Category Archives: General musings

General posts not relating to a specific topic

The writing on the wall #7 – location, location, location

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Location, location, location...

Let’s for a moment put aside the discussion as to whether an investment by a law firm into premium real estate makes sense. Let’s assume that clients don’t object to funding acres of marble and an atrium full of lush vegetation. This question is about where your firm’s offices are, not what they are.

The location question is very personal. For some firms it might be simply be about growth – we are outgrowing our current premises – do we just need a bigger office, or should we open a second office (and if so, where). For other firms it might be about national expansion, or response to an existing or future competitive threat. However for many firms the stakes are higher, and it’s about international expansion.

It may be an understatement, but international strategy is not easy. Aside from the economics, the cultural, regulatory and language differences, suddenly the complexity and management overhead increases dramatically. Whether the market entry strategy is through acquisition, merger  or lateral hire, you can then throw a whole host of political and personal factors into the mix.

With that in mind, opening a new office seems like a decision to be made thoughtfully, but in a fast moving market that is changing more than ever, how can you make the time you need to really assess where the right locations are for you?

 

The writing on the wall #5 management complexity

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Firms are getting bigger. Mergers and International expansion may be the main culprits in recent years, bit add the economy slowly returns to growth, plenty of other law firms face the challenges associated with getting bigger.
Some, like the competition for talent are frequently mentioned, but there is another that is less talked about and yet arguably harder nut to crack. It’s the management overhead. Aside from the difficulty and effectiveness of management, how can firms manage the spiralling cost and resource drain?

Whether it’s professional management cost or the time of the most competent partners, it’s easy for it to grow unchecked. What’s the story in your firm?

The writing on the wall #4 – the commodity game

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It seems that whatever the practice area, lawyers talk in hushed tones about their work becoming a commodity. Corporate law, employment law, technology law are among the areas where there is much gnashing of teeth and squeezing of margins.

Much of the debate focuses on whether to do the commoditized elements and if so how to do them profitably, but there is little discussion of what will replace that work at the high end. I suspect the implications of this will be felt in the not-too-distant future.

The writing’s on the wall #3 – resistance to change

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IMG_4954.JPGThere is no shortage of commentary about the need for law firms to change in what is the most significant transition in the profession in a lifetime. Theories from Darwin to Kotter are cited yet firms still struggle with the day to day reality of change.

Partners speak of their frustration that things don’t move fast enough and clients are increasingly outspoken about the growing gap between their expectations and the service delivery they receive.

So for your firm, what’s at the heart of the resistance to change, and critically what can you do to address it?

A new beginning – the writing’s on the wall

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Efficiency + Growth = ?

Efficiency + Growth = ?

Almost exactly three years since I called time on this blog (see The End of the Beginning) , I now feel called to reignite it but in a way that better fits in with the way social media has evolved. The battle for attention has intensified – lawyers and their business colleagues (whether in law firms or businesses) are more overloaded with information than ever. A partner at a large UK law firm calls it the “fight against digital obesity” while another talks of fee earner productivity in firms dropping, yet the lawyers are working harder than ever.

Working in the profession for nearly twenty years, as lawyer, client, consultant and supplier, this is a trend I have seen evolve and intensify. As Davenport highlighted in his book The Attention Economy, attention is an increasingly critical resource. With this in mind, I have over the last ten years refined a set of content sources that consistently cover the most relevant and thought provoking trends in the fast-changing legal market place and the skills and capabilities lawyers and their colleagues need to stay ahead of the game. I curate and share the best of this via twitter and Linkedin, and am conscious that the legal world probably doesn’t need me starting blogging again and adding another item to an overloaded agenda.

The other aspect to this is that much of my message in the last ten years has been the need for law firms to embrace efficient working (a challenge which many of the large firms are now genuinely meeting rather than skirting round the edges), and as such I believe it is important for me to operate in a way which makes a thoughtful trade off between the time I invest in the blog and the impact it has for my readers, my company and for me personally (and anyone else with a similar philosophy might like a look at Essentialism, one of the best books I read this year).

