Legal Education "Not Fit For Purpose"

17/10/2011

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Legal education and training are unfit for their modern day purpose, causing lawyers to fail to meet the needs of clients and leaving the profession exposed to rival market entrants filling the gaps, according to Professor Stephen Mayson who spoke at the UCL Laws debate in London last week.

He went on to say that proof of lawyers’ deficiencies could be seen in the success of organisations such as Co-op Legal Services, which “has become in five years from a standing start a £30m legal business… which takes it into the top 100 [law firms] very comfortably”.

“I don’t believe the Legal Services Act would have been possible if we were really creating a profession that was fit for its purpose… lawyers who were doing what the marketplace wanted in ways it wanted, at times it wanted, at prices it wanted,” he said.

Speaking to an audience that included legal academics, Professor Mayson, (who is also a director of the Legal Services Institute) said: “I am delighted there are so many law teachers, law faculties, law firms and professional regulators who are delighted with the outcomes they create. 

That, however, is an internal view. It doesn’t take much account… of those who use and pay for those outcomes.”

Despite the October 2011 statistics, that 81% of consumers want an out-of-hours service from law firms and 96% of businesses want to communicate online with a law firm, Mayson’s views were challenged by other speaker in the debate and also from the floor.


Philippe Sands QC, argued that it was necessary to resist the view that legal education should be “informed by the need to respond to what consumers and the marketplace want”.

It was important for society to decide whether lawyers were business people or have a different social function. Professor Sands rejected the notion that law is a business: “When I provide legal advice as a barrister, I don’t think of myself as a business person; I think of myself as a professional person bound by a duty of independence,” he said.

Professor Sands went on to say that the number of law graduates had increased from 5,200 a year in 1998 to 13,000 in 2010. The reason, he said, is that “the provision of undergraduate and other graduate legal education is hugely profitable. Universities are turning to it because it provides a massive subsidy to other areas.”

And that is the crux of the matter.  Law students pay top fees and they only need a classroom, a blackboard and maybe some free wi-fi.  Their fees go on to subsidise other academic areas that may need extensive resources such as laboratories as one example. 

This system churns out too many law students that leads to too many lawyers chasing too few jobs and therefore the existing spend on legal services gets diluted. Combine this with the recession, the Legal Services Act and new entrants such as co-op legal and we start to see market forces at work.

There have been recessions before, and legal services have survived them.

But this time, it’s different. Lawyers may think they’ve seen it all before but the Legal Services Act is unlike any purported revolution that has come before and come to nothing.

As Professor Stephen Mayson went on to say, “Previously there were internal opportunities that lawyers, en masse, decided to ignore. But now change is being driven from outside the profession. It will be impossible to ignore”.

While it’s nearly impossible to predict how the new world of alternative business structures (ABSs) will eventually turn out, some developments surely seem unavoidable.

Making the process of using a lawyer more customer friendly is one. Every law firm in the land proclaims how client focused it is, but the level of complaints against solicitors * would indicate that they do not all practise what they preach – or at least that there is still a serious disconnection between what customers want and what lawyers think they want.  And that should not matter whether you consider yourself as a business person or as a professional person bound by a duty of independence.



*1589 complaints a week in England & Wales

And for the Scots readers amongst you: http://www.scotsman.com/the-scotsman/legal/number_crunching_most_solicitors_are_bad_business_managers_1_1914251

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ABS's - We Don't know what they are - But we Oppose them Anyway...

18/05/2010

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Alternative Business Structures (ABS) are not a new creation.  They started life just after the second world war in Germany when lawyers and tax accountants set up in business together. 

Since that time they have become common in other European countries and have migrated to France, Canada, Australia, Hong Kong, Singapore and more recently in India and other parts of Asia.

Also known as Multidisciplinary Practices or MDP's the definition of one is; a partnership, professional corporation, or other association or entity that includes lawyers and nonlawyers and has as one, but not all, of its purposes the delivery of legal services to a client(s) other than the MDP itself or that holds itself out to the public as providing nonlegal, as well as legal, services. It includes an arrangement by which a law firm joins with one or more other professional firms to provide services, and there is a direct or indirect sharing of profits as part of the arrangement.

The most prolific academic writing in this area appears to be Professor Mary Daly who collaborated on a voluminous tome on the subject called Multidisciplinary Practice; Staying Competitive and Adapting to Change.  What's of interest to me is that she wrote two complete chapters on the legal profession's opposition to change, citing that this would be the biggest challenge of all. 

Given the recent events with The Law Society of Scotland debates, she's not wrong.  In fact, you don't need to read the whole book as the clue to what to do is in the title.

