Now blogging on www.lexfuturus.com

Lunatics running the asylum

During the 2010 FIFA World Cup, The French National Team, made up of some of the finest footballing talent in the world, many of whom had been world cup winners in 2000, crashed out of the competition in a spectacular act of self destruction.

Some claim that the (astrologically obsessed) Raymond Domenach, Team Coach, had "lost the respect of the dressing room".  Others claim that all the team decisions were being made by a cabal of senior players.  The quote that best summed it up came from one of the junior members of the coaching staff, who said that "the lunatics were running the asylum".

Recently, I heard the exact same phrase used by a partner (former partner, to be fair) of a large firm spiralling towards oblivion - "the lunatics were running the asylum".

Domenach's team had some of the most talented individuals in world football - the problem was that they were neither a team nor where they Domenach's.

Partnership is, itself, a strange beast.  The concept of the professional partnership was formed back  in the annuls of history, when small numbers of like minded professionals sought to co-operate to advance their mutual interests.

Going back to my football analogy, a bit like a group of friends or colleague, all of who want to play football, setting up a local team.  The formation of the team creates a body to which they may belong.

The model of partnership fostered a collegiate atmosphere with equity aforethought.  Partnership worked as the number of constituents was small, their shared a common endeavour and were happy to be both individuals but equal.

Local team, jumpers for goalposts, playing for the joy of playing.

Even today, small or niche firms or local teams exist perfectly happily within this model.  Co-operating to advance a mutual interest.

Whilst Domenach's team still only had 11 players on the pitch at anyone time, it's stakeholder constituency is exponentially larger than that of a local team.  Supporters, government, sponsors and a whole football federation all had expectations, investments and were answerable to. 

Unlike the local team, Domenach's squad we're more transient members of the team - coming in and out though performance or, often, their own wont.  There was no longer a nucleus of shared interest.  Players competed not just for places but for profile.  Without a nucleus, a team needs leadership.  Management with a clear and well communicated objective which put the team ahead of any one individual.  Such as Alex Ferguson at Manchester United - no player, no matter how good, no matter how big their profile, comes ahead of the team or the club.

Otherwise, behaviours become less social, individuals compete for dominance within the team rather than for the team. 

This also happens at some larger law firms.  Top legal/client relationship talent has a premium and is transient.  The mutual co-operation becomes less important but the owner/manager/player nature of partnership not only protects those who exhibit bad behaviours but, in some cases encourage it.  The way in which profits are distributed can encourage individual advancement over the firm progress.  Two excellent pieces this week by TheNakedLawyer and The Law Society Gazette demonstrate how this can manifest itself.

So how forward? We, you could become a full corporate, crystallise ownership and separate ownership and management.  However, does this really still foster Individual creativity that a partnership encouraged?  Some, at organisations that have undergone the change, would argue that it doesn't. Creativity gets lost in process and layers of governance.

The Big 4 Professional Services businesses are still partnerships.  They encourage and foster individuals to advance and innovate. However, when I asked a Big4 partner how it worked he responded "The only time I really get to exercise my power is when I vote for the new managing partner.  Once elected he is the boss". Clear leadership, providing direction.

Recently, at the Young Vic, Michael Sheen played Hamlet.  It was set within an asylum.  Characters being patients, staff or doctors.  The patients took over - it didn't end well.

Each organisation has to find its own structure but to survive needs clear leadership.  If not then we may have "...variable service, two dishes, but to one table: that's the end" (Hamlet IV ii)

The illusion of competition...

This blog is deliberately provocative.  I am not suggesting that law firms use "slight of hand" but seek to draw on an analogy that a lack of buyer control that comes from not focussing on what should drive buying decisions:
_________________________________________________________________________

Cry of the Market Seller:
"Oranges, £2 per pound".

I can inspect the oranges and compare the price offered with that of the stall down the road.

Cry of the Fairground Worker:
"Roll up, roll up.  Ladies and gentlemen, a fair and open contest for those eagle eyed amongst you.  Three cards turned over, which one is the lady?" 

They all look the same. There is no transparency.  We try to follow the dealers hand, but he always manages to fool.  Why?  His trick relies on the similarity of what we are comparing and his ability to manipulate our lack of focus.

In a market, the consumer is in control.  In a fairground, the consumer is prey to other influences and chance.

Law firms, essentially, all look the same - partnerships, charging for time and materials.  The model offers little in the way of transparency and the buyer always bears the cost of reinventing solutions or over engineering. 

You can negotiate the hourly rate but not so the number of hours or seniority of resource that may be used.  Leaving aside certain well commoditised retail offerings (conveyancing, for example), fixed price is never fixed price - based always, essentially, on a guesstimate of time and materials. 

In fact, as hard as you negotiate rates - the total spend year on year goes up.