For my readers, I do believe I can offer a different perspective on the legal market. As well as the roles I mentioned earlier, I have spent the last three years focusing on the world of in-house counsel in the UK, and have interviewed, researched and worked with many different in-house teams. For the last six months I have been in a similar role working with the UK’s largest law firms, which adds another dimension to my thinking. Synthesising this and drawing out key trends prompts a number of questions in my mind about the challenges facing the profession.

It is these questions that will form the basis of this blog’s revival – posted as “the writing on the wall”. As ever, I’d love your feedback on both the format and content. I genuinely hope they are useful and get you thinking.

The end of the beginning

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This is a post about endings. It has two main parts.

Firstly, the legal profession, and my thoughts on where we are in the evolution of the legal services market.

Secondly this blog, and where it’s going (if you don’t give two hoots about this, stop after the first section – that’s fine by me).

Is this the end?

I started writing this post almost exactly two years since I started blogging, and the amount of change in the legal profession in that time has been phenomenal. It’s as though much of the innovation and drive that has been missing from so many parts of the profession for decades has suddenly been discovered and injected into its flabby buttocks.

Yet it really only is just beginning.

My first couple of posts were about how change was coming and that the increasing pace of the market meant traditional ways of formulating strategy were unlikely to be fast enough for law firms to be successful in the new world.

As the changes that were on the horizon became reality, there was no shortage of material to write about – outsourcing, new business models, technology,  the need for innovation and differentiation, and the even more pressing drive for efficiency and (truly) effective strategy. As fast as I could write, real world examples appeared in the press:

The speculation about the possibility of UK law firms attracting external investment and the potential that brought began to become reality with the emergence of new law firm franchise models and the well publicised investment in Quality Solicitors (mentioned above). Much of the focus in this area was on consumer focussed legal services, but in the world of commercial law, pricing models continued to vex the profession, with pressure on profits resulting from a growing rejection of the billable hour model and a re-examination of what value really means in the world of legal services.

Irrespective of whether lawyers were working in the world of business or consumer legal services, traditional career paths were breaking down and new options were emerging. This in turn has triggered a debate about how fit for purpose current legal training is – and, in particular, against the current economic backdrop, whether training as a lawyer is a sensible career choice.

Massive change, in the space of two years.

This change will undoubtedly continue, and in my view will accelerate. For the agile, entrepreneurial firms and lawyers, and those new entrants with the assets and appetite for success, this is a time of great opportunity. For those law firms struggling to change, sitting on the fence, or burying their head, the end may not be as far off as you think.

So for those law firms, I do think this is the beginning of the end, but for many more this is the end of the beginning.

Let your creativity and courage take centre stage and sieze the opportunities that will emerge.

Just do something.

And so to this blog.

After two years, around 100 posts and over 35,000 views, it feels like it’s time for a change.

Time to sit back and watch the market – watch new business models and legal service providers emerge and challenge old ways of thinking.

Time to listen to new voices and examine the new perspectives that will undoubtedly join the more established commentators.

Time to reflect on the fantastic comments and feedback on the blog thus far.

Is this the end?

Who knows.

I feel I have a book brewing, and it maybe that a break from the blog helps me get it written.

It may be that some of the developments in the profession get me blogging again sooner than expected.

Time will tell.

But for now, it’s goodbye and thanks for reading. If you’re a new visitor, take some time to explore the links in this post. If you’re a regular, thanks so much for your support. You are the reason I’ve been writing, and I sincerely hope you’ve found some of my posts helpful.

 

Postscript – how the year turned out.

For the curious and any of my regular readers who return in a fit of nostalgia, WordPress sent me some interesting facts and figures about the blog which I thought I’d share:

  • The concert hall at the Sydney Opera House holds 2,700 people. This blog was viewed about 28,000 times in 2011. If it were a concert at Sydney Opera House, it would take about 10 sold-out performances for that many people to see it.
  • The busiest day of the year was January 18th with 2,870 views. The most popular post that day was You are wrong. I am right..