Also, the 1982 Nobel Prize winning economist George Stigler (whose son David is a lawyer) wrote about the regulation of law in a 1971 article called The Theory of Economic Regulation where he stated that "...as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.  The actual purpose of regulations is to provide special privileges for the powerful interest groups that want to restrict competition and raise prices; so regulations hurt the public."

Interesting stuff considering that the main thrust of the opposition is that the lawyers who are against ABS have a perception that they prevent a non-lawyer from exercising undue influence over the independence of a lawyer who is representing a client and that this somehow unduly affects the protection of the client for the pursuit of profit.

In the same year Stigler won his Nobel Prize, the American Bar Association (ABA) formed the Kutak Commission to try to relax these prohibitions, but the ABA's own committee then rejected the proposals of that commission:  Here are the objections they raised:

1. The Commission proposal would permit accounting firms and others to open law firms in direct competition with traditional law firms.

2. Non-lawyer ownership of law firms would interfere with the lawyers' professional independence.

3. Non-lawyer ownership would destroy the lawyer's ability to be a professional regardless of the economic cost; and

4. The proposed change would have a fundamental but unknown effect on the legal profession.

Not dissimilar to the recent objections that we have seen from those in the anti-ABS camp in Scotland

The common denominator of these objections is that they clearly indicate the mind-set of a protected guild and not that of professionals operating in a free and competitive marketplace.  The protection of customers and the pursuit of profits are not something that are or should be at odds with one another.  You could argue that they are in fact a perfect alignment of business interest; and if not, then they most certainly should be.

But let's look at each of the objections in turn:

1. The Commission proposal would permit accounting firms and others to open law firms in direct competition with traditional law firms - Why is competition objected to?  We know that consumers benefit from competition, that is surely not in doubt and any action that restricts competition is therefore a net harm to the very consumers that the legal profession purports to protect.

2. Non-lawyer ownership of law firms would interfere with the lawyers' professional independence - Also strange since prospective non lawyer owners could be subject to rules of independence.

3. Non lawyer ownership would destroy the lawyer's ability to be a professional regardless of the economic cost - pure exaggeration as there should be no correlation between ownership rules and conducting oneself as a professional subjected to a code of ethics and principles.

4. The proposed change would have a fundamental but unknown effect on the legal profession -  Surely the strangest objection of all as it effectively states "We don't know what the effects are going to be but we oppose them anyway!" 

I work in Intellectual property and almost every new business idea is a model or an experiment.  As long as no laws are broken, private individuals and companies must be allowed to test their ideas in a free marketplace.

Imagine the argument against BT and a flotation because it would open up The Post Office to competition for their telephone services and it's effects would be unknown! A ludicrous suggestion and an unworthy argument coming from professionals who allegedly act in the interests of consumers.

ADP's should be allowed and we should leave the consumers to decide their fate. 

If they turn out to be unviable then traditional law firms will have nothing to fear. 
If on the other hand they do turn out to be a success, then it will have proved that they work and are therefore in the consumers' best interests; which is exactly why Stigler won a Nobel Prize nearly 30 years ago.
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Bentleys and Lawyers

07/01/2010

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One of the privileges bestowed upon anyone turning up at the Bentley factory, especially arriving in one of their cars, is that they let you park up right in front of the main reception...and you’re greeted!

And sure enough, as we neared the main entrance, there was a small party of company executives and other guests waiting for us.

They call it a factory, but bits of it look more like a showroom. Clinically clean, not a thing out of place...and quiet! It’s about as far away from the typical image of a mass production assembly line as you can get.

On the way round, I learned some fascinating stuff...

Every Bentley Arnage takes 14 weeks to make from start to finish, and just 30 cars are completed each week. The wood trim alone takes 11 weeks to make, and the company have 86 people working on that and nothing else!

All the veneers for an individual car are cut from a single piece of 80 year old timber. If just one of the veneers (say for the ashtray cover) gets spoiled in production, then all the other wood pieces for that car are scrapped, and they start again. Everything has to match perfectly. Even the pieces you can’t see (like the underside of the picnic tables) are finished to the same standard.

Fourteen cow hides are used to trim the interior of every car. I watched as staff painstakingly inspected every square inch of every hide. The slightest blemish results in a hide being rejected. It has to be totally perfect.

We went into the engine workshop and watched the engines being built from scratch. Some of the parts you never get to see are like works of art...perfect in form and finish. The gearbox control unit alone consists of over 130 separate parts. We spoke to the bloke who puts the units together. He’s been there for 28 years, and has assembled every unit personally over that time. That’s all he does.