Law firms have thrived on the similarity of models, the lack of real transparency, and the lack of focus of the buyer on value.

Proof of this is that, even today, some firms are able to leverage super-profits (top 10 law firms margins are between 30-50%) that their customers can only dream of. 

A natural oligopoly has been allowed to develop.  Whilst there are over 15,000 law firms in the UK, there is only the "illusion of competition" - there is a limit to what the current model can deliver in terms of market led price pressure.

Let's compare this to the airline industry.  Let's imagine I need to get from London to Edinburgh by tomorrow noon.  According to facelesstravelagent.co.uk, I can fly with UKBRUMMYInternational or Das Germaner for £158 or £177, respectively.  If I fly cheesyJet, I am initially intrigued by a fare of £92 but with "extras", included in the other fares, I pay £162.  The mean of the other two.
 Professional services are, of course, a more complex model and with ABSs on their way, the challenge for buyers of legal services will be how they compare what "legal value" they get for every £1 spent on "legal cost" across a multitude of models, offering the same thing.  

Legal value may be risk mitigated, contract rights protected or the operational effectiveness of a project. It will change for and be pertinent to each buyer. However, in true economic terms "value" can be measured.

Buyers who learn to compare these measurements will shatter the "illusion" and enjoy a transparent market where they can assess value and make informed buying decisions.

So, in the future, where would you prefer to buy your legal services.  In a market or in a fairground?

Reasons to be Cheerful, Part 2

"Some of Buddy Holly, the working folly, Good Golly Miss Molly and boats, Hammersmith Palais, the Bolshoi Ballet, Jump back in the alley, add nanny goats"


Reasons to be Cheerful, Part 3 - Ian Dury and the Blockheads


Last week, I wrote a blog entitled 'In the pursuit of "happiness"...', inspired by the socia-economic measurement of 'well-being', first dreamt up by King Wangchuck of Bhutan in 1972, as the start of a number of further blogs which would look at alternative ways of 'assessing value' of legal services.


This blog had a bigger reaction that any of my others.  Further reading this weekend and  reflecting on one of my favourite songs of all time (as above) has inspired me to write a follow up.


Before I get to this, let's remember that 'cost' and 'value' are not the same things, at all.  I could give you countless arguments put forward by Smith, Marx or Ruskin.  I think Oscar Wilde says it plainest when he describes a cynic as a man who "knows the price of everything and the value of nothing".


I did, try to, make it clear in that blog that I was talking really about measuring 'client satisfaction' as a metric to assess value rather than happiness.  Yet nonetheless, some cynical elements of the legal profession kindly informed me:


> "If clients have paid on an hourly rate until now, why should we change";
> "Some clients will never be happy"; or, my absolute favourite,
> "It is not a lawyer's job to make his client happy".


I have just read a fantastic report this weekend, prepared by  CXINLAW. As the foreword by Professor Stephen Mayson explains, this is not another attempt to bash lawyers but a well researched and presented report, the overriding message of which is that lawyers should not "...give up on the content or quality of advice but (should) work much harder on the 'customer experience'. 


Too often the rebuttal of the cynical lawyer to change, is that those calling for it are looking to 'dumb down quality'.  Mayson's foreword speaks for all of us seeking genuine change: retain quality and ethics (in my view the qualified professional's USP) but compete on the experience of your customer.


Carl White, one of the report's authors, when asked what he hoped the report would achieve,  replied rather modestly, but quite validly, "to add the phrase 'customer experience' to the lawyer's lexicon".  Not an inconsiderable aim.


I repeat, satisfaction/happiness is just one metric which may be used to supplement or, even, replace measurement of value by hourly rates.  But can it really be measured?


Yes, according to an increasing number of economists.  Last week, a blog published on The Economist website, entitled "No longer the dismal science?" looked at the growth of the 'Happiness Industry' and a number of works, including a UN commissioned report.  The blog's conclusion is that "it is not clear whether it really would be such a good idea for the government to decide it knows better than individuals do what constitutes their happiness".  


In macro-economic terms, this is probably a very valid point.  


In the micro-economic environs of a lawyer and their customer - not so. CXINLAW's report is a good start, we need more reports like this.  We also need consumers to drive this behaviour, to stop the cynicism of price comparison and look to value.  


Rather than quoting  Jerry Maguire (a sports lawyer/agent, I think) asking to be shown the money, they should, perhaps, take a leaf from another branch of the law (crime fiction, in this case) and ask their lawyer to "Make my day".

Brick-in' it!

"Mirror, mirror on the wall is Samantha Brick the fairest of them all?".


Not if you believe the 10,000 comments on the Daily Mail website in reaction to her piece “why woman hate me for being beautiful”.


Ms Brick's response to the public outcry is that it proves she is right and is the subject of spiteful scorn for her beauty. 