    • Top search terms were:  intelligent challenge, value disciplines, chargeable hours, and identify the best value discipline.

  • Most visitors came from The United States. The United Kingdom & Netherlands were not far behind.
  • Top referring sites were wordpress, twitter and linkedin

Thanks again for visiting.

Excuse me, I think your pricing is broken

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I was pleased to read the post on 3 geeks about value billing as this is definitely a topic that needs exploring further, not least because I’m astonished by the number of law firm partners who continually tell me that it’s for clients to find a pricing model that works for the firm’s services.

Caroline the Finance Director had the new pricing model absolutely nailed

The common refrain from private practice lawyers (especially those who know how I feel about hourly rate billing) is that in-house lawyers who talk about value based billing really just want to pay less, and are not really interested in concepts like sharing risk. Opening a dialogue about pricing is simply an exercise in getting the law firm to do the same work for less money.

I my have missed the point, but of course they want to pay less!

The fact that the firm hasn’t developed a model that really meets their needs, or if they have the firm can’t communicate it in a compelling model does not turn this into the client’s problem. It’s the private practice lawyer’s problem. It’s the firm’s problem. It’s the profession’s problem.

The market has changed.

Forever.

Except for those highly differentiated firms that have unique or otherwise genuinely marketing leading skills and expertise, law firms are shifting to being price takers rather than price setters in the market. As barriers to entry in the legal market fall, and new models of legal service delivery emerge, clients have more choices about how they resource work:

  • Big firm, small firm?
  • Global firm or international network?
  • Insource, outsource?
  • Disaggregate, multisource?
  • Onshore, offshore, nearshore?
  • Automate?

Fewer and fewer GCs respond well to a conversation with a law firm that starts at a notional rate card, which of course is all great news if you’re a firm with some creativity and innovation.

To me, understanding value starts with a conversation with the client.

Too many firms assume that clients all want the same thing, but in my experience the range of client needs and expectations are almost infinitely variable.

Organisations of a similar size in the same vertical industry may look similar on the outside. They may have similar sized legal teams which do similar types of work. But actually the underlying businesses may have different operating models, different shareholder expectations, different objectives, different risk tolerances and of course different legal budgets. What they want from their internal and external lawyers may be very different, in fact it might vary significantly across the business.

There are a whole host of client needs that might emerge from a well structured conversation, implemented through some good questions.

The challenge for the law firm is then to define the service that would best meet those needs, identify the variables, work out what the cost implications of those variables are on the overall cost of service delivery and then stitch the whole thing together into a great value proposition at a compelling price.

Some of the variables might include turnaround times, the style of advice (who is the ultimate recipient – business person or in-house lawyer?), the  level of detail, different types of relationship management (dedicated team?) and the hours of operation/availability for the external lawyers.

Thinking about how these factors help the client’s business, as well as the needs of the inhouse legal team, can provide a deeper understanding of value – for example will a quicker response time allow a deal to be completed more quickly? If so, what does that mean for the business?

From this baseline understanding, the firm can get creative, but to do so also needs to ensure they really understand the cost and benefit to the firm of moving these “levers” (i.e. changing the variables).

Cost is often not simply the employee cost, but also may encompass opportunity cost or the cost of holding WIP for specific periods of time. The flip side is that the benefits to the firm can be broader than simply revenue – improved cash flow, client referenceability, employee retention (if the work is prestigious or interesting), replicability (the ability to reproduce the output for other clients at lower cost/higher margin) are all benefits that have value and can be quantified.

With all these factors to play with, plus of course the dynamic of genuinely sharing risk and reward with a client, I would be amazed if a firm couldn’t find a pricing mechanism that works for both the client and the firm. Once some pricing options (hint: that last word is a useful one in these conversations), the overall value proposition for the service offering can be pulled together and communicated. Law firm BD has become increasingly sophisticated, and there are plenty of skilled professionals who can ensure the resulting proposal is truly compelling and is tightly tied to the value it will deliver.

