The Future of the Legal Profession

The great boxing coach Angelo Dundee died this week age 90.  He was the man who coached a young Cassius Clay to an Olympic Gold Medal and then coached him all through his professional career.  And what a career that was.  In fact, Muhammad Ali was voted Sportsman of the Century.

Ali credited Angelo Dundee as the man who made him. 

One particular turning point was when Ali fought Sonny Liston for the first time.  Ali wanted to throw in the towel after several rounds as his eyes were stinging.  Dundee told him that he was on the verge of greatness and needed to go into the ring for one more round. And the rest is history.

But this is a legal blog, what’s this got to do with the law?

It’s not about the law, it’s about coaching and how coaching can help business and more specifically, the business of running a law firm.

Coaching is not the best opening line in the world when it comes to talking to lawyers about improving their business model, so the short story about Angelo Dundee serves as an opener to show how valuable a good coach can be.

Note that I said “a good coach” and not just a coach; there is a BIG difference in the quality of business coaching.  (There is also a massive difference in the quality of life coaches…but let’s not go there!)

In public, no one wants to buy business coaching…especially not lawyers. Why would they…they know everything so they don’t need a coach.

That is until it is explained what business coaching can achieve for a law firm. And the answer is, more time, more money and less stress.

Law firms know that they need to change and that they need to start implementing systems and altering the way they do business with their customers.  They know that if they keep on doing what they’ve always done, their income (which is dropping) will continue to drop and their profit (which is dropping) will continue to drop.

They know….but they suffer from FTI disease.  A Failure to Implement.

A lot of firms that I talk to have understood that they need to change, they’ve even had a committee approve it. It might be on their “To Do” list. Someone may have even been tasked to see it through, but there is still inertia. And that’s where they need someone like a coach.

Angelo Dundee didn’t get into the ring and fight.  He had done it in the past and he knew not only what worked, but the best time to use the things that work.

So if you, or anyone you work for, could do with more money, more time and less stress, then it wouldn’t be a bad idea to look at business coaching.

Richard is the managing partner of a medium sized law firm.  He’s also the largest equity partner and when the accounts are published and they show the largest pay out, it’s Richard who gets that money.

Now I know Richard reasonably well, we never walk past each other in the street without stopping to chat and we’ve had a few coffees together and a discussion about the whole legal services situation.  

I always ask how he is getting on and how his firm is getting on and he always exudes positivity.  Things are great, they have merged ( err...taken over) a few other firms and are “well placed to meet the challenges that the coming changes might bring”.  Or so he says.

The firm Richard manages is a Limited Liability Partnership (an LLP) so the accounts are available online. I’ve looked. In fact the last few years accounts are available online. I have them.

From what I can see, Richard is taking home nearly 40% less now than he was 5 years ago.  Turnover is £2m down on what it was and I know for a fact that his staff have taken pay cuts, some have left and as a firm they’re not hiring.  I’ve also done a bit of secret customer work on them (as on  a few other firms) and called up posing as a customer looking for legal services.  They never called me back.  But then again, neither did 7 of the 12 firms I called, so nothing unusual there.

But what’s odd is not only does Richard say everything is alright, I think he actually believes it’s alright.  There is even a psychological term for this called confirmation bias.  It’s where we look for evidence that we are right; or that things are the way we believe they should be.  Bias is stronger for emotionally charged issues and deeply entrenched beliefs and I know from my conversations with Richard that the issue of Alternative Business Structures is an emotionally charged issue for him.

The unfortunate thing is that although this makes Richard feel better it means that his behaviour is worse.

Like a rabbit caught in the headlamps, he is looking at the wrong thing and worse still, he’s not moving out of the way because he’s only focussing on evidence that confirms his position.

He tells me that social media is a fad, twitter is a waste of time ( “I don’t want to know what you had for breakfast!”) blogging is ridiculous, online documents will never work, we don’t need to spend money on marketing, we don’t need to take credit cards and so on.

He looks around his office and sees busy employees, the court department is buzzing (it has to its holding up the rest of the firm!) and all the clients they inherited from the “mergers” has boosted their list of customers, WIP remains strong. What’s the problem?

