Beyond Clementi

Extensive research being carried out by Practical Solutions on behalf of the LSSA has examined a number of aspects of the use of legal IT but its main focus has been on wider issues. Allan Carton shares some of the first impressions and examines the potential impact of the new business structures that will probably soon become possible for delivering legal services – the “Alternative Business Structure” or “ABS”. The results of the research are being presented and discussed in early February at “The Future of Legal Practice” conference.

Although our research was commissioned by the Legal Software Suppliers Association, they were sophisticated enough to know that they and their law firm clients were likely to be affected by greater pressures than could be covered by a narrow analysis of what future technological tools would be taken out of the box in lawyers' offices in the future. I can give you a flavour of the approach by selecting a few of the questions we have asked in our discussions:

  • How do you feel lawyers' relationships with clients and introducers of business will change during the next 10 years?
  • If you could change 3 things about law firms today to make them more successful, what would they be?
  • Do you feel that lawyers generally have established enough of an e-business capability? Where do you see the gaps?  What steps do you plan to take to fill them? What do you think the obstacles will be?
  • Where should maturing technologies and e-commerce capabilities open up new opportunities for lawyers?
  • Looking into the future, what technology initiatives or tools do you feel have the most potential to help lawyers achieve your strategic business objectives? And how will those strategic objectives change during the next 10 years?
  • What technologies are currently lacking that would help lawyers develop a stronger business?
  • By 2010, what % of your communications do you think will be paperless? And by 2015?
  • What should be the overriding objectives of IT professionals in legal firms during the next 10 years to help the business achieve its objectives?

Inescapable IT
That technology is integral to the way in which legal practice develops in the next ten years is scarcely an original perception but that knowledge represents an important undercurrent for our research - as you will have noted from some of the questions. Bearing in mind that this is an article for Computers & Law, it would seem impossible for me to escape an obligation to report a few distinctly IT-related impressions, although I do emphasise that these are impressions and that I have time for much reflection and discussion prior to the report's publication itself at the LSSA Conference on 8 and 9 February.

It looks as though the main themes arising from our research will include:

1 - There is a lack of effective leadership, management and communication in developing innovative business solutions supported by technology - and generally.

2 - Substantial business returns arise from effective integration of internal systems and from integration with external business partners and introducers of business, and these justify innovation and investment.

3 - There is an overwhelming need to make more of the technology that is already available by tackling people and culture issues.

4 - IT can provide (relatively) easy wins when applied as solutions to help complete management of the supply chain.

5 - Expect the emergence of SAP and SOA (service oriented architecture) as relevant approaches to improving ROI and increased value from investments in IT.

6 - There is a crying need for more collaboration - within and between law firms, clients and between software suppliers.

7 - Use of video as an effective means of communication internally and externally is likely to increase substantially.

8 - There is a need for changes in management roles - we need IT Directors with more business understanding who are more pro-active.

9 - Do not expect a specific drive on IT from clients - it is up to the lawyers to innovate and develop IT solutions that clients don't care about, in order to deliver the service at a cost they do care about.

10 - There is a need to build commercial strength through consolidation of small providers and through vertical integration with other related service and product providers.

Overall, there is plenty of technology available - it is just not being used effectively to strengthen the client/customer relationship. There are a lot more specifics that flow from this. Medium sized firms (and smaller firms with innovative partners) are likely to be the most capable of responding to imminent changes in the profession. Very small practices need to consolidate or collaborate to be assured of a future. The large firms may feel comfortable and protected in the short term but, unless they begin to be more pro-active, they will suffer in the future.

We plan to provide hard information gathered from the extensive research from which firms can evaluate where their own firm stands now, getting a clearer view of relevant issues and options in key areas of practice.

MDP+ - Is The ABS a New Beginning?
The government clearly has its own agenda when it comes to legal services. When Sir David Clementi filed his report and recommended that it might be wise to take the cautious approach of introducing Legal Disciplinary Practices (LDP) before moving on to Multi Disciplinary Practices (MDP), the Government decided to go further. Much further!

In the Government's White Paper - the Future of Legal Services: Putting Consumers First - published in October 2005, we see for the first time, the more progressive proposal to introduce even more flexible, licensed “Alternative Business Structures”  (ABS) which present a very different challenge and opportunity, both for lawyers and for other potential providers of legal services. Some of the key features are these.

  • Non-lawyers and lawyers can be partners or directors, to work together on an equal footing.
  • External investment will be permitted.
  • There has to be a Head of Legal Practice, who will be a lawyer who must ensure that services are provided by those properly qualified and that the ABS operates within the terms of its licence. There is no requirement that lawyers be in the majority.
  • There will be safeguards for consumers “to ensure high standards of quality, propriety and independence in the delivery of services.”
  • The Law Society is one of the organisations that can apply to the Legal Services Board to be one of the regulators of ABS', but there will probably be others. The influence of lawyers is being diluted to make sure that a more commercial approach will prevail.
  • Regulators will apply their judgement on the basis of the business plans presented to them in granting licences.

This should release some business-minded lawyers to conjure up new, more flexible offerings of a mix of services to customers that include legal, but much more too. However, it also opens up equally interesting new opportunities to non-lawyers, levelling the playing field dramatically for potential new entrants to the legal services market.

