Friday, 30 March 2012

Can law firms go near shore? Oh, to be sure.

How long do you think it took the pump house at the H&W shipyard to drain the dry dock in which the Titanic (and her less famous but perfectly successful sister, the Olympic) was fitted out, from full to dry?

Remember it was 100 years ago and we are talking about 21 million gallons of water, enough to fill 172 Olympic size swimming pools or the equivalent of 168 million pints of Guinness (other Celtic stouts are available).

So, what was your guess? A week, three days, two days, 24 hours?

No, those innovative Belfast engineers of the Victorian era were able to pump all that water out in just 100 minutes!  I know, quite unbelievable.

My guide, Gail, told me not to be surprised as Belfast was home to much of histories innovation.  She reeled off a long and impressive list, which included the ejector seat and the giro copter (007 is grateful).

In legal services, Belfast has been the centre of some of the biggest relocation stories of the past couple of years.  Allen & Overy, Herbert Smith and, most recently, Axiom, have all announced the creation of back and middle office operations.  Belfast remains true to its pedigree for innovation.

There have been rumours that these high profile moves are little more than window dressing.  This is not true.  I have seen them, they are very real and they are growing.

InvestNI inform me that there are more in the pipeline and whilst some will question the potential saturation point, each job currently advertised in one of these centres has in excess of 200 highly capable applicants.

The cost differential is huge.  One (non legal) international company, with its back office operations now based in Belfast, advised me that the fully loaded cost of general accounts staff is around US$25,000 per annum.

The overhead that burdens many law firms can be greatly reduced and those whom are truly innovative will reinvest this saving to reengineer their services, to transform their delivery models and utilise technology.  The key ingredients to deliver better, cheaper and simpler legal services.

Those firms now here have made a bold step and all the evidence suggests it is paying off.

If this is the case, then it looks like Belfast have given the world another Olympic, with not a single iceberg on the horizon. 

Thursday, 29 March 2012

Don't look back in anger

Who knows what tomorrow brings? Even Albert Einstein said "I never think of the future - it comes soon enough".

For most in-house lawyers, thinking about the future is a luxury they can only dream of. Burgeoning demand, ever changing regulation and a drive to cut external expenditure all contrive to make the present far too pressing to even remember there is a future.

It is not really a luxury though, it is a necessity. Fail to plan and plan to fail. The challenges are only going to be greater tomorrow than they are today and without investment in thinking about what tomorrow may hold- most in-house teams current model won't be able to cope.

There exists today technology that can add control, minimise risk, manage documents and capture knowledge - the choice can be bewildering. Many in-house teams have made such an investment but have not also made the most precious investment - time to ensure that it does today and will do tomorrow what they need it to.

Ultimately planning for the future is time well spent. Technology will get faster, smarter and more powerful. It is important to ensure that beyond all the bells and whistles it does the job you want it to, what you need it to and what you will need it to.

Let's remember that your phone has more computing power today than the whole of NASA had with the Apollo programme. In 1969, they managed to launch a man to the moon. In 2011 many use the superior technology to launch birds at pigs!

Wednesday, 28 March 2012

Let them eat (cold) cake!

This is not a satrical poke at the brioche-chomping UK Chancellor for his insipid responses to questions from the Treasury Committee yesterday, re: "pasty-gate".  However, as the title suggests, there are parallels to be drawn with Marie Antoinette's failure to see the big picture (in MA's defence, she was only 9 when Rousseau attributed the infamous phrase to her).

No, my issue is more fundemental and addresses the impact of poorly thought out policy on business.  In this case, what is "hot", what temperature represents "hot" and if prepared "hot" -what if the pasty is sold once it has cooled down.  This will undoubtedly spawn litigation-a-plenty with a tax authority already famous for the "cake or biscuit" case (my personal favourite case of all time).

Poor policy, makes bad law. Bad law is difficult to interperet and even harder to safe guard against.  It adds cost to every business in terms of compliance and, inevitably, when dealing with failure to comply. 

The problem with bad law is that it is a modern day epidemic.  Regulation burgeons and in-house legal departments find themselves increasingly stretched just to cope with the relentless onslaught of bills, acts, regulations, clarification and direction notes not to mention case law. 

