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All about ABS
I Just Want to be Appreciated
In the early stages of working with Law Firms, one of the things we always do is talk with the existing staff and ask them to list three things they love about working for the firm and three things they dislike.
We do this because most of the gripes tend to be small things that can be fixed quite quickly and cheaply and when staff see that “things are happening” they tend to come forward with other, bigger suggestions and before you know it, a lot of the problems are fixed.
But no matter the size of the Firm or where they are located, the things that staff like or dislike tend to be the same, or very similar things.
The list they create can be anonymous by handing in notes on a bit of paper or made in an open forum, such as a small group. But no matter which way we use, the outcomes are nearly always the same.
The results are that they nearly always like who they work with. They like the social events, such as last year’s Christmas party and they might also like being located in town.
However, when it comes to the “dislike” list they nearly always put down the first dislike as; “underappreciated”.
In a recent Gallup Poll 71% of workers are “not engaged” or “actively disengaged” in their work, meaning that only a third contribute to their work in a positive manner. I would say that from our anecdotal surveys it’s probably higher than that.
But let’s take that one step further and see what it really means for the Firm or business these disgruntled people work in.
By asking the people who listed “underappreciated” exactly what they mean, we discovered that the knock-on effect of this was enormous and had a big impact on the whole business.
For example, when we hear comments such as “The partners don’t appreciate me and don’t really value the work I do” we ask how that makes them feel and how does it manifest itself on a daily basis.
It means they arrive as late as possible and leave exactly on time. They don’t go the extra mile on anything. They make no real effort to help others. They don’t provide the kind of service they would if they felt appreciated. This ripples through and affects overall productivity, leading to negativity and low morale which inevitably leads to increased staff turnover; all at a time when many firms are struggling to survive.
And yet, the remedy is easy to implement.
Why? Well, when we ask the partners if they appreciate their staff, guess what? They do.
They just don’t tell them.
So the simple solution is to tell them.
Telling them can be done in a variety of ways but often the simplest solution is the best one such as saying “Thank you. Your contribution makes a difference” or better still, writing to them, emailing them or by creating some service awards or as many of the staff say…by giving us a pay rise!
The partners do actually want to give a pay rise, but until some things change, that might not be possible. So what else can be done?
Well, the army is not the place you would ordinarily look to in matters of staff appreciation. They also have other names for it such as man-management and its counterparts, motivation and leadership.
You might think that an army has nothing much to do with a law firm, but let me give you some examples of their thinking and see if any of it could apply to a law firm.
Field Marshal The Viscount Montgomery of Alamein defined leadership as “The will to dominate together with the character which inspires confidence.” He went on to say that “…a leader has got to learn to dominate the events which surround him; he must never allow these events to get the better of him; he must always be on top of his job and be prepared to accept responsibility.”
Wouldn’t it be good if a few partners demonstrated these abilities?
General Sir John Hackett said “…when speaking of leadership I do so in the context of a leader in battle; in battle, pressures are high and the problems of leadership stand out. But while battle may be unique but the problems it exposes are not. Leadership is concerned with getting people to do things willingly when it is most keenly needed, when difficulties, doubts and dangers are at their greatest. Successful leadership is impossible without the leader’s commitment to the group in his care.”
There is no doubt that the Legal Services Act, ABS’s, the recession (it IS actually a depression but won’t be called that for at least 5 years) all combine to make it feel as if we are in a battle. Difficulties, doubts and dangers are at their greatest.
So are you as “leaders” committed to your group? You almost certainly appreciate them, but do you tell them?
If not, what’s stopping you?
(Oh, and the other two dislikes on the list? IT systems and pay…nearly always those two)
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.
Standing Still Gets You Run Over.
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:
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 was chatting to a Broker who will specialise in putting investors and law firms together in readiness for the Legal Services Act coming into force on 6th October 2011 in England and Wales.
Just to recap, for the very first time this Act will allow law firms to become Alternative Business Structures (ABS) possibly to merge with other companies and to sell shares on the stock exchange or privately to investors.
I asked him what law firms should be doing now, today in March 2011 to prepare for investment (should they need it). I also had one eye on the Scottish market in readiness for 2012, so the checklist below will apply to the whole of the UK.
