MMC Lateral Lines – Thoughts for Lawyers in a Changing World
March 2009
Alternative Business Structures
In the current business climate of back to basics, talk of alternative business structures in any other sector than ours is likely to be met with suspicion. For lawyers though, the flexibility to structure their businesses differently is something whose time has come, not gone. But what do we mean when we refer to ABS’s? What reasons might there be for considering one? And how might a firm go about setting up one up?
In the fullness of time, the two types of ABS’s being facilitated by the Legal Services Act are Legal Disciplinary Partnerships (LDPs) and Multi-disciplinary Partnerships (MDPs). The principle behind the first is to make it easier to involve non-lawyers in senior management roles and to facilitate funding via the entry of external shareholders. The principle behind the second is to allow lawyers to team up in business with other types of lawyers or professionals. This loosening of the regulations is being introduced in phases but the most important thing to recognise is the driver for change – to foster innovation in the services on offer to consumers.
For any lawyer therefore, the starting point when thinking about ABS’s must be the consumer – not the lawyer. If gaps exist between what consumers would like, and what is currently on offer, the key is to identify them. Given that the provision of legal services has been regulated to the extent that has influenced the working practices of lawyers – from the way they think to the way they bill – it would be a surprise if this weren’t the case. For lawyers, it is time to think more like businesspeople.
I went through this exercise myself a number of years ago when I set-up Law At Work. After speaking to many employment law clients, I identified a particular profile – SME’s and certain types of larger companies – that were needing a service not provided by existing providers. Rather than legal advice when things became sticky, they were needed a blend of HR, legal and resolution advice to help them avoid things going legal. They wanted cost certainty and greater access in their advice taking, and financial protection if things went wrong. To provide this I designed a multi-disciplinary team of advisors, established a completely different cost base, set up strategic relationships with insurance companies, and recruited non-lawyer directors to bring wider commercial experience.
Back then, creating Law At Work within a law firm was not possible so I elected for a legal services company. Creating a different corporate entity also helped to foster the distinct culture I felt was needed. Moving forward, ABS’s open the door to creating all sorts of new service offering that, like Law At Work, address more precisely the legal-related needs of certain consumers than traditional models.
Of course, the very fact that I could create a company to offer legal services means others could too – and many have. Banks, insurance companies, HR consultancies and accountancy firms have been offering legal services for years. Which is why lawyers have to react and have to recognise both their strengths and weaknesses. These other types of businesses are skilled in market research, new product development, marketing, sales and distribution. Innovation, to a greater or lesser degree, is in their blood. Lawyers have not been trained in these disciplines.
But what they have been trained in is technical skills, thoroughness, problem-solving, consistency; precisely some of the areas where these other businesses have let themselves down. The Government may be right in recognising the public want change in the range of legal services on offer but the key is where? In my experience, most of the frustrations with traditional service delivery are to do with the way in which advice can be delivered – too narrow, verbose or not practical enough. The way in which it is charged for – too expensive or uncertain. And too one-sided – commercial clients often feel resentful taking all the risk.
But, unlike the banking sector for example, the issues are not to do with trust. And it is here where our strength lies. To exploit it in a less regulated environment though we have to master some other disciplines too – beginning with market research. So, whatever your field of expertise and level of experience, I urge you to canvass the opinions of clients and non-clients alike, and ask them one simple question: what would you like to be different? Like a psychiatrist getting to the root of a question, probe and suggest, clarify and confirm. Then, when you see some pictures emerging, work backwards to a service model.
Depending on how different it is to what you could provide from your existing platform, think about whether the flexibility of an ABS might help deliver the new service that is being sought after. If you can identify an unmet need in the market, can fill it at a price that works, and can deliver it in a way that keeps clients coming back, you can’t fail!
To reserve a place on our forthcoming seminar on Alternative Business Structures click here >>
Redundancy – Exploiting the Change
Historically, law firms have been reluctant to implement redundancies for a number of reasons; sometimes a reluctance to "let go" loyal employees; on occasions a tendency to watch what other law firms do before making a move. In some cases, firms have delayed simply because it was a decision they did not wish to make. In the current economic climate, this can prove fatal. It is crucial that decisions about redundancies are taken firmly and implemented fairly. In a declining market, as each month goes by, the more of the impact of funding redundancies will be felt when the decision has to be implemented.
This is the reality of the world in which many aspiring lawyers are living. An inevitable consequence is that more lawyers will strike out on their own, forced into recognising that the option of moving to another law firm seldom exists. The days of long-term partnership are diminishing, the prospect being less attractive anyway as more examples surface of the consequences of the negative side of it - banks calling in overdrafts, being a signatory to a lease etc.
For those affected by redundancy, there has probably never been a better time to set up on their own. Historically, recession has always been a good time to set up a business. It is a time for innovative thinking. There are good deals to be had in set-up costs. Clients still have legal needs but are increasingly cost sensitive. A lawyer who is able to address client needs from a minimal cost base, with a very personalised service, and who is able to market that service efficiently, will do well. Working from home, or sharing office costs with others, can keep overheads to a minimum. Using a website and Web 2.0 platform effectively costs very little but reaches a wide audience. A redundancy payment can provide a cushion and some seed capital.
There are many examples from outside the legal world of strong businesses that have grown from an opportunity created by redundancy-Stagecoach to name but one. Being removed from a comfort zone can be a very good thing-it all depends on how you see it. The experience of lawyers who have done this has tended to be that, while "scary" at first, it opens up opportunities, not least of which are those related to lifestyle. All of a sudden they are their own boss. They tend to report that they have found that their relationships with clients have improved because they have become more personalised and clients have found billing levels more to their taste.
For lawyers considering this option, networking and co-operating with others to refer work needs to become a way of life. Most business functions can be outsourced, leaving the lawyer free to get on with delivering the legal service. The key here is to identify what aspects of legal practice you most enjoy and excel in – where you have most added value in the past. Then talk to some trusted contacts about what they like and dislike about the traditional model. Consider possible roles/ relationships where you could act on a retained basis. Could you act as part-time in-house counsel for example? How many clients would you need to cover costs? There is then the choice to stick with the lifestyle approach or, having gained confidence by setting up from scratch and surviving, to then go on and build a business. It's all a question of attitude and a preparedness to seize opportunity. Time to think like a business person first, and a lawyer second. On the continent, the legal community is differently structured. The number of sole practitioners is much higher as it is much more typical for small companies and private individuals to have their own retained lawyer. Perhaps this is part of the way forward here?
To reserve a place on our forthcoming seminar on Redundancy – Exploiting the Change click here >>