So I’ll grant you this – it’s more effort than simply negotiating percentage discounts on an hourly rate. It requires you to understand the client’s business in more depth, but also your own. But surely both of those are worthwhile steps in any event.

And if you do get a client who is genuinely not interested in this type of conversation (assuming you are not in the commodity market where the price genuinely will be just about lowest price), then maybe they’re not the right fit for your practice?

Or maybe you need to go back and tweak the model some more…..

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Hasta la vista baby – the termination of the legal profession

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Later this week I’m running a session for a group of leading technology lawyers which will explore the future of the profession.

Withington & Co's new M&A lawyer was a force to be reckoned with

Why I think this will be particularly interesting topic for this group is that I believe technology will be the  single biggest driver of change  for the legal sector in the long term.

Sure, globalisation, outsourcing, commoditisation, changing procurement patterns are all shaping the market now, but technology has the potential to change it to a much greater degree.

Here’s why.

There are a number of technology trends that have already influenced the profession to a greater or lesser degree:

  • The Internet has enhanced communication speed and accessibility which has fundamentally changed client service expectations and the response times in the market
  • The vast amount of electronic information available has made search and retrieval a vastly different affair to that of twenty years ago, when a trip to the law library and a long afternoon was required to get oven an overview of the latest law in an area
  • Collaboration software is allowing the process of working with internal stakeholders and external parties to become more efficient (not least by reducing the number of times documents are passed backwards and forwards)
  • The sharing of information between law firm clients has become far more widespread (intensified by social media) so that emerging client buying patterns such as the rejection of hourly billing become more adopted more quickly
  • Technology supports the standardisation of work – with more and more firms focussing on efficiency and improving process, tools like workflow software can support and enhance changes to the way lawyers work
  • The automation of low complexity work, most visible in the consumer space (think automated wills online), is also beginning to see wider adoption in the B2B space as more complex work gets disaggregated and the low complexity components get packaged up and automated (standard due diligence report anyone?)

However, to my mind, this is really only playing on the edges of what’s possible.

Where I’m really interested is the area of law where lawyers believe they add most value. The high-end, complex work. The work that NEEDS a specialist. A true expert.

Lets go right to the “business end” of the legal value chain.

Think about the legal sector and what it actually does.

Law is made (the government legislates, courts decide a case etc). This law is recorded and at a high level interpreted (often by academics and other commentators). The combination of these two steps provides a shared view of generally what the law is.

By and large, and the moment the value here is really only accessible to legal practitioners – the public  can get access to certain statutes and cases for free online, but the public’s ability to understand what they mean remains limited – although this is beginning to change.

The next step is to turn this information into a broad set of tools (largely documents – agreements, policies and other commercial instruments) and for the lawyer to use these tools and his or her understanding of the law to interpret the high level meaning and apply it to a particular set of facts, and in doing so create some further value for which the client will pay.

S0mewhat simplistic, but in very basic terms, the majority of the value that the market will pay for is in this interpretation and application of the law to increasingly complex situations. There are other factors that drive value such as the scale and risk involved, but generally speaking, more complex work means higher fees.

Looking a bit more closely at what lawyers actually do in this high value phase, in the vast majority of cases it will take  two forms – advising and creating documents. We already know that technology is starting to shape document creation (have a look at Epoq, Rocket Lawyer, legal Zoom and LexisNexis if you don’t believe me), but surely (SURELY) technology couldn’t actually start to creep into advising clients?

Could it?

This is the skill honed over years of hard-earned experience. The ability to steeple fingers, sit back in chair and let the cogs turn. To casually drop a Latin phrase into an argument. Those uniquely human abilities to find meaning and similarities between cases and facts. To both synthesise, analyse and structure highly complex information.

