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…..





The Great Commodity Debate

6 09 2010

Fascinating debate over the last month on the Linkedin group “Leadership for Lawyers” on Mike Ames’ discussion “Is the law becoming a commodity, and if it is, what can be done about it?”.

If you can brand and differentiate salt, legal services should be easy, right?

One of the things that immediately struck me about the comment, was the implication that commoditisation was a bad thing, and something to be resisted. By contrast, my natural inclination is that there are certain areas of law that should be commoditised, but that the inefficiency of the law firm market and the business models of firms in the market that have prevented this happening extensively so far.

However, rather than look at the rights or wrongs of commoditisation, or indeed the future impact on the profession (which is where much of the Linkedin debate focuses) I thought I’d share my thoughts on what is driving this trend.

In understanding the roots of comoditisation, Delong, Gabarro and Rees in their great book “When Professionals Have To Lead” talk about the relentless commoditisation pattern facing professional service firms, and suggest that technology is a major driver of this trend.

Another author, Dawson in his book “Developing Knowledge-Based Client Relationships: The Future of Professional Servicesargues that the main causes are in professional convergence (i.e. the blurring of boundaries between the professions) and the “unbundling” of professional services. Unbundling  occurs where new competitors, rather than competing head-to-head with incumbent firms, select a very narrow section of services and offer very focused competition; to compete the incumbents have to unbundle their service offerings. I believe this driver will become increasingly prominent as a result of both the increased deregulation in the UK market place (leading to more new market entrants) and increasingly sophisticated LPO offerings that are beginning to reach the market.

In addition to these supply-side forces, I believe much of the drive towards commoditisation comes from the demand side of the market. In particular, as a law firm client I  frequently resisted paying for services by reference to a traditional “hourly rate” on the basis that the service was now a defined offering which had a clearly identifiable market price.

Buyers of legal services are undoubtedly getting smarter (whether commercially-savvy corporate counsel or in house teams working with procurement professionals) and the push for more fixed price work in turn drives law firms to put boundaries around their services (in order to control scope and risk). The recession has heightened these buyer behaviours, and as a consequence more and more services are being “productised” into individual and standardised products, which are easy to replicate and difficult to differentiate, which in turn means the market becomes price and cost driven.

So, that’s my take on some of the drivers. What it means for the profession (both opportunities and threats) are for another day, but if the comments on this post are as rich and well thought through as those on the Linkedin discussion, I’ll be a happy man.