It is clear that we are working through an extraordinary time for the legal profession; there are so many factors in play that it can feel almost impossible to discern trends. There are, however, three significant factors that at least provide some context for this period of unprecedented change:
- First, the potential for significant deregulation of legal services heralded by the Legal Services Act which is forcing, at the very least, a dialogue about change
- Second, the consequences of a deep economic recession on client perceptions of cost and value and
- Third the inexorable march of technological innovation.
Many commentators have described this as a “perfect storm” for lawyers and the legal profession. The phrase “perfect storm”, however, in my judgement, is completely wrong. It is resonant of uncontrollable forces resulting in an inevitable and disastrous conclusion for those unlucky enough to be caught up in it; a misfortune likely to be preceded only by one’s passive acceptance that one’s lot is up.
While I have long held to the view that change of a significant and sustained nature is bound to impact on the legal profession, I have also stated many times that this is the opportunity of a generation to shape a profession for the better. This is clearly a vulnerable time; but is also a time full of positive possibilities.
For lawyers proud of the traditions and history of the great men and women who have shaped the profession, it is a time to protect and entrench age-old ethical values that are too precious to discard, but at the same time to take the really significant strategic and operational strides forward that would have been unimaginable even ten years ago.
Change today is significant and there for all to see. For example, many commentators have written about the significance of outsourcing, legal process outsourcing and off-shoring. Even more have bandied around the misnamed “Tesco Law” to speculate on the commoditisation of legal services in a consumer-driven revolution that will see retail disciplines applied to professional services.
These are concepts that are real today and potentially significant for years to come; however, what I want to write about are the less headline-grabbing, but nevertheless discernible trends that also suggest different models of organisation and delivery. These changes are more subtle, more interesting and will potentially make an even bigger impact.
The problem with “Tesco Law” is that it has become a cliché; there is no longer any analysis; instead it is the unquestioned apotheosis of a deregulated market. In reality I suspect that while the productisation of legal services will continue apace; the supermarkets will not be suppliers of legal services; they will be the retailers of personal legal services.
It is entirely reasonable, therefore, to view such a development as one where lawyers and law firms will benefit. In effect it provides another channel of delivery for their talent and know-how, not a denial of their living.
Off-shoring and legal process outsourcing are more interesting. Law firms (and perhaps some of the biggest corporate and public sector in-house teams) will increasingly view this as an opportunity to take cost out of their processes. This is a little like car assembly plants where the components are manufactured in cheaper lands far away, but assembled and badged in Sunderland or Swindon (or in the case of legal services closer to the Square Mile or Wall Street). For legal services it offers the potential for quality to be assured through the brand of the supplier, but for the supplier to manage its cost base more effectively and certainly. In a significant way outsourcing and off-shoring is about profit preservation and less about innovation.
What then are the changes that might make an even bigger impact? I think there are four very different and quite subtle shifts in temperament and style that have the potential to be truly revolutionary. I also think that these ideas, while they are not widely seen today, are the very essence of entrepreneurialism; in ten years time I believe we will look back and see their true worth as pointing the way to a completely different approach to legal services. The four ideas can be summed up in this way:
1. Knowledge is power:
Centuries ago the printing of books began a revolution in the dissemination of information that empowered the education of the working classes and accelerated innovation in commerce, the arts and the sciences. The internet revolution of the last decade is our equivalent today and is doing the same, but in an exponential way. Legal services are being caught up in this revolution too.
Access to justice, in terms of court representation, may still depend for now on the interpretive skills of advocates, but this is only a small part of the access issue. The major players in legal content publishing, companies such as Lexis Nexis and Practical Law Company, have established extraordinarily powerful bases. I am not a great technophile, but the rapid developments in mobile technology, in searchable databases, in “intelligent” algorithms bring legal expertise to a far broader audience than ever before.
This is the democratisation of legal services and will drive cost down, in most cases, to a negligible level. Where once lawyers could charge their time to assess, research and advise, in future a few clicks will give most people most of what they want. I am not judgemental about this and there is clearly risk (for lawyers and consumers) for all to see, but, where good is good enough, no one can deny the incredible opportunity that the publishers have to bring about unprecedented access to legal expertise that will change commerce, dispute resolution, protection of rights etc for ever.