The skill that requires (in the UK) a three year law degree, a year of practical training, a two year stint of on-the job training, before the brightest and best graduates can call themselves qualified and enter the profession fully to “start” their career and their real learning.

Surely not.

Think about this, from a BBC article on the impact of technology in the City:

“Trading floors were once the preserve of adrenalin-fuelled dealers aggressively executing the orders of brokers who relied on research, experience and gut instinct to decide where best to invest.

Long ago computers made dealers redundant, yet brokers and their ilk have remained the masters of the investment universe, free to buy and sell wherever they see fit.

But the last bastion of the old order is now under threat.

Investment decisions are no longer being made by financiers, but increasingly by PhD mathematicians and the immensely complex computer programs they devise.”

While there are many differences between this activity and the legal profession, there are also plenty of similarities.

Once you start really looking at what lawyers do, and begin to grasp what technology is already capable of, a real threat to the profession as we know it doesn’t seem so far fetched.

Entity recognition (understanding, finding and cross-referencing individuals and organisations in documents) is already well established, and software like Autonomy (“the leader in meaning based computing”) can do magical things in terms of identifying relationships between “things” and deriving meaning from raw information (think “facts”).

Look at recent developments in ediscovery and contract management software, and have a read of Jason Wilson’s great post on lawyers “I am now an app” for lawyers, and of course, whether you agree with him or not, do revisit Susskind’s work .

For me, rather than the commentary in the area, what makes me really believe big change is coming, is what I hear and see when I talk to some of the leading technology thinkers in this area.

To hear them describe the law by talking about decision trees and statistical probability (based on historic data and future trends), to hear them explaining rules engines, logic and information structures, really makes me pause for thought.

It’s a different language, but with the same objective of solving problems and creating value for clients.

This type of technology promises paradigm shift in speed, accuracy and cost reduction that goes far beyond what an LPO could offer with a human based process.

Of course it’s not that simple. Apart from the very real time, effort and money required to build the technology, aside from the judgment required to apply the law, there is of course a truly human element in providing legal service (that word is a clue). This service wrapper is likely to keep large chunks of the profession safe for a while, and of course as one work type is automated, the opportunity for the profession is to find a new, higher value area of law to explore.

My (human!) instinct is that it will be lawyers who first use these new generation of tools first, to provide faster, better services to their clients, rather than clients using them directly to replace lawyers.

The lawyers may be at traditional law firms (large or smaller niche players) or LPO or other volume providers. Either way the early adopters will become the Terminators, the firms that resist will be Sarah Connor.

Seems far fetched?

My belief is that the fundamental changes now facing the profession are only the beginning of the beginning, and that technology will shape the end game far more than any of us can probably predict.

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The legal market place – carnage or opportunity?

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When you look at the legal marketplace, what do you see?

With the implementation of the far reaching Legal Services Act finally happening in the UK (albeit with some fairly significant delays in related regulation), it seems the right time to step back and assess the state of the market.

Talking to people in the profession about this, from partners to in-house lawyers, business development directors to IT professionals, through to trainees and law students, one thing is clear.

There is no single opinion on the state of the market right now.

In fact, nothing could be further from the truth.

Opinions are strong and polarised.

Is the glass half empty or half full?

The world of pain

One group see the profession as an industry in decline.

Painful struggles with increasing firm overdrafts and personal debt are symptomatic of underlying structural problems with the profession, and the cash flow challenges facing many firms are just another indicator that it’s time to get out before the interest rates rise and bankruptcy looms large.

With lawyers at both small and large law firms working harder than ever, increasing competition from overseas firms and LPOs becoming more visible, and constant talk of a new wave of competition, does not fill them with hope that easier times are ahead.

Small firms worry about hyper efficient, large scale competitors with a resource base, national reach, consumer brand and technology platform  that they simply can’t match. Large firms worry about transactions being disaggregated and large chunks of profitable work being placed with legal service providers with a cheaper cost base. Mid-sized firms talk about being squeezed, with larger firms looking for work in new markets just to keep their associates busy while they weather the current economic storm, and about smaller, more agile firms  punching above their weight.