You have to ask yourself how can a seemingly educated journalist can get it all so wrong. The public abhorrence of her piece is not a reaction to a beautiful woman speaking out against a society which judges her for her looks, as she claims is the case.  Nope, the public are appalled at the unashamed arrogance of the piece and at her for saying it.


It is clear that Ms Brick has little or no comprehension of the social mores that most of us seem to understand: boastfulness, swagger, cockiness, bumptiousness or, lets face it, conceit is a turn off rather than a turn on.  Whilst the Daily Mail will delight in the level of coverage this piece has got, and Ms Brick may even profit as an anti-heroine, most of us would not want to be seen in this way.


I am sure that, when not writing for the Daily Mail, Ms Brick is nothing like the public persona she has created. However, her complete lack of judgement and seeming focus on what and who she is, rather than how she fits in with others is a failing.


So, what has this to do with lawyers?  


Lawyers are often seen as Society's pariahs.  We all have heard jokes about how greedy or distrustful Lawyers are.  Whilst funny (we all need to be able to laugh at ourselves) they do not reflect the majority of people I come across on a day-to-day basis.


It is, however, a question of perception.  True or not, lawyers have a reputation that reputation has stuck. 


There is a fabulous web tool called wordle (I am sure most of you know it). If you drop in a body of text, it creates a word cloud which gives greater prominence to the most frequently featured words.  It can be an invaluable tool when assessing client feed back to enable you to identify themes, for example.


It is also useful to demonstrate the subliminal message contained in websites and marketing collateral.  A few years back, I used to have law firm clients undertake this exercise with their website text and marketing literature.  


The most frequently used word, in almost every case...?  "We".


And who hasn't been at those lunches where partners have insisted on telling a relentless chain of "war stories" detailing their legal prowess and cunning, failing completely to judge the mood or ask their client "what are you focusing on at the moment?" or "what keeps you awake at night?".


Most law firm website sites, still, focus on what they are about, what they are good at and what they offer.  Marketing literature and tender documents tend to be no better and sometimes worse.  Mercifully, however, the war stories seem to be dying out.


What we all need to remember and ensure we project is not, who and what we are, but what we can do for our clients.  Less "We" and more "You".  


Clients want to know how lawyers will help them, put their needs at the centre of consideration and deliver the right advice in a service-centric way. Its not about the law or how clever the lawyer is but about solving their issue or challenge as efficiently and effectively as possible.


Lawyers can learn from Ms Brick's (appalling) example.  People rarely judge us for who we are but for the who we project ourselves to be.

In pursuit of "happiness"....

In 1972, King Wangchuck of Bhutan made a commitment to building an economy which would best serve his country's Buddhist values. He commissioned the Centre for Bhutan Studies to develop a survey to assess the country's general well being.  Gross Domestic Product (GDP) was replaced with the concept of Gross Domestic Happiness (GDH).


Beyond what was seen by some as a totally left-of-field metric, we now have second generation GNH and the first ever global happiness survey was launched in 2006 to measure 'happiness' as a socioeconomic development metric. The survey was undertaken by the International Institute of Management and assessed:


> economic wellness
> environmental wellness
> physical wellness
> mental wellness
> workplace wellness
> social wellness
> political wellness


For those who want to know more please click on results here.


"OK, so what has this got to do with legal services?"


In legal services, the only universal metric is the much (and deservedly) maligned 'hourly rate'.  This, in my opinion, is a totally flawed metric.  


This blog is the first of what I hope will be a (sporadic and non sequential)  series looking at how other metrics from other fields may be applied to legal services.


So what's wrong with the 'hourly rate'.  Firstly, it doesn't even accurately indicate potential cost (which is actually the net result of a triumvirate of inputs which create the 'volume of cost'). So, you can set the rate but not the number of hours or the level of resource utilised. 


Secondly, and more importantly, the hourly rate doesn't measure 'value'.  What does taking legal advice contribute to the balance sheet in terms of income realised or liabilities protected against?  'Value' will always be, after all, greater than 'cost' by a good number of multiples.


So, what can measuring 'happiness' do to help assess 'value' in legal services.  Perhaps 'happiness' is too much of a stretch, after all legal services are, at best, a necessary evil.


But how about 'satisfaction'?  Is making sure a client is genuinely satisfied something that should be measured and can have a 'value'?  In short yes.  I have direct knowledge of  a service which is measured, against other things, against an agreed benchmark satisfaction value.  Hit the benchmark, great.  Fail to meet it and their are financial consequences for the supplier.  Exceed, and there is a premium payable.  


Why is this important?  Let's imagine that there are two identical cars in a show room.  One is priced at £20,000 more than the other simply because it took longer to build.  Hands up who would pay that premium for the input effort, regardless of the resulting product (they are identical, remember)? No one, right.


