Constructive conflict: turning partners' personal agendas into a joined-up strategy

Few firms - if any - will be unaffected by the combined effect of the Legal Services Act, the recession, the ban on referral fees for personal injury work, and the abolition of legal aid. Yet many well-established practices have displayed little interest in change and still seek to maintain their existing formats and structures.

To them the revolution appears to be a long way off. They are still reasonably profitable, able at least to maintain a comfortable level of drawings for partners, are solidly risk averse and are reluctant to change what appears to them to be a way of working which has stood the test of time.

However, new players and ways of doing business are entering the legal services market rapidly. They bring innovative structures, greater reliance on technology and a total customer focus to the marketplace. For example the Co-operative has already announced its clear intention to become a major force in the market for legal services and organisations like Axiom Law and Clearspire in the USA have developed new business models which challenge traditional hierarchical structures.

How do partners begin to deal with the increasingly difficult market conditions they will have to face? Clearly they are not prepared to rebuild the entire firm or to throw away years of growth and development overnight. Equally the new demands caused by these market forces mean that lawyers will have to tackle the constraints which their present structures and mind-sets have created for them. The quality of strategic decision making now will determine the future trajectory of the firm and, if the decisions made now are faulty, that future may well be very bleak.

Eyes on the future

The context in which this strategic decision making process has to take place is not without its difficulties. Organisations which have reached a certain level of maturity tend to take short-term views heavily influenced by low risk and financial factors rather than by the need for innovation and change. Individual partners can become fearful of rocking the boat so they sit in the boardroom and agree to decisions which tend towards maintaining the status quo and, in severe cases, denying the reality which exists outside the confines of their offices.

Some may even, privately, recognise what is happening and become afraid for the future, but will not reveal their fears because that denial of the prevailing ethos could introduce a discordant note and mark them out as mavericks or naysayers.

This is where leadership in strategic decision making becomes paramount. Lawyers incline towards a process where decision makers listen carefully to all the arguments, weigh up the pros and cons and make a considered judgement which recognises the majority view, perhaps with some compromises towards a vocal opposition.

This approach is fine in a stable business environment but in turbulent times where decisions need to be made quickly it simply will not do, because it tends to default towards maintenance of the status quo.

In times of change the process of successful strategic decision making requires positive leadership and a strong steer without it becoming autocratic and dogmatic. Partners need to strive, within their organisation, for a balance between control and flexibility. This requires them to have a clear vision of the long term targets and objectives for the organisation (where will this organisation be in three years, five years or ten years' time?) and a recognition of the need for innovation and change - this must be recognised as constructive and renewing rather than scary and destructive.

 

Challengers Several organisations are developing legal offerings to rival traditional law firms. Some of the most notable are: The Co-op (UK) Cooperative Legal Services is planning to hire nearly 3,000 lawyers over the next five years in a rapid expansion programme that will challenge the profitability of traditional high street solicitors. The organisation believes its reasonable rates as well as ethical and socially responsible values will attract large numbers of customers who are deterred from approaching more expensive, traditional law firms.  Axiom Law (USA) Axiom offers outsourcing or “managed legal services”. They report that the company has 900 people, of which 800 are lawyers which leaves 100 “headquarters” staff. So the company operates at a lawyer to staff ratio of eight to one, much lower than traditional law firms. Furthermore, since many Axiom staffing lawyers work from home or at client sites, it has much lower occupancy cost. Axiom only serves institutional clients – so far. Clearspire (USA) Clearspire operates primarily through an online platform that connects lawyers and clients through virtual offices and high-end videoconferencing systems. This model allows them to outsource all business processes, technology, administration and commoditised legal work which can cut overhead costs by up to 50 per cent compared to traditional firms. Clearspire claims that this drastically reduces client fees on complex legal matters and maintains market salaries for its lawyers and staff.

 

The controlling board must be managed in such a way that decisions can be made in a spirit of constructive conflict without regard to personality clashes or personal agendas - so if a suggestion is not followed no one takes their bat and ball home in a huff, or plots to unseat the senior partner. This requires an ethos to develop within the controlling group in which dissenting voices can be heard and radical ideas expressed and given due weight and consideration. In turn this requires, as a minimum, the partners to create a climate within the firm where client-facing staff and administrators can feel free to communicate ideas without feeling that this could be prejudicial to their career prospects or badge them in some way as troublemakers or 'not one of us'.

Back to basics

The objective underlying the strategic decision-making process is to go back to the principles which built the organisation in the first place. There are three key aspects to this.

First, a total focus on the client's needs. The firm must recognise that, to the client, it is simply a supplier like any other and if it does not offer value for money the client will go elsewhere. Clients will expect to see firms being proactive in improving their legal processes, working increasingly to fixed-fee arrangements and responding rapidly and efficiently to their demands. Clients are consumers of services and suppliers of those services are subject to the same market forces as any other supplier. Nothing is protecting individual law firms - they have no privileged place in the market.

Second, partners must work constantly to keep the organisation dynamic and to avoid complacency. The decision-making process must try to stimulate innovation and change in order to refresh the organisation on a systematic and regular basis. This requires attention to innovation in service delivery and the development of new business units or new markets rather than a shuffling of the pack. Simply relabelling existing structures or moving people around into teams is not change. What is needed is a fundamental reappraisal of how the firm does business and what can be done to meet the recognised challenges of the future.

And third, the controlling board should institute a review of the firm's management information, resource allocation and reward systems, and these should be linked to achieving the organisation's long term aims as identified through the strategic decision-making process.

To many traditionally managed law firms this may sound like management speak. They may try to reassure themselves that they are already doing what they can. But if the business is already declining, or about to, then they are not doing enough. There are more innovative ways of delivering legal services than simply having partners, associates and trainees sitting about in the office waiting for the client to phone or walk through the door.

Partners must look at the business model and ask questions to which there must be honest answers. Some of these may be painful or result in painful decisions.

Only by maintaining a position where change and control are finely balanced and the firm becomes truly client centred can it hope to withstand the future shocks which are on their way right now.

 

ASK YOURSELF ?  Which parts of the business are successful and why? ?  What are the firm’s strengths and weaknesses? ?  How diverse and robust is the  client base – where do we draw our clients from? ?  How loyal is the client base and what makes a client loyal to the firm? ?  How robust are our internal processes – do we have good corporate governance, does our management information system give us everything we need? ?  Can that client base be serviced in another way – can we take advantage  of technology to service clients in a better way? ?  Are our fee earners working effectively – can we outsource services, can they work from home, do we need all these people all of the time or can we work with a core of professionals and outsource the rest? ?  What are we doing badly and why are we doing it badly? ?  What parts of the firm can we do without? ?  What are we not doing that we should be doing?

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