I asked Richard how he could sustain a 40% drop in income.  He denied any such thing despite my logging in to Companies House to show him how I knew. Then he went on to tell me that he no longer had any school fees to pay, so his disposable income had actually gone up.

Well, that’s ok then.

Well that's another year over...and unfortunately a few more law firms have gone to the wall.

If you feel that your firm is in a precarious position, please contact me for some guidance on what to do in 2012.

It's there and it's big....and no one is talking about it.

I refer of course to the frightening unacceptence by many practising lawyers that owning and running an average law firm right now is damn hard.

Right now, today, for too many lawyers struggling to keep a business together... things are slow, cash flow is a problem and serious business or personal debt issues are either looming or are here, now and frighteningly real. 

But ask any sole-trader or small partnership firm lawyers and they will tell you that not only is everything "Ok" but that their business is "...doing well in the circumstances..." and that "..things will improve..." or "...there will be a turn around in the economy and we will be ok..."

This prolonged economic and cultural shift in the way legal services are delivered versus the way the buying public want them to be delivered is causing many sleepless nights, serious alcohol problems, drug problems and relationship problems with many lawyers and partners and the fear of the future is causing an inability to accept this and  act.

How do I know this?  Because as a result of this blawg, as a result of speaking at seminars and as a result of a simple ability to "do the maths and say it like it is" I speak to a lot of lawyers and I know things are bad because I look into their eyes and ask and they eventually tell me.

Either that or they phone to ask to meet me at a neutral location and after a short while they admit that they or their firm has serious problems and they want to talk about what to do about it.

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

Recently I’ve been having discussions with some very senior players in the legal marketplace about creating new style law firms to get ready for what’s going to become (or already HAS become) a bit of a gold rush.

I call it a gold rush, simply because one of the new style of legal models will outsell the others, then, through viral marketing, it will start to capture a huge chunk of the legal marketplace and a disproportionately high chunk of the profit, and clearly, that’s the one to get involved in.

But like a gold rush, whilst we know that there’s gold “out there” we just don’t know exactly where it is and by that I mean, it’s not yet clear what legal model will outsell  and out-profit the others.

But as the legal marketplace  is now the next target of opportunity for Venture Capital (VC) funds (regardless of the social cost or the cost to small firms and sole practitioners) it now really IS time to take stock of where you are and more importantly, where you are going.

But just in case you don’t really buy in to all the dust on the UK legal horizon, let me mix my metaphors and tell you that the light at the end of the tunnel really IS an oncoming train.

If you’ve not yet read Richard Susskind’s book “The End of Lawyers?” then first of all, you should, but in it he writes about “disruptive technologies”.  

VC investment into the legal sector will also be disruptive, but let’s look at what “disruptive” means;  


On the one hand, disruption means changing the way things operate by making them more efficient.  

On the other hand, it means sucking the value from an industry in favour of the disrupter.  If VC’s invest in something, it’s because they want to divert all the value (and money) from that sector into the business that they invest in.

Consider these recent examples in other industries; Apple changed the music industry, Amazon permanently sucked the value out of retail bookstores and Vision Express has almost wiped out High Street Sole Trader opticians.


Here’s what’s been happening in the new legal world in the last few months:

• Rocket Lawyer has received investment from Google Ventures to the tune of £11.4million. Rocket Lawyer which was founded by a US lawyer Charley Moore, provides a template of legal documents for consumers. It has a network of over 6,000 practising lawyers in the USA on hand to review (for free) forms created by Rocket Lawyer’s documentation system . It’s not a law firm and the lawyers involved are part of a referral network. Rocket Lawyer plans to enter the UK online legal market in 2012 because “the UK market is getting more receptive to new ways of consuming legal services”. They expect 20m people to use their service this year.
  