Now let's imagine one comes with a client care package that promises roadside assistance, servicing and replacement cars in emergencies.  The value here is protection for the customer, piece of mind and enhanced service delivery.  If the premium was right, you'd pay for this?  Probably.


Yet legal services still, in the main, based on the input effort.   


The question taking GNH as an example is, should lawyers be remunerated on how long something takes or how happy they make their clients?  I'll let you decide.

A bar walks into a market....

Yesterday, The Bar Council of England and Wales published its response to The Government's Triennial Review of the Legal Services Board.

In short, the response:

> accepted that there remained a light touch supervisory role for the LSB to ensure parity and consistency across all legal "Authorised Regulators";

> called for the LSB's remit to be confined now that the objectives of the Legal Services Act 2007 had been put in place; and

> cautioned that the LSB be prohibited from unnecessary and burdensome interference in the operations of the "Authorised Regulators".

When I first read the headline that The Bar Council were calling for the LSB's remit to be confined, my immediate reaction was to say "yeah, of course they are". 

However, having read their (refreshingly succinct) response - I have to say that their stance is entirely right but, maybe, not for the reasons that The Bar Council had intended.

Whilst a healthy and robust regulatory framework is essential to ensure public interest in a professional and ethical legal services market, having a multi-tiered regulatory model is unnecessary and adds to the ultimate cost of service for the consumer. 

The LSB's remit is and should be to ensure that the spirit of Clementi, as enshrined in the Act, delivers a new competitive landscape for legal services.  The LSB needs to set and then monitor the criteria and de minimis standards for all legal regulation and then leave it up to the "Authorised Regulators" to decide how they regulate.

The Bar Council (BSB), the Law Society (SRA), CILEX and the Council of Licenced Conveyancers et al must be accoutantable to the LSB and demonstrate they are encouraging competition and ensuring that the minimum standards are met.

So, to this point both me and The Bar Council are as one.

However it is at this point where myself and The Bar Council go our separate ways.

What is the point of having a number of Authorised Regulators if they themselves don't compete with each other?

Each Authorised Regulators should seek to establish what they stand for and then build a quality mark for their regulated members to operate to.  Consumers will then be able to choose, and understand the basis of their choice, between legal service providers including who they are regulated by. 

So bravo for The Bar Council - less over-regulation please but, for me, more clarity about what each regulator stands for and greater competition in the market. 

I hope that the Government heed The Bar's counsel, even though the Bar should be careful what they wish for as it may just come true.

Heedless Chickens?

Yesterday, I was driving along Jamaica Road in South East London.  In the space of one mile, I counted no less than twelve fried chicken takeaways.  No major brands and nothing to distinguish between them.  Every single place had the words "tasty" and "hot" displayed on their signage or in their windows.

Anyone in "need" of fried chicken has no reason to choose one place over another.

This weekend, Brian Inkster (@TheTimeBlawg) tweeted that a search on Google had revealed 8,310,000 mentions of the exact phrase "leading law firm".  Words such as "professional", "expert" and "commercial" all are similarly sprinkled with liberal abandon across the websites of most law firms.  Like the purveyors of buffalo wings in South East London, the legal profession do little to distuinguish themselves from their competitors.

The custom of sticking to tried and tested formulas and the fear of stepping out from the crowd means that those legal service providers who have a genuinely differentiated offering fail to advise their customers of this.

Porter's Five Forces analysis, assesses the competitive intensity of a market through analysing:

> competitive rivalry within an industry;
> bargaining powers of suppliers;
> bargaining powers of customers;
> threat of new entrants; and
> threat of substitute products.

Looking at these, why would anyone open up another fried chicken business south of the Thames? 

Similarly, why would anyone start up a law firm?  Competitive rivalry is high, RBS tell us that there are at least 6,000 too many solicitors in the market.  This directly impacts the bargaining powers of suppliers, supply outstripping demand. Setting up a law firm is relatively simple, and therefore new entrants are always being established further oversupplying the market. 

Customers, however, hold the upper hand in terms of bargaining powers.  The market is oversupplied and the cost of switching from one supplier to another is minimal (when compared to IT suppliers or financiers). 

Last week we saw ABS day, the first three Alternative Business Structures were authorised by the Solicitors Regulation Authority.  Now, law firms have to deal with the threat of substitute products too.

Law firms can no longer avoid changing what they do. Maintaining the status quo is no longer an option.  Strategies and offerings need rethinking.  Lawyers need to move themselves into a market space that has fewer suppliers and where the opportunity for new entrants is much tougher.

They need to invest in creating intellectual property and new products and services that customers will value.   Lastly lawyers need to tell their customers why they are different from the rest of their market (rather than why they are the same as the rest of it).

So, as ABSs join the market and we see the fusion of new businesses from different industries combining to offer clients a more integrated service, I have one question - who's for Fried Chicken Street Law?