2. Price reduction for richer for poorer
In this world where we pay less and less for the gift of knowledge, will we pay more and more for the wrapping?
I have lectured for years now on this theme; on the one hand even the most discerning purchasers of legal services struggle to articulate how they differentiate between providers in terms of the quality of legal expertise deployed. Yet on the other hand we are all capable of assessing whether the elements of the service we receive are acceptable. These elements, such as the accessibility of lawyers, the clarity of their communication, their understanding of context, nuance, tolerance to risk, and empathy with the client, etc, are factors we all assess all of the time.
The inevitable conclusion we reach is that value (and therefore profit) will be attributed to the service we receive, not to the legal advice itself. Obviously we will expect (perhaps even assume) that the legal content will be good enough and this is perhaps the role for regulators going forward to provide the “kite-mark” of quality we need, but in very many ways what we will increasingly pay for will be the quality of the interaction.
The providers of legal services therefore, – especially providers who are not dealing in the high-end consulting services (the mega-deals, the inter-governmental activity etc), but who are working in the broad swathe of corporate, commercial and consumer law- must drive down the cost of their “product” while driving up the value of the service. This is something that we can see today in a variety of areas that are not obviously linked.
At one level law firms have become used to pricing the component elements of a transaction or dispute, in effect unbundling their service. This has encouraged a detailed examination of process and procedure that has improved efficiency and has also challenged law firms to consider what elements of a service/process are ones that clients might pay for and those which might have to be priced at a loss, even given away for free.
At another level the claims handling legal services that are provided to the biggest insurance companies focus value on the quality of the management information, the trends analysis and the efficiency improvements. This is as far removed as you can get from the traditional “wig and pen” caricature of lawyers and is in the same space occupied by serious process engineers and logistics management experts.
Moving into the transactional realm, the quality of relationships between lawyer and client still has significant influence. In this area of activity, if the client is made to feel valued, it will help the lawyer to articulate value. However, this is a very vulnerable space which is always likely to be undercut at all times by the latest iteration of process improvement or technological advancement. The only realistic way in which this segment of market activity can be protected is to tie-in the client to a genuinely creative and important value-add proposition.
What does this mean? It means, for example, providing exclusive and insightful thought leadership to clients so that being a client ensures access to relevant and helpful strategic guidance on market/sector trends. Law firms that can leverage their position of privileged access across markets, from regulators to suppliers and to consumers, can draw trends, point to developments and opportunities and so can create competitive value for their clients. Value-add also means supporting the clients’ own resources for managing risk more effectively. This might be through training programmes, systems development and/or adding people to the in-house team.
The logical extreme of the approach will see legal content reducing in cost often to a point where it is free, but where the profitability of the supplier is developed through bundled “membership” services, through resource management, access to know-how systems and strategic advisory services.
3. The public sector collaboration
Lawyers who worked in in-house teams twenty years ago were often maligned by lawyers in law firms. They were not “good enough” to cut it in a law firm. Similarly, lawyers in in-house teams in commerce and industry would sometimes look at lawyers in public sector in-house teams and be equally judgemental. Whatever the weakness of the arguments twenty years ago, the position today is very different from that perception.
The public sector is now a major driving force for change in the profession. Major players have emerged who have a dynamic, sometimes controversial profile and the debate on the future of legal services is being shaped by their influence.
Kent County Council is one obvious example of this recent phenomenon, but they are by no means the only player. The opportunity for the public sector to transform itself is partly a natural evolution (taking advantage of technology and know-how management) and partly driven by the necessity to demonstrate value at a time of considerable austerity in the public finances. What Kent County Council have done, under the strategic leadership of Geoff Wild, is to prove that entrepreneurialism can be harnessed to create value, career opportunities and innovation in even the most conservative of environments.
Now lawyers in the Kent County Council legal department provide services to other public sector bodies both on their own account and in collaboration with a law firm partner. The intention is to do this not just within their geographical/political boundary, but across the country.
Whether Wild succeeds in the longer term in his South East stronghold will depend on any number of factors; his vision, however, should not be judged just by the results that he achieves for the good people of Kent, but by the release of energy that initiatives like his have unleashed across the public sector.