• LegalZoom, one of the best known legal brands in the USA, also founded by lawyers, has had $66 million injected into the business in the last few months by the Kleiner Bell Group. Again, not a law firm, LegalZoom provides legal documents created via its own documentation system and checks are made by its Hollywood based customer care team, who amend errors such as spelling mistakes, capitalisation and so on. LegalZoom also plans to enter the UK online legal market in 2012.
• Aderant acquired Client Services and CompuLaw for an undisclosed sum. Aderant, a software vendor used by law firms for billing, content management, and practice management is now the legal technology field’s largest independent software provider and its newly expanded applications catalogue is similar to that of LexisNexis, but without content and research services.
• Legal365 is a venture between serial Entrepreneur Ajaz Ahmed -the founder of Freeserve -and Last Cawthra Feather, a Yorkshire law firm.  Legal365, will be driven by Epoq Legal – a desktop lawyer service already established in the UK . Legal365, is an online venture providing automated document assembly where lawyers will be on hand to help fill-out fixed fee legal documents the customer has purchased online and plans to roll-out a UK national network of city centre law shops. Mr Ahmed hinted that Legal365 could even become a franchise and even take over some empty high street shops.
• LawCloud an Edinburgh based offering from Lawware has seen a big increase in take-up since launching earlier this year.
• Face2face Solicitors is a new UK national franchise for solicitors that offers a harbour in the storm for sole practitioners who want to branch out on their own.
• LawPivot .  As with RocketLawyer, is also partly funded by Google ventures, provides Crowdsourced legal advice for businesses in the US.
• QualitySolicitors, founded by UK lawyer, Craig Holt, is already up and running with its business model, but now even includes concession stands in WH Smith known as Legal Access Points (LAP’s). Aims to create a "Quality Mark" for legal firms.
• Lawyers2You  an offering from Blakemores Solicitors are increasingly active in shopping centres in the English Midlands and pulling in the business without lawyers.
• HighStreetLawyer an offering in England & Wales only, also aiming to create a "quality mark" so that consumers get to know and trust a brand.
• Wigsters a legal price comparison website which also allows you to comment on and rate solicitors.
• Legal Spring, like Wigsters, provides and online review of online legal service providers in the US.

I could go on and on, as there are many other examples of both large and small new legal firm offerings making an impact in the local or national marketplace. But the bottom line really is this; if you are in a law firm of 15 partners or less then it really is time to decide where you want to be in the next 5 years.

And as you can see, doing nothing is not an option.

I wrote a blog piece in January 2011 on why a Partnership may not be the best model for a law Firm, and I touched on an issue know as Pluralistic Ignorance.

The gist of that article is that some partnerships are inefficient because when it comes to driving a law firm forward or doing “non-lawyer” work, such as marketing, or being innovative, no one wants to take any action because they think that someone else will do it, so nothing gets done.  Nothing useful anyway.

(Yes, there are a number of firms that have partnership models and do grow, but they tend to have a nominated leader or quasi-dictator; but in general, in these recessionary times, a partnership model is not the way to go)

I had thought, in researching that article, that pluralistic ignorance in itself prevented law firm growth, but there was always that niggling suspicion that something else was at play and it wasn’t until I read some of Edward Banfield’s book, The Moral Basis of a backward Society, that I realised what it was.

Banfield’s book describes a fictitious town in Italy called Montegrano, where the people share a great deal of trust with their own family members but they are highly suspicious of anyone outside of the family network and so they were unable to build businesses that were bigger than an extended family unit. 

Because of this inability to grow, they became stuck. They had placed a ceiling on what they could earn as a community and it was entirely self-generated.

Banfield established that Montegrano's predicament was entrenched in the ”distrust, envy and suspicion displayed by its inhabitants' relations with each other”. Fellow citizens would refuse to help one another, except where their own personal material gain was at stake. 

Many attempted to hinder their neighbours from attaining success, believing that the others' good fortune would inevitably harm their own interests. Montegrano's citizens viewed their village life as little more than a battleground. Subsequently, what transpired was social isolation and ultimately poverty.  An inability to work together to solve common social problems, or even to pool common resources and talents meant that they were stuck in a progress-resistant culture.

