I read a post published recently by Canadian legal sector consultant Jordan Furlong. To say that it resonated was something of an understatement. But I didn’t agree with all of his conclusions. You can read his post here and this was my response.
Jordan, your article is a clarion call that strategists in commercial law firms around the world should heed or face extinction. And of course, for that reason I expect little change in 2013, meaning by 2014, the traditional law firm is no more than a plump turkey waiting to be pulled apart by more astute commercial players.
Why is this? Because traditionally law firms reward big billers and rain makers with promotion to management status, whereas those actually skilled in longer term business development and strategy are overlooked. Lawyers are inherently self-interested and are forced to work together out of need and those at the top of the trees all to often are arrogant and unwilling to consider that there may be any other path.
But here’s the thing. Whilst it may be that big enterprise likes to align itself with one firm or another, ultimately law is a relationship business. When you look across the UK legal scene (which is where I work), you see a vast array of firms and to the business owner or manager, almost every single one of them is seen as a substitute for another. Which firms could be excepted from that analysis. Pannone perhaps, or maybe Slaughter & May. I can’t think of any others that have their own distinct personality.
In my father’s day, the lawyer was at the heart of the client relationship. Networks were personal. Not because they were jealously guarded, but because professionals in market towns naturally grouped themselves into non-competitive alignments with fellows who thought like they did. But this changed in the 80s when English firms were allowed to start marketing themselves. As a result, the idea of a central law firm identity, a brand, started to take priority over the individual lawyers. But of course lawyers didn’t know what a brand was – and many, most perhaps, still don’t.
The attitude of the individual lawyer towards cross-selling is guarded not merely because of his or her doubts over the quality of service that might be provided by a colleague of which s/he knows little. The lawyer protects his or her contacts because of the very pressure s/he faces to cross-sell. I can’t count the number of times at the larger provincial practices for whom I worked when, faced with a client need out of the ordinary, I would approach a dept head or team leader for permission to refer said client out to a specialist I had found at another firm only to be told “Jenkins does that sort of thing, or something similar or he’ll work it out”. Why? Because equity partners are not motivated by long term gain through first class customer service. They are motivated by the scale of their drawings, which themselves depend upon the revenue generated within the tax year.
When I decided to set my firm up in 2011, I decided to do everything, EVERYTHING, different. Why fight our client’s desire to bond with their adviser? Why not to sell ourselves through our support of that relationship? For our consultants, why try to restrict what they do with their contacts and clients? Why impose covenants on them? Why force them to cross-sell. Instead, new would-be consultants are told that should they wish to leave, not only will they not be restricted, they are positively encouraged and will leave us with our blessing. If they wish to refer their clients to advisers outside the firm, that is absolutely their decision.
We do this because when we set the firm up, we decided first to build a brand (not an identity, an actual brand) and then see where we went from there. So we created a values document that all of our advisers must not only sign up to, but must make sing out through their work. And that values document is provided to all of our clients so that they can hold us to account. So we can be confident in the absence of controls over our people, because they wouldn’t be with us in the first place if they weren’t the RIGHT KIND of people. And so we don’t push our brand on the clients of our lawyers. And it’s by operating this way that our clients love us so much.
Which brings us back to where you started, and the idea of the growth-by-merger fallacy. When two large firms combine, what analysis is made as to the qualities of the lawyers at the coalface? Practically none. Or if there is, it’s merely about their ability to bill as opposed to their ability to build a long term relationship with their clients through which those clients might place total trust in the fidelity of their lawyer. Because a merger between two firms is not about the building of economies of scale, it’s about the building of megaliths that massage the egos and satisfy the avarice of their equity partners.
Thus far, the focus in England post-Legal Services Act has been on the destruction that is to be reaped upon the High Street sector by the likes of the supermarkets and other large consumer brands. But there is a tsunami that is going to overwhelm the commercial side also before long. Insurers, business consultants, accountants, unions even, are all bigger than us and better resourced and much more astute in a commercial sense.
The future for quality legal resource is, as you mention, niche.