Legal services in the public sector will be increasingly based on shared resources that combine to form virtual teams that capture and reuse know-how and which join-up people and organisations to make a more efficient, more expert and more relevant service to a broader group of users and consumers.
The ambition will be to reduce the bottom line cost of delivery without any adverse impact on quality, and a significant outcome of working collaboratively will also be pro-active identification of opportunities to offer new services without incurring additional costs. Done well this will create, encourage, develop and embed multi-functional, cross-agency, real and virtual teams that come together for specific initiatives or that, through common interests, collaborate on a long term basis.
Public sector lawyers are setting the agenda already with shared panels of external law firms and joint ventures between in-house teams and law firms willing to co-operate to provide legal services both internally and to other agencies. One senses that change in this sector has only just begun.
4. The integrated solution
Much of the ground explored in this paper so far is also revealed in the final development I want to describe. It is potentially one of the most significant developments in legal services for decades shifting not just the perception of operational effectiveness, but redefining what legal services are and what they mean to clients. The Managed Legal Services (MLS) proposition from Berwin Leighton Paisner (BLP) is game changing.
The proposition came to public prominence when BLP announced a deal with Thames Water. The issues being faced by Thames Water were common to many businesses and the lawyers they employ in their in-house teams. These are issues I see in very many of the teams I work with every day.
- How to manage an increasing demand for quality legal support with capped or reducing budgets.
- How to manage a multi-firm panel for value and build mutually supporting relationships.
- How to create a strategic role that plays to the strengths of the in-house team while demonstrating efficiency in the way significant volumes of operational activity are being managed.
- How to provide a career path for ambitious and talented in-house lawyers in a flat and opportunity-constrained structure.
BLP seeing this concluded that offering different pricing arrangements without more was not the answer. They considered that they would have to be more innovative and re-think the way legal services are managed and delivered. In effect BLP concluded that the traditional methods of employing an in-house team and selecting and managing a law firm panel were potentially constraining some aspects of collaboration and innovation.
John Bennett, the partner heading the MLS operation for BLP, recognised these tensions and shortcomings. Encouraged by clients he came forward with a new model. It is a model, underpinned by intelligent multi-sourcing and proprietary information technologies, that is cheaper, better and simpler for the client. The model also supports the transferring members of the in-house team with excellent training, know-how, systems and processes.
Thames Water has transferred their legal team (other than a core retained function) to BLP to resource their legal services requirements with an appropriate blend of lawyers working on-site from the previous in-house regime and expert teams working within BLP and its legal service partners. All are provided by BLP and covered by insurance and extended privilege. In relation to each assignment the tasks are allocated by the BLP on-site management team according to capability, efficiency and the need to achieve guaranteed performance standards.
John Bennett and the MLS team see this as a strategy that can support a great many larger organisations which are significant users of legal services, but I see it having an even wider appeal.
The collaboration has a resonance with many of the points made in this paper and brings together a solution that is client-centric, innovative and collaborative. Not every client will want to be so embedded in one law firm, but many will see great value in a partnership which will deliver resourcing flexibility, efficiencies, greater pricing certainty, enhanced legal risk management and systems, processes and resources that enable the lawyers to be more effective.
It is also possible to see the model working for discrete elements of the legal services required by an organisation; for example for all the employment work or all of the contract work etc. The principle and approach are the same.
Bennett describes MLS as an “optimum solution to maximise value”, not a phrase many law firm partners would have been comfortable using ten years ago, but it is hard to argue against. Thames Water now have access to as much dedicated legal services supply as they need; lawyers working for Thames Water have great know-how and systems at their fingertips and, by combining the former in-house team with the law firm, new career opportunities are created for the in-house lawyers as well.
The key to this model’s long term success will be ensuring that this is not a shotgun marriage, but a creative combination of common interests. The work that is done in setting-up the arrangements, with real thoughtfulness and care, will be crucial; but more than that will be a need to thoroughly assess the value of legal services needed and then to focus on delivering and articulating value at every turn.
Bennett describes BLP as being “the manager of value added consulting services” and, if ever there was a statement of how far the legal profession has come in recent years, that is it. It is the future today.