But to take this in context, I could see that within law firms - even quite large firms - that lack of trust in something bigger than a family unit survives and inhibits growth.

I’m sure you’ve heard or read the phrase “operating within silos” as it relates to legal firms.

Quite a lot of firms operate as large entities but in reality they are nothing more than a collective of small firms or silos with a partner as the “head of the family” and they tend not to trust other silos or “families” even within the same organisation.

That lack of trust is what really inhibits growth.

When it comes down to it, partners in (some) law firms don’t really trust their fellow partners. They may say that they do, but their actions betray otherwise.

Partners meeting are often fractious affairs where individuals hold on to their people and fight to make sure that any work they or “their people” have done is correctly billed to their department. This sort of attitude does not bode well for customer service and also inhibits cross-referrals within the firm.

Yet Trust is the glue that binds commerce. Business relationships are forged in trust and when people working together communicate effectively and co-operate with each other, they build up trust.

Trust creates the perfect environment for growth to take place and the lack of has the opposite effect. 

As a culture, the law is and lawyers are, naturally suspicious.

Anything that is said, suggested or especially written needs to be corroborated. Every action they undertake as lawyers needs to be exact, certain, precise. 

To be otherwise is to invite criticism, a complaint or even a lawsuit, so this manufactured tendency will naturally permeate through all aspects of a lawyer’s life; and dealing with fellow partners is no different.

There therefore tends to be suspicion seen in every action no matter how small and this in combination with pluralistic ignorance is the real reason that many law firms fail to grow or even fail to get themselves to a position where they are even ready to be taught to grow.

The firms that can encourage a truly trusting culture will be the firms that go on to dominate the legal marketplace.

I wrote another article stating that if you were to start a law firm from scratch, now, today, there is no way you would want to follow the partnership model; but if you did, and you decided to use the traditional methods, you would at least have a name for it…and here it is…I give you… Montegrano & Co.

"It's not enough that we do our best; sometimes we have to do what's required." Winston Churchill

I like Churchill quotes.

There are so many situations where they are suitable and they have stood the test of time.

I chose this one for this blog because I was chatting with a lawyer from a well-known firm that is clearly struggling in the present climate and he said that he couldn’t understand it because they (the partners) were all “…doing their best to generate new business…”

I dug a little deeper.

By “..doing their best…” he went on to explain that “…they had increased their advertising spend and were doing a lot more marketing…”

He said that they had done all the traditional advertising in magazines, newspapers and corporate sponsorships but that it had been a waste of time and money.

Traditional advertising is one of the least effective ways to advertise a law firm. Unfortunately, most lawyers think that marketing and advertising are the same thing. The result is that you end up wasting money and have no new prospective customers to show for all the effort.

Here are three major reasons why advertising in the traditional sense does not work.

1. It does not move people along in the sales cycle. It's only effective in the first stage when the potential customer is getting to know you.

2. Frequent advertising is too costly for most budgets. Lots of advertising research has shown that you need to reach your prospects multiple times – usually from 5 to 7 times -  to make enough of an impression so they will remember you when they need you. 

3. Most adverts are often poorly designed or written, even to the point of being boring instead of influencing your target market. Often they are created by lawyers themselves and tend to drone on about how great at law the firm is and how long it’s been going.

The other problem with their approach is that “their best” was the advertising industry’s worst.

Imagine if an ad agency had decided to create their own contracts, do the legal work on their own property lease or handle their own employment law issues and you start to get the picture.

If they had been a little bit wiser and not so smart, they could have measured the results and gone on to target their future ad spends in the right areas.

That was what was required.

The news that Irwin Mitchell is considering becoming the first law firm to float has come as no surprise to many of us. Irwin Mitchell has a proven track record in adopting change and has been described as a personal injury powerhouse, carving a path for others to follow.

As traditional practices come under increasing pressure to change their ways or be forced out of business, Irwin Mitchell is aiming to become the leading supplier of commoditised legal products when the Legal Services Act comes into force.

Will this and the arrival of the “brands” change the way many law firms market their services and their practices?

Do you believe that your own brand in your local community has no value?