These people can often see the need for change, but despair of the pace of change in many law firms, pointing out that the culture and consensual nature of partnership often make decisions glacial when they need to be made at the speed of the digital world we now live in.

They look at the management of their firm, and question whether they have the right skills and experience to thrive in such a turbulent environment. Management themselves wonder how they can free themselves from operational fire-fighting to spend time focussing on the strategic questions that will define their firm’s future.

The lawyers lower down the pyramid see equity structures remaining in some firms that encourage low performing partners to sit back and coast, while the best talent works their asses off and often still finds it impossible to break into the club.

Below them are a generation of students who have made a huge financial and personal commitment to enter the profession, and are finding training contracts like gold dust. Those that are lucky enough to find work may be confronted by suggestions that the legal training system is in need of reform and is not equipping graduates with the skills they need to excel in the profession and exceed client and colleague’s expectation.

They may also be confronted with a linear career path, and find that if that’s one they are willing to follow, then the demands made by the firm are at odds with a generation Y philosophy that puts greater emphasis on work/life balance.

Those who see the world in these terms often point to clients showing less loyalty and who have ever increasing expectations in terms of service standards, yet in the same breath are looking to pay less for that service. A widespread rejection of the hourly rate billing model leaves many firms struggling to come up with a viable alternative and without the capability to re-engineer their business model to support these new fee structures.

The downward fee pressure squeezes profit margins further, and even after several rounds of morale-sapping restructurings and redundancies, with economic growth in the core western markets slow at best, there’s no end in sight.

Pretty grim huh?

Now those that know me know that I’m on balance, a pretty upbeat person, so let’s try and bring a bit of balance to the picture.

There are plenty of people out there in the profession who don’t think like that. Who see the current time of change as tremendously exciting. These are the people who see

A world of opportunity

First and foremost they see an incredibly profitable sector that has weathered an unprecedented recession and shown real resilience with relatively few high profile casualties.

They see businesses with the ability to offer a broad portfolio of services that add real value to clients at critical points in their lives or organisational existence. Many of these services are counter cyclical (helping manage difficult economic conditions) and many of which allow the lawyer to genuinely claim that coveted position of trusted advisor.

It’s not hard to point to law firms that have access to senior people at some of the best and biggest companies in the world and advise some of the most influential people who are shaping society.

For those in the UK, having a core competency in the English language and the common law system that underpins many other legal markets means firms are well placed to support global businesses and expand intro higher growth international markets (as indeed many UK firms have done very successfully).

While there would be an acknowledgement that the bar for client acquisition and retention is being constantly raised (particularly by increasingly sophisticated business development professionals and practices) this is raising standards in the profession and represents progress. There is still a huge opportunity to win by being ahead of this curve and setting the pace.

For those with one eye on the future, advocates of the profession will point out that the chance of a career offering not just the potential to earn big bucks, but one that can offer a lifetime of intellectual challenge and stimulation, will always attract its fair share of top talent, and that the training and development opportunities within law firms have improved massively over the last ten years.

Those who see opportunity see the ability to innovate as being a genuine source of competitive advantage, and are looking at technology, process and efficiency as ways of maintaining and indeed improving profitability in a fast changing market. The ability to change quickly is a key enabler, and they recruit the people with the ability to adapt and thrive to make this a reality.

They also see that market consolidation can offers opportunities. Low price acquisitions, the ability to pick and chose individual teams, to make strategic acquisitions of particular clients or relationships, and the clearing out of some of the noise in the market place.

Yes clients are demanding “more for less” but that’s a common refrain across all business these days – the change facing the profession is not unique and in  many other industries there are organisations that came out as big winners.

A somewhat simplistic categorisation, but I urge you to reflect – which messages resonate most, and critically, what are you going to do about it?

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