MMC Lateral Lines – Thoughts for Lawyers in a Changing World
January 2009
Think Like a Consultant, Not a Lawyer!
The corrections taking place in the world markets bring with them an unprecedented opportunity to reorganise law firms to take advantage of a new era in legal services. At a practical level, every law firm needs to deal with two issues. One without the other will not suffice. Firstly, as a short term measure, every possible efficiency must be achieved by reducing fixed overheads, and exploring opportunities to share costs, adapt working practices and outsource. Secondly, while recent turmoil has emphasised the folly of attempting to predict the future, firms must learn to live in a state of constant change and adapt to changing client requirements in an uncertain world. This requires sound planning and much more adaptable ways of doing business, taking into account new business models, commoditisation, better marketing and an openness to more billing models to name but a few.
Dealing with the first issue is not entirely straightforward. If redundancies cannot be avoided, they have to be carried out in such a way as to retain sufficient skills for a viable business when conditions improve. Most firms carry a substantial overhead comprising office premises, and associated costs. Particularly when the premises are leased, the overhead cannot simply be lost.
The problem is particularly acute for large law firms, especially with exposure to the corporate and property markets. Demand will not return in either for some considerable time, and it is unlikely that Scotland will see significant leveraged deals in the near future, if at all. What is required is a radical review of the business model, starting from first principles. Who are the firm's clients? What are their needs in the current market? How will their needs change as the economy evolves? Has hourly billing had its day? Will clients ever be in a position to return to high hourly rates? Is an expensive centralised infrastructure compatible with delivering an efficient service at the right cost? What work should be commoditised? What possibilities arise through an ABS?
Firms in the mid-tier generally have more of a spread of business and less exposure to corporate and commercial work as a mainstay. However, the cost base is still likely to be rigid and high. Profits in most mid-sized firms are being hit and those that keep their overheads under control and stay close to their clients should weather the storm.
Many small firms face extinction as a result of the decline in the residential conveyancing market. However, small firms are potentially more able to adapt to the new world. They have low overheads and generally speaking a good spread of business and loyal clients. While many are vulnerable because of low margins and an historic reliance on residential conveyancing, they have the ability to adapt quickly to their clients changing needs. What is needed is action. Doing nothing is not an option.
The future shape of both the commercial and private client markets favours small, efficient business units. Think connected PC’s as opposed to mainframe computers. Envisage a future in which small firms are able to deliver high quality legal services by co-operating with each other through a combination of referrals, outsourcing, selling specialist services and sharing costs. This makes complete sense in an era in which clients more than ever value trusted one-to-one relationships. Small business units can deliver these. Go and talk to key clients – find out what is happening to their business and look for opportunities to provide solutions. Uncover the clients’ needs rather than wait for instructions. If you suddenly have free time, visit clients for free review meetings and hold free surgeries. Recognise the weaknesses of law firms and address them to move ahead of the competition. Train up more rainmakers in professional sales techniques and market the firm. Avoid becoming too defensive and identify unexploited business development opportunities. Think like a consultant, not a lawyer. Solicitors should recognise the opportunities presented by the downfall of other sectors. In this constantly changing world, there has never been a greater need for a trusted, independent adviser delivering high quality advice at a reasonable price.
All Aboard The Technology Train
“The economic system of the [law] firm looks like the last vestige of the medieval guild system to survive into the 21st century”. “Firms risk losing their professional origins while not yet fully defining themselves as businesses”.
These two comments were made by Mark Chandler, Cisco’s General Counsel, and Paul Lippe, CEO of a software company called QLAS, respectively - two of the most influential figures in legal technology. They feel that instead of exploiting technology to open up the flow of information between adviser and client - and improve the efficiency of its delivery to mutual benefit - law firms have generally resisted change or kept the benefits to themselves. To many lawyers, this might sound like the uncomfortable truth.
Together with eight other Fortune 500 companies, Cisco has taken upon itself to drive through change with an on-line collaboration project called Legal OnRamp that aims to close the technology gap. Its starting objective was simple; frustrated that the disparate and often over-complex legal updates from their panel law firms didn’t meet their basic needs, these companies set out their own FAQ’s covering a range of topics and jurisdictions. Law firms now answer and update these online, so it’s always in the form they want, when they want it. Managed on a ‘cream rises to the top’ basis, for contributing lawyers it’s a chance to market themselves to the world’s biggest legal spenders.
The on-going objective, however, is to foster far wider technology-driven change. To influence the way legal services are actually procured, and information handled and delivered, to the benefit of both clients and firms. The various articles, blogs and discussion groups on the site give examples of how law firms can add value to clients - at the same time as reducing costs - surely the holy grail of our times.
How to unbundle work packages and move from the hourly rate to ‘value pricing’, adopting a fixed fee approach where possible and outsourcing if appropriate. How to exploit the benefits of electronic billing and knowledge management. And how to provide more of the quantitative data that clients hunger for in probabilities and timings. Mark Chandler believes the greatest vulnerability of the legal industry is a failure to make information more accessible to clients and drive models based on value and efficiency.
So, three New Year recommendations; 1. Read his speech on technology in the law at http://blogs.cisco.com. 2. Find someone who can show you around www.legalonramp.com (it operates on a referral basis). 3. Review the work you did for your top three clients last year and consider how technology could have helped you deliver this differently. Then go to them with ideas for offering more for less (or just ask what more you could do to adapt to their needs), before they come to you. Or worse, someone else goes to them.
Legal OnRamp comes on the back of other client-driven projects such as the UK’s Banking Legal Technology Group (www.bltportal.com) but it is by far the most ambitious online initiative we have become involved with and reinforces the need for lawyers to view technology as a tool that can deliver mutual benefits. Richard Susskind forecasted that commoditisation and online community will transform legal practice in the coming decade. Legal OnRamp shows both of these in action so you can judge for yourself!