As we got to the finishing area, we watched as every panel was exposed to very bright lights and examined in minute detail for the merest hint of a paint defect. The slightest imperfection resulted in a piece of sticky tape being applied and a trip back to the paint shop.

Nobody else would notice, but that doesn’t matter.

Every single aspect of the car is built with perfection in mind, and is then subjected to microscopic inspection to ensure that those standards have been met.

And here’s what’s interesting...

The Bentley Arnage costs around £150,000 brand new, which is a great deal of money. But everyone who tours that factory leaves with a far better understanding of why they are so much more expensive than the competition...and why they’re probably worth the difference.

The visit...organised by the Marketing Department not surprisingly...serves to justify the price.

You see, your average multi-millionaire didn’t get rich by having people overcharge him for stuff. He might be able to afford 10 cars at £150,000 each, but he’s only going to buy if he can see the value, and he’s certainly not going to buy if he feels the company are trying to rip him off.

But when he’s told how long the car takes to make, sees the attention to detail that goes into it, and the quality of the materials which are used, (even in the areas he can’t see) the high price becomes one that he can justify to himself.

You get what you pay for, and he can see very clearly why what he’s paying for costs as much as it does.

Now, what does this mean to you and your business? Well if you’re anything like me, it probably means that when you look at what Bentley do, you realise you’re not doing enough to help customers appreciate the value of what you’re selling, or to help them justify the price they’re paying.

Let’s take one of our seminars as an example...

I could tell prospective students that the course took over a year to prepare, cost over £25,000 in "hidden" costs, and gives them unlimited access to several recognised legal experts with a combined experience of 122 years in the field. All for just £150...

Which may seem a lot of money - until you learn what goes into it.

But do I tell them that? Sadly, for both them and me, I do not. Sadly for us because we’d sell more courses if we did, and sadly for them because I’m not giving them all the information they need to justify a purchase to themselves.

If you look at your own business, I’m sure you’ll see similar opportunities lost.

Are you telling your customers things like...

*   How long your product takes to produce?

*   How far afield you go to get the very best materials?

*   How long you, and your staff, had to train to do what you do?

*   What lengths you go to, to ensure quality?

*   How passionate you are about attention to detail?

*   How much money you’ve invested to be able to bring them a product/service like this?

These are just examples of course, which might not necessarily be applicable to your business. But the point is that there is probably information about your product/service and the way it is produced/delivered, which would differentiate it from the competition, and make customers more comfortable making the decision to buy from you...even if your prices are a little higher.

In competitive markets, the temptation to compete on price is a strong one - but it’s usually wrong. Fact is that your profit margins get cut to the bone, and everyone else just follows suit. Great for the customer, but not so good for the businesses which end up working for nothing.

It seems to make a lot more sense to follow Bentley’s example...stay with your premium price, but give your customers as much detailed information as you can to justify your price, and make them want to do business with you.

This idea isn’t new, and you don’t have to have a massively superior product like Bentley to make use of it...

In his book Scientific Advertising, first published in the 1920s, Claude Hopkins tells the story of a brewer who multiplied his sales by demonstrating the purity of his product. He used a photograph of a plate glass room where his beer was cooled in filtered air. He told how bottles were washed 4 times by expensive machinery and how he went down 4,000 feet to get pure water. He explained that 1,018 experiments had been carried out to make yeast to give a matchless flavour. And how all the yeast they used was forever made from that adopted mother cell.

Very persuasive information, I’m sure you’ll agree...

But what’s really interesting is that there’s nothing special about any of this. All brewers at the time were doing pretty much the same thing. It’s just that this one was the first to go to the trouble of telling people about it.

In the 1980s, the brewers of Stella Artois used a very similar approach to justify the comparatively high price of their lager. They went into great detail in their advertisements about the quality of the hops, the length of the drying process and the experience of their brewers, before stating that their product was “reassuringly expensive”.

For all I know, the various processes they described could have been ‘industry standard’, but it didn’t really matter. The perception of a superior product was firmly planted in customers’ minds, and they felt comfortable paying the higher price because of that.

So here’s a question...

Is there something fascinating or impressive in your sphere of business which everybody does, but nobody has bothered to tell customers about yet?

If there is, you could ‘claim’ it for your own, and use it to justify your higher price, or to avoid matching a price cut made by your competitors.

The bottom line on all of this is that the more you can tell people about the time, trouble and expense you go to, to bring them a first class product or service, the more comfortable and willing they will be to pay your price.

Article first published by John D Harrison
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