The Legal Services Act 2007 is set to herald irrevocable change in the legal sector. Driven primarily by the objective of putting the consumer first, these reforms will lay the foundations for a new class of legal services providers as a result of the introduction of Alternative Business Structures (ABS). From 2011 this Act will allow any organisation including supermarkets to own law firms or offer legal services directly to their customers. Only recently, the Legal Services Board has confirmed that the first ABSs will be ready to do business by October 2011. No doubt, this will result in a new level of price competitiveness in the market for legal services.
This regulation-driven change, coupled with the aftermath of the recession, means that practices will need to devise new ways of conducting business and staying competitive. The statistics on the state of the legal sector over the last two years is alarming. A report in The Times in 2009 said that as many as 10,000 lawyers could be out of work in the UK in the next two years as the legal business faces its worst slump in decades. Further, a reduced legal services market has not only led to a substantial drop in partner hourly rates with some legal practices claiming a decrease of almost a third, but has also initiated the argument for a move to a fixed fee model.
This begs the question – how will legal practices deliver a high standard of professional customer service in the face of reduced headcount, increased competition, falling fee levels and a move to a fixed income business model?
Operational efficiency is the need of the hour
The writing is on the wall – firms need ‘to do more with less’. Today, they are left with no option but to embrace client-centric strategies in order to deliver on the specific needs of their customers and provide services that are superior compared to their competition, whilst simultaneously controlling spend and costs.
A tried and tested way of achieving operational efficiency which has an impact on the bottom line is by streamlining and automating the underlying business processes. Business process automation essentially involves taking existing processes and making them more efficient by applying business rules and underpinning them with a technology solution.
This approach will also enable legal practices to take advantage of the new business opportunities that come their way in a recovering economy. For instance, the reforms under the Legal Services Act 2007 will allow legal firms to receive inward investment from other sources including national and international businesses, giving them the opportunity to meet their business growth targets. A streamlined and efficient business will be perceived as an attractive business to potential investors.
Also, the market is ripe for mergers and acquisitions, a trend that often gains momentum during difficult economic times. Just recently, it was announced that Lovells, the City’s sixth-biggest law firm, is in merger talks with Hogan & Hartson, a leading American group, which is being seen as possibly the biggest tie-up in the legal sector in nearly five years. This market consolidation is likely to continue, at least in the near term. Joining up and streamlining disparate technology systems to facilitate enterprise-wide efficiency and compliance can help newly merged entities further strengthen their competitive position in the market.
Technology can be the panacea
Firms’ technology infrastructure can be both a challenge and an opportunity. Whilst technology is at the core of efficiency gains and can enable business process automation, many firms are sat on technology assets that are no longer able to deliver on their business requirements. The economic situation may not allow law firms to invest heavily in new technology or major upgrade initiatives, but consolidating existing technology systems and re-engineering their underlying processes to create a unified platform from which to conduct their business can be the answer. This can further help firms develop innovative service offerings, reduce inefficiencies and adopt best practice across the organisation.
For instance, law firm Mishcon de Reya does not wish to retire any of its incumbent mission critical solutions such as the practice management or document management systems. Rather it plans to overlay its infrastructure with middleware that will provide workflow, single instance data entry and point solutions to create an exact fit between technology and its re-engineered processes. This will not only make it a ‘leaner and meaner’ organisation, but also provide it with the flexibility for future solution development without the need for additional expensive technology investment.
To truly do away with inefficiencies, firms must consider re-engineering the underlying processes across every aspect of their business, not just the legal processes such as matter management as has been traditionally done. For example, in human resources, the process employed for new joiners can be automated and honed to ensure that fee-earners have the training and tools at their disposal immediately upon joining so that they are billable within a reduced amount of time. In Business Development, the bid and tender management process can be streamlined to ensure that only the most appropriate personnel and references are included. Using embedded analytics, the team can then also calculate if the prospect would be a long-term profitable opportunity. By streamlining processes, the Finance Department can provide clients with a transparent view of fees structures in real-time, safe in the knowledge that all information is accurate and fully auditable.
The Legal Services Act 2007, aimed at modernising legal services, will bring about a fundamental change in the way legal businesses are run. Pertinent to enabling this change will be technology. Those who embrace it will position themselves well for bigger and better opportunities in the years to come.
Bob Hadingham is Platform Director at LexisNexis Practice & Productivity Management
