Michael Burne: A law firm, but not as we know it
Carbon Law Partners' founder wants to free lawyers from having to run law firms and focus on delivering great legal advice
A large and airy open space in a converted factory off a Victorian arcade in central Cardiff, with floor-to ceiling windows on one side and cozy sofas in a corner, Carbon Law Partners’ office is everything you might expect from a business hoping to bring a slice of the gig economy to the legal services sector.
Yet, the brainchild of former City solicitor Michael Burne nearly didn’t happen. After qualifying with what is now Dentons, followed by a few years at Allen & Overy, Burne moved in-house at St James’s Place (SJP), where he eventually became head of legal before moving to a project development role.
This, he says, is where he first started thinking about setting up a different kind of law firm, along similar lines to SJP’s structure, where the term ‘partners’ refers to a commonality of enterprise rather than an ownership structure.
The Legal Services Act, Burne thought, would be the opportunity to turn his idea into reality. His plans for a new model law firm were developed with the support of accountancy firm Mazars, which lined up 17 pitches with potential investors with a view to raising £10m.
The first took place on the day Lehman Brothers collapsed, bringing financial markets crashing and making investors nervous.
“All pitches took place but nothing came off them”, Burne remembers. “I got good feedback about the idea and the model but the timing was dreadful.”
Burne was fortunate enough to find another senior position in financial services but it took another two years before he finally decided to leave and start his law business. Carbon was finally born in March 2010 as a limited company and became authorised by the SRA in July the same year.
“I didn’t have any backing, I wanted to see if I could make it work myself”, he says. “I got busy pretty quickly.”
Busy enough to employ a PA and a barrister as a paralegal. Where there were gaps, he approached other firms for assistance, borrowing their lawyers as consultants deployed under the Carbon brand, which had advantages for all those involved.
For the law firms, “they got paid their headline hourly rates, it reduced unused capacity, there was no client risk and great recoverability, and we had reciprocal non-poaching agreements in place”, says Burne.
As for the clients, they too seemed to be satisfied by the arrangements. “I asked clients if they cared or noticed the difference; it didn’t matter to them”, he explains. “It was just me and this small team, and everything else was ‘dial up, dial down’ when resources were needed.”
Burne continues: “What I learned in that period is that clients aren’t interested in inputs, they’re interested in outputs. I’d been a client and that’s what I was interested in – what’s it going to cost, what’s the result if I instruct you.”
By the end of 2012, the business was healthy enough that Burne felt he was in a position to convince others to join as ‘partners’. The first joined five years ago, in May 2014, and others came on board gradually, reaching 42 on the day we meet.
The term ‘partner’, as the firm consistently stresses, refers to the spirit of partnership, not the legal structure or confine of a legal partnership.
“A ‘partner’ is a consultant solicitor and their ages range between 35 and 71”, Burne says. His point is that in traditional law firms there is a three-tier pyramid structure: “at the bottom, the aspirers, in the middle, the equity partners, and at the top, the retirers who need to give back their equity points for the aspirers to continue to stay”.
While Carbon can’t do much for the middle tier, Burne says it provides an attractive alternative to younger lawyers who don’t want to buy into equity – either because they don’t want to burden themselves with a loan or simply because they don’t want to take on the professional and regulatory risk – and for experienced partners about to retire under the partnership deed they signed up to.
Why create another law firm, however, was the real existential question. When planning Carbon in 2013, Burne came across leadership guru Simon Sinek, well known for his ‘Start with why’ TED talk.
“I started asking myself the question in the process of starting up Carbon: why do we exist, what are we here to do among 11,000 law firms, why do you need another law firm?”
Carbon’s purpose, Burne continues, was to be defined in a mission statement that reads as follows: ‘to create and develop the conditions for exceptional people to flourish’.
“The conditions are the recipe: what are the conditions for great people to do great work. The people we’re working with in the spirit of partnership are the lawyers, our team here [at the Hub – the separate entity that provides back-offices services to the lawyers], and the clients – to help them to achieve success however they define success. That’s the point, why we exist.”
Such thinking has been commonplace in business circles for decades and is certainly gaining traction across entrepreneurial law firms.
So how different, really, is the thinking at Carbon compared with a growing number of forward-looking traditional siblings?
“The real trap for anyone running a business is to describe themselves as ‘different’”, Burne replies. “‘Different’ is a subjective appreciation. You experience ‘different’.
So we don’t describe ourselves as ‘different’, we describe what we stand for and why, and allow others to determine and judge if this is ‘different’.” It’s not what you do
Burne continues: “Law firms usually start by saying what they do, but people don’t buy what you do, they buy why you do it.