In-house counsel have to cope with this, cuts to their budgets, reduction to their headcount, and the rethinking of their priorities at the eye of a perfect storm.  Ask any GC or Head of Legal what keeps them awake at night, and it is generally worry about what they don't know or haven't thought of. 

The current model of in-house teams working on a "per event" basis with a large panel of law firms can not cope with this epidemic.  The unitary cost of legal has to come down to cope with what business needs (more for less). 

An "on-demand" market can not deliver this and, even worse, it creates the false assumption that buyers can "shop around" for the best price.  It necessitates the re-invention of the wheel and leaks institutional knowledge - all adding to future cost.

Buyers and suppliers (and even suppliers and suppliers) have to "partner" to create a model that can cope with the increasing flurry of bad (and good) law.  This means that buyers have to select their partners on a longer term basis and, therefore, more carefully.  Suppliers have to be willing to co-operate with each other and be transparent around their pricing.

Like any revolution, it is important to understand what side you are on.  For too long there has been the misapprehension that buyers and suppliers are on opposing side.  They are not, they should join forces to battle against the growing leviathan of regulation.  Vive le revolution!

Tuesday, 27 March 2012

Buyer be-wary!

The warnings are age-old but still ring with truth today:

~ "beware of Greeks bearing gifts" (no, not Merkel but Virgil)
~ "all that glitters is not gold" (Shakespeare)

In a depressed market, buyers will offer gifts and gold galore to win the prize - or, as far as us lot are concerned the next instruction or that oh so important spot on the panel. 

Law is, currently, a depressed market.  Corporate activity is at a minimum and there is an over subscription of solicitors (it has to be more than the 6,000 RBS claimed?).  Buyers can push panel rates harder than ever and many firms will readily agree: the "yes-men-firms".

This will not serve buyers well in the long run.  By way of example - yesterday, I was discussing this with Proxima a outsouring, sourcing business.  They aim to give clients an honest assessment of the value they will deliver and are prepared to back this up with a measurable commitment.  However, they face competition from those who "low-ball" to win the deal and then ratchet up the costs or ratchet down the service to deliver. 

Ultimately Proxima will win out.  They have to be selective of potential client pitches to ensure that their message will be understood by the buyer.

Some call for "sacking your clients" (Economist-27.3.12) and this can appeal to the macho-billy-big-biscuits element of the legal industry.  This is not what Proxima do, they try to educate using real metrics and, only if having tried to do this and their clients persist with "cheapest is best" do Proxima withdraw.

In legal services today, we have one universal metric - the hourly rate.  It is flawed, totally flawed and should be never spoken of again!  There are alternative metrics that really measure quality and service. Law firms who promise their clients rich pickings in terms of discounts on hourly rates whilst agreeing to service improvement should be eschewed (the result will be cost up or service down, ultimately).

Those of us who want to deliver genuine innovation need to carry on giving clients an honest response to what they are asking.  More for less is possible, "more of the same for less" is not.

It's not a case of law firms "sacking clients" but it is a case of good firms saying "no, that's not possible but this is".  Caveat emptor, buyers be-wary of the yes-men as all that glitters is not gold.

Monday, 26 March 2012

Ringing the ch-ch-ch-changes on the High Street?

In the past fortnight, QualitySolicitors have launched their private equity backed TV campaign to drive business to their members.  Regulated ABSs are just, well maybe just, around the corner which may see "Tesco" (other quality supermarkets are available) dabble in the consumer legal market.

It is predicted that we will see the 'death of the High Street solicitor' with consumers preferring to buy from brands.

The High Street Solicitor was on their knees anyway.  The Woolf reforms set about, in 1995, a catastrophic turn of events by creating the opportunity for claims management companies to prospect for personal injury claims in return for a referral fee.  The dreaded referral fee took root for conveyancing matters and will writing.  High Street firms found themselves unable to compete on price for referral or scale of operation and thus three stalwarts of their business disappeared.

Whilst some have diversified, become niche or have become effective with social media.  The vast majority, however have struggled on, much down to legacy goodwill and a rather benign banking industry.

The Jackson reforms could have gone some way to turn this around but, I fear, they will be too late.  By the time the take effect, the new entrant ABSs will have delivered the final blow.