Here is his list:
a. Create a clear strategy for growth focussing on the 'commodity' you deal in which could be; Residential conveyancing, debt recovery, mortgage repossession, claimant personal injury, re-mortgage and probate.
b. Are you making best use of IT and are you outsourcing where possible?
c. Consider strategic alliances with Claims Management Companies, legal expenses insurers, other law firms etc.
d. Create a more corporate structure with key roles filled eg Marketing Director, Financial/Investment Director.
e. Develop a concensus amongst the partners (possibly the hardest to achieve!)
I would probably have put the Partner consensus first as without it the rest won't happen.
If you would like me to put you in touch with the Broker, feel free to contact me.
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.
The Co-operative Group is planning a new campaign to promote its legal services to food shoppers in its 3,000 supermarkets nationwide.
The news came as the group, which aims to be one of the first alternative business structures, told the Lawyers Gazette that it believes ‘the die is cast’ for legal services reform, no matter which party is in government after the election.
The advertising campaign will see the Co-op’s legal services division promoted for nine weeks in an initiative that will include the use of in-store radio and animated till screen displays.
The group aims to increase awareness of Co-op Legal Services by 5%, matching the success of a similar campaign run last year.
Co-operative Legal Services managing director Eddie Ryan said the division had increased the number of solicitors and Institute of Legal Executives staff it employs by a third over the past 12 months, and is continuing to recruit. It currently employs 37 solicitors.
Members of the Scottish Parliament (MSPs) have backed controversial plans to introduce so-called "Tesco law" in Scotland.
Despite what the lawyers themselves think, MSPs gave their backing to the Legal Services (Scotland) Bill at yesterday’s stage one debate, but agreed that amendments were needed at stage two to address concerns.
The bill, which would allow solicitors set up in partnership with other professionals, such as surveyors or accountants as alternative business structures (ABS), will now go to the Scottish Parliament’s Justice Committee for further scrutiny.
The bill would also allow external ownership or external funding of law firms and could see organisations such as banks or supermarkets providing legal services in Scotland for the first time.
In its first reading at Holyrood, MSPs backed it by 92 votes to two.
Turkeys won't vote for Christmas
Solicitors voted against the introduction of alternative business structures (ABS) in Scotland at a special general meeting of the Law Society of Scotland yesterday.
The vote, including proxy votes, was 1817 in favour of a motion from the Scottish Law Agents Society against ABS as proposed in the Legal Services (Scotland) Bill, with 1290 against the motion, and five abstentions.
A compromise amendment on the introduction of “Tesco Law” had been proposed by McGrigors’ managing partner, Richard Masters.
The firm sought to remove the part of the SLAS motion declaring that external ownership of legal practices would be reserved to those qualified as solicitors, and state instead that majority ownership should be in the hands of such persons, "or persons so qualified together with other persons who are regulated professional owner managers of that business".
However, the amendment was rejected.
Of course it was...can't have the public getting a better service. We're lawyers after all.
We studied for years and deserve to have our monopoly protected. Yawn.
I said it before and I'll say it again, legal reform will not be driven by what lawyers do
or do not want, it will be driven by economics and social change. People needing
legal services will vote with their wallets and the firms that deliver the best service
will get the most business.
All this internal bickering is self-serving and pointless.
Can lawyers prevent change? No. Their strength could "oppose" the Bill, but so what?
Just as "money" finds the friendliest place to live, so too will consumers find the
friendliest place to do business.
Spend time and effort on that and christmas WILL be worth having.
Phew...What a Close One!
Scotland’s solicitors have voted narrowly in favour of legal services reform – by a margin of just 24.
In the first referendum question, 2,245 members of the Law Society of Scotland voted to support the current policy in favour of alternative business structures being introduced to Scotland – as long as there are appropriate safeguards – while 2,221 voted against.
The second question, on whether Law Society should apply to be a regulator of ABS, 3,622 solicitors – 81 per cent – voted in favour, while 844 voted against.
In what was the biggest turnout in a Law Society referendum, a total of 4,466 solicitors – 43 per cent of the society’s membership – voted in a secret ballot which closed at midday on Wednesday 7 April.
Ian Smart, president of the Law Society of Scotland, said: “The narrowness of the result clearly illustrates just how the issue has brought out widely divergent views across the profession.
After many years paying lawyers,I became one in 2005 Just in time for the largest upheaval in the law since records began. Brilliant. Exiting times ahead.