There are 11,000 firms. They’re all the same, aren’t. they, like ‘magnolia’ is just a shade of the same colour? So, we start by saying why we do what we do, and how we do it is by adhering to a set of values, beliefs and qualities.”
In their search for defining values, Carbon founders looked for inspiration in the world of sports to find a way of providing clients with assurances about of the quality of the lawyers’ work.
“A client shouldn’t have to assess the quality of a lawyer’s work because the firm’s own systems should demonstrate it. We ended up looking at athletics, where there is compulsory random drugs testing without warning”, says Burne.
Carbon’s equivalent in legal services terms is a regular external audit, carried out by Riliance, where lawyer’s files are inspected without warning or notice.
“That means that if you’re a lawyer thinking about working with us, you know the standards our lawyers submit themselves to are that high, and if you’re a client you know we don’t just pay lip service to quality”, he sums up.
Within Carbon, the ‘partner’ approach also meant designing a solution to give those involved a share in the business’s success
In April last year (2018) Carbon converted to an alternative business structure, allowing its lawyers and other staff to buy into the business.
The share issue – which took place just before Christmas – made Carbon one of the few employee-owned legal businesses.
In addition to 12 of the then 26 lawyers, one of the Hub managers came on board, along with an external investor – the organisation’s accountant who expressed interest in investing after crunching the numbers with Burne.
The resulting corporate structure is a holding company, Flourish Holdings, which now owns the law firm Carbon Law Partners and the separate Carbon platform – the Hub.
Flourish also owns the second recently formed Carbon-branded business Carbon Advisory Partners, a venture set up to explore the possibility of rolling out the Carbon model to accountancy services.
“Just as I did nine years ago, Carbon Advisory Partners has just one person in it now doing proof of concept”, confides Burne.
“It’s about using a senior chartered accountant not to produce accounts – because the production of accounts will be done by computers in five years’ time and the traditional practice will look very different – but to be an adviser, the senior figure who can go into a boardroom and advise whether they can merge or sell or exit or raise money.”
And if this works, it could open further channels between the two businesses: “Because off the back of that advice spins legal work, and vice versa, off the back of legal advice comes professional advice”, Burne adds.
Partner practice value
One further conundrum Burne was keen to crack was what happens to a lawyer’s client base on retirement. Small firms can get bought out and perhaps some clients will stay with a firm after their main contact has retired, but more often than not, Burne argues, “the client base I’ve built up as a partner just gets left behind”.
His answer has been to introduce practice buy-out, which allows another ‘partner’ to buy an exiting ‘partner’s’ client base.
He says this de-risks the investment lawyers have to make to buy into the equity of a traditional partnership and it creates values – both of which should be an incentive for younger lawyers.
Carbon won’t take a cut, he says, the organi sation already takes 30 per cent of the fees generated and its interest is more in ensuring that clients stay with the brand.
For all the effort that has gone into setting up a structure intended to allow lawyers to be lawyers, to the outside world, though, Carbon wants to look just like any other law firms.
“Under the bonnet the client never sees the partners’ service company, it’s just another law firm, one brand. We’re responsible for the advice, it’s our professional indemnity policy, the responsibility of the practice in exactly the same; we just have a fee share in place”, Burne says.
But having shunned the traditional partnership model, Carbon has also eschewed traditional marketing methods.
Its marketing team actively uses social media to push the brand, but ultimately, Burne says, everything comes down to developing personal relationships, starting with existing clients.
“In traditional law firms, there is a fixation on winning new clients, people would much rather go hunting than become farmers. But what about the clients you’ve already got?”.
Buying, he goes on, happens out of human interaction. So out with brochures and leaflets, which have “uncertain outcomes and questionable effectiveness”, and in with personal introductions.
“When one person introduces you to the person they already know, you’ve got a 100 per cent hit rate: you’re going to a meeting with someone who wants to meet you”, he says.
This may sound like Tupperware parties for 21st century legal services but Burne responds: “We talk about ecosystems. None of us live in a vacuum. The best way to get another partner to meet you is to have a good relationship with you first. We do that by spending time with you, by doing great work for you, by being astute, candid and enterprising when it comes to what I charge you.”
Burne cites the latest research on wills, which indicates that 31m people don’t have one, and that 72 per cent of those are between 35 and 54. “That’s most of our client base, so if I care about their business, surely I need to advise them about protecting the wealth they create,” he says.
“As a partner, you raise it in passing when advising about the business; and vice versa