Let's mark in history today, however, that ABSs focussed at the consumer market will not succeed solely on the basis that they deliver an alternative. 

The truth is, that there isn't an alternative - the Woolf Reforms "infected" the market almost twenty years ago and we are only seeing the fatalities from this today.

Talking about kicking a man when he is down!

Sunday, 25 March 2012

Bottled at source?

Henry Ford famously claimed that had he asked his customers what they wanted, they would have asked for faster horses.  Innovation, it is claimed, must come from the supplier.

Certainly, it is true that, none the iPod, iPhone or iPad would have been invented had customers been asked what they wanted, myself included.  However, I would not be without any of them now and in some cases am on my third iteration.  Apple, having proved to me the art of the possible created new markets for products, I myself didn't know at that time I had a need for.

In legal services too, it will be necessary for innovation to come from suppliers.  The very essence of Clementi's Report and the resulting legislation was to encourage new thinking on the supplier side and therefore improve the service offering to consumers.

Simple then?  No.  

Unlike Apple products, legal services are bought on an "on-demand basis", usually as a distressed purchase, and necessitate an urgent and bespoke response.  Law firms, being partnerships, do not have the corporate structure to invest speculatively in what it guesses a client may want should they be called up when the need arises.

Increasingly, corporates and the public sector are 'procurement techniques' to source panel law firms and agree fixed pricing.  Many "legal consultants" charge on the basis of the % saved on hourly rates, the only metric that any one relies on at present, albeit that it is entirely flawed being only one of a number of components of the total cost.

New metrics are needed to provide consumers with a benchmark as to what good looks like.  However in a market that has no reliable data published, it will require respected experts (like the Big 4 accounting firms) to collate this over the coming few years.

Until then, it will require courage from consumers to commission suppliers off legal services to deliver and price in a different way, with measured and specified outputs driving savings and service improvement today.  

Buyers will need guidance from properly 'qualified' consultancies and should have the courage to invest in this to buy better and cheaper.  Failure to do so, or running the sort of tick box exercise that lead to the Applied Language Solutions deal with Ministry of Justice and you will buy less for more.

I have worked on at least 10 RFPs for legal panels from major UK companies which, in each case, they have openly declared war on the hourly rate and sought 'innovative thinking'.  I know that a number of suppliers offered such thinking yet those companies still opted to source based on the hourly rate claiming that suppliers had failed to innovate!  

They didn't get what they set out to, why - in short, they bottled it.

Friday, 23 March 2012

A state of independence?

And so, The New York State Bar's Committee on Professional Ethics has decided that a member, a NY lawyer, working in NY, cannot practice for an out-of-state or foreign firm owned or managed by Non-Lawyers.

NYSB claims to be concerned for clients that non-lawyer ownership may lead to the independence of lawyers not being sufficiently protected.

This is at odds with the current American Bar Association's Commission on Ethics which is considering limited scope for non-lawyer ownership.  Something akin to Legal Disciplinary Practices (LDPs) here in England and Wales.  LDPs have been regulated by the Solicitors Regulatory Authority since March 2009 and there has not been an instance of the question of independence being raised.

Whilst progress for those of us eager for the long awaited Brave New World remains painfully slow, the UK has lead the way in opening up the closed shop of legal services and inviting in new thinking and new approaches. 

I am the first to demand that new entrants need to be regulated with the same degree of rigor that lawyers are and this has to be an irreducible minimum. However, the reality is that regulation continues to heap burden on persons and companies alike and the current economic downturn (emanating from a US regulated mortgage industry) demands that new approaches to efficiency be brought to bear.

Lawyer managers and lawyer owners, whilst professionally and ethically sound, have not the experience nor training to drive these changes alone.  Those that embrace change, bring in outside help and/or money will thrive delivering better, cheaper and simpler legal solutions whilst maintaining or, maybe even, enhancing margins.

Those who don't admit the need for such help from other professions or maybe fear that margins of 30-50% (unheard of in the industries of a vast majority of their clients) may be eroded will seek to rail against such change.

So, are the NYSB really worried about independence of the profession and the potential erosion of ethics or, perhaps, is this a case of the members of the NYSB "ethics committee" looking after their own?

After all, are the turkeys that vote against Thanksgiving every year truly independent?