Change on the way for law firms

January 5, 2006

In the olden days it was all so straightforward. The young tyro worked hard at law school, secured a good training contract, worked like a pit pony for a few years, made partner and then worked at making rain.

Then as the rather fatter and more arrogant version of the man he used to be, the newly middle-aged lawyer reached fifty, was instantly perceived to be on the wrong side of the hill and was despatched to play with grandchildren, his capital largely intact and with a valedictory dinner to permit former colleagues to say nice things about the old boy now that he had gone at last.

Unfortunately (or fortunately depending on your point of view) this may not be the predictable course of a law firm career in the future.

New age discrimination rules will permit many who want to stay on in law firms the opportunity to get fatter and more arrogant and to postpone the day they have to play with their grandchildren. This however would seem to be a much less dramatic change than the metaphorical earthquake that is about to be unleashed on a largely unsuspecting world.

Much more significant is the very predictable demise of partnership as the preferred business model for law businesses. In the future, and not so far away, a new dynamic will begin to take over.

I will not mourn the passing of the partnership model should my analysis be right. I have always thought that the partnership concept was fundamentally flawed in at least two significant ways;

? First, partnership does not encourage decisiveness. Instead it encourages consensus. Consensus is great in a democracy but it is a bit slow and ponderous for a supposedly cutting edge, dynamic business environment.

? Secondly, power in a partnership is concentrated in the older established partners. These very clever people, however, tend to be among the most reactionary, conservative and change resistant species on the legal planet.

Running the Parish Council on a consensus basis is essential ? delivering leadership, change and profit on a consensus basis is a near impossibility. And, frankly why would senior partners risk their exit strategy, risk their capital, risk their security for a dynamic, change orientated, entrepreneurial business model?

But in practice this means that the only way forward for a firm contemplating change is to find an exit for these partners.

The trouble is that the consensus model dictates that partners only tend to leave with a very, very soft landing ? only to be replaced by the next generation of slightly thinner partners who will be looking for their own soft landing in a few years time.

This is all very well and good if every law firm works in a similar way. Competition is great, of course, but a lot less painful if people don’t rock the collective boat?

But what if the legal landscape changed fundamentally?

What if a new type of law business could be made to work? One that concentrated on service, value for money, diversification in delivery channels? A model that encouraged risk and entrepreneurs, that rewarded innovation and creativity? A model that wanted expertise with the right attitude however old or young it was?

In England the Government has recently published a pre-legislation White Paper which will permit law firms to be part owned by non-lawyers.

It does not sound too revolutionary does it? In effect, however, this will ensure that a new business model can be created and one that will compete head on with traditional law firm partnerships.

The new model will allow law firms to seek investment from third parties. Capital investment, however, comes with conditions and what will this new breed of owner want for their money?

I think it is very predictable and it is bound to include some or all of the following:

? Guarantees that their investment will be well managed
? Predictable business planning strategies
? Excellent information systems
? Innovation in product design and delivery
? Cost control
? Strong, insightful leadership
? A good return on their equity
? A predictable growth strategy
? Accountable management
? Excellent reputational risk management

And what do most law firms today currently offer against this list?

?I won?t try to kid you?I do not think the list is quite so long.

But think about this:-

In a world where investors will look for management to deliver a sustainable legacy rather than their own exit, more focus will be on the business than on the people running the business.

In a world where competitive advantage will depend on subtle nuances of approach and where fine decision?making will be valued above most other qualities, age will not be an issue but experienced leadership will be.

In a world where successful risk-taking will become essential, the onset of middle aged spread will be of no concern but the ability to deploy ones experience in clever and innovative ways will be essential.

The point I am making here is that the old style partnership model actually drives out talent and has become a redundant, self-serving, self-congratulating monument to institutionalised arrogance.

The talent this old system wastes however, in a new model, can be re-energised and refocused. Meritocracy will value different skills to rain-making and we will see more emphasis on values, brand and service.

Entrepreneurs of whatever age will rise to fulfil their potential. People of talent will find ways to enrich the lives of their clients and their colleagues?

And the development of truly innovative ways of delivering cost effective legal services to more and more people will be a realisable dream.

I am not so na?ve as to think that there are not huge hurdles to overcome in a new model. Neither do I believe that every investor has benign intent or that profit will not be the key to their fulfilment. Partnership, however, is such a stale model and new investment with new ideas provides a significant and realisable hope for much wider access to justice. Access that combines both excellence and affordability in a way that once only idealists would dream about but now potentially the objective of every well run sustainable legal services business.

So harness your talent, define your values, and deliver on your plans. The world could be changing faster than you think?

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