law firm capabilities is a real sign of progress

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