Are you seen as the trusted advisor but have failed to exploit this relationship with your clients, customers and other professional introducers?

Alternatively, have you advocated your responsibility for the survival of your practice by jumping on the QualitySolicitors bandwagon, building a brand that you do not own?

We have all heard about the estimated 3,000-plus legal practices which are expected to disappear over the next few years, with the impending arrival of the Act and increased competition. I have little doubt that the prediction is correct, particularly as we are still seeing many firms which refuse to face or embrace the substantial changes that are set to arrive in the very near future.

Law firms’ options are unquestionably limited; consolidation in the sector is inevitable and a strategy for survival could be to grow by acquisition or merger. However, this will not change your practice sufficiently unless you adopt a very different approach to packaging and delivering services in a less transactional way.

The alternative is to become a specialised niche player, drastically reducing overheads and delivering a web-based solution, thus joining the large number of new entrants into the sector following redundancy.

We have seen 1,126 new firms being formed in the last 12 months, whilst 484 have simply closed. This is a net gain of 642, the vast majority of which are limited companies.

We are already seeing numerous practices being absorbed by larger firms whilst mergers of medium-sized firms are also, I believe, set to increase, as partners seek to create larger stronger regional practices.

Larger firms have become the predators and many are looking to grow by acquisition. As a contact at one newly merged firm told me: “Merger? We just merged into the background!”

Hence a word of caution. If you are considering buying, selling or merging your own practice, don’t attempt to go it alone and negotiate your own deal.

Although an element of compromise is essential in every negotiation, having a professional on your side will help achieve the best possible outcome – and your survival.

Sadly, lawyers who don’t want to be part of a radically changing profession are unable to simply “shut up shop” because of the provision of run-off cover – the insurance that must continue to run after a law firm ceases to trade.

We are already seeing firms merging on the simple premise that there is no capital value whatsoever in their practices, but their run-off cover can simply be absorbed into the larger firm’s professional indemnity premium. The best that partners can hope for in such cases is to achieve a salaried partner position or a consulting agreement for a limited period.

The other alternative is to grow by stealth, finding innovative ways to both deliver and package your services. Deciding on who your clients actually are is crucial before you decide what types of services you will offer – commoditised or restricted?

Many partners, principals and directors of legal practices are not only juggling the day-to-day challenges of running a business covering everything from financial management to compliance issues to personnel (whilst, in many cases, fee-earning in their own right!), but having to also make time to consider the strategic options for their practices in the short, medium and long term.

Owners of law firms that want to survive the tough years ahead have to adopt innovative thinking in order to take their practices forward, understand and consider what is required to keep their business financially viable and plan to continually build on existing success.

Creating value in a current practice will also make that firm a more attractive merger or acquisition proposition than other less progressive practices, if this becomes the preferred option.

As time progresses and we see a growing number of practices choosing to sell or merge, we will see less value placed on them. Therefore preparing yourself now for a possible opportunity is essential if you are thinking of selling or merging.

It is vitally important that there are specific policies, procedures and controls in place to ensure that the practice is not only a financially viable proposition, but to allow a degree of compatibility with future potential partners or investors.

The management and structure of the business, its finance, personnel, technology, clients, risk management and marketing all need to be considered carefully – and without delay.

For lawyers who envisaged an enjoyable career and then a comfortable retirement, this is no doubt uncomfortable reading. But the current situation will not pass – it will simply become more acute.

Every single law firm needs to take a decision now on where it wants to be in the next five years and how it’s going to get there. Putting this decision off is not a realistic alternative – it simply makes matters worse and reduces the options available.

The good news is that for firms prepared to rise to the fundamental and inevitable challenges ahead, there will be opportunities. The market for legal services in England and Wales is an astonishing £26 billion and this is likely to increase in the foreseeable future.

Will opportunity be knocking on your door? Or will that door be closed for business?






This article first appeared in Legal Futures and is reprinted with the kind permission of Viv Williams.  (Actually, it was his proxy, Brian who sent me a text agreeing to allow me to reproduce it here!)