The Market & The Opportunities
Just a few of the relevant key themes we will be developing in the report that will flow from our current research are the need for lawyers to:

  • Move untrained and unskilled managers away from management
  • Consolidate so that they can benefit from otherwise costly administrative support
  • Collaborate with other law firms and business partners to provide better solutions
  • Be more flexible, innovative and receptive to new ways of working that improve the legal experience for customers
  • Use the technology tools already available to improve communications and cut costs
  • Improve treatment of people and their working environment to keep good people
  • Apply strong leadership to support changes in culture.

There are clear opportunities for lawyers who are prepared to be innovative in a new business environment where consolidation of providers, collaboration between business partners, increasing sourcing of work through introducers and commoditisation of many legal services for legal customers are all recognised as inevitable - in crime, family, personal injury, commercial property and residential property for starters.

On condition that there is a sustainable and appropriate business plan approved by an appropriate regulator (who may well not be the Law Society), here is an opportunity to:

  • Operate as a corporate enterprise, with devolved management responsibilities and options for flexible share ownership for lawyers and non-lawyers
  • Generate commercial finance to expand the business and invest in large-scale capital projects, such as facilitating technology
  • Deliver a range of legal and non-legal services
  • Bring in professional managers to run the business
  • Broaden your exposure to a wider range of business opportunities within a more flexible business organisation.

Don't allow yourself to become complacent because you feel they've talked about changes in the past that haven't come to fruition. This is being driven by the EU to defeat anti-competitive practices across Europe as part of a concerted initiative that is at the core of EU policy. 

Perhaps more importantly, now the cat is out of the bag and this model is up for discussion, most businesses and members of the public like it. So it's time to start remodelling your business and the way you work to take advantage of it if you possibly can. This will happen within the next 10 years . if not tomorrow. This model fits with the way legal business is developing and what most customers believe they want.

Is It Good for Lawyers?
Are there enough business-minded lawyers around who are innovative and enthusiastic enough to make the changes that will keep competition from beyond the profession at bay? Does it matter if they can't? For some it will - which will be an obstacle to innovation and change in established law firms. There are some understandable obstacles in the way here. 

Successful legal firms and equity partners don't want to lose out financially. They may struggle to find the incentive to change unless they operate in areas where they recognise that pressures to improve the client focus and to re-engineer the way service is provided are likely to make them a less attractive option in the future.

But this is true in almost every area of legal practice. It may be more visible in some that have already become more “commoditised”. Particularly where collaborative relationships with business minded introducers have moved client service and real service standards to the fore, in residential conveyancing and personal injury work.

On the other hand, there has been a tendency for frustrated lawyers with business acumen to jump ship and set up a niche practice from scratch without the traditional baggage? This will probably happen more often in the future and it presents quite an opportunity for some. Perhaps they will more often become the Head of Legal required by an ABS to provide the legal content of their range of products and services.

Some current introducers of business will roll their services into legal firms that will take the lead in an ABS and vice versa. Some legal firms will provide services through an ABS that might outsource niche legal work to specialists.

There are many options to explore to guide your plans for your practice, but the danger is that fear and uncertainty could leave too many lawyers so unsure about what to do next that they do nothing at all. Most firms need to take radical action to achieve radical change in a short period of time, where the traditional, conservative approach won't produce results quickly enough. 10 years will pass remarkably quickly, so it's time to get started now.

Early Conclusions
Rather like the old Legal Aid Board's Franchise scheme, which resulted in genuine improvements in the internal management of legal aid firms, perhaps discussion of the options that an ABS might realistically open up will be a catalyst for new initiatives amongst legal practices of all sizes - from sole practitioners upwards.

If lawyers had been more pro-active in marketing their personal injury services effectively when advertising restrictions were lifted in the past, they would be in more control of the personal injury market - not paying huge introduction fees to claims management companies. If conveyancers had been trained to sell conveyancing services then the public would be choosing who handles their conveyancing based on who provides the best service, rather than who costs least -  which currently allows the estate agents to earn a premium because they know how to “sell”.

Here is another opportunity that reflects the need - which is being confirmed in our research - to change the way that lawyers operate, to fit what customers want. An ABS is not a solution for everyone. Legal practices will continue as legal practices, but they will compete with ABS-style one-stop shops that will be managed professionally.

There are some characteristics of ABS-contenders here that ought to be investigated, adapted and applied in developing your business. Lawyers should be capitalising on the potential that most keep locked away because we are so focused on getting the legal work done. The comments of two senior executives from major providers of legal business are fairly representative of introducers of business generally and of frustrated professional managers working in legal practices:

“Lawyers are generally hard working, dedicated, with clients interests at heart, but they are not great at running a business.  Sometimes they are determined to provide a Rolls Royce when a Mondeo would do just fine.”

“Generally they are technically good and know their stuff, but most are not commercially aware.  They need to be brought into the 21st Century. They need to work smarter.  I want them to be more pro-active about the solutions.”

It is time to break the mould in more areas of legal work, where lawyers should be pro-active in restructuring the business to play to their strengths, filling the gaps.

Business priorities and development options, including movement towards an ABS, vary depending on the size of your firm and the types of service and clients you deal with. These will be explored in more depth in the conclusions to our in-depth report.

Allan Carton is Managing Director of Practical Solutions: www.inpractice.co.uk. Complete findings and conclusions will be presented back to the profession and discussed at the LSSA Conference 2006 - “Planning for the Future of Legal Practice” - which runs alongside Legal IT 2006 on 8th (for larger practices) and 9th (for smaller practices) February.  For more information on this event, please contact Clare Dewhirst on 01732 887367 or by email to c.dewhirst@ukonline.co.uk 

Published: 1999-01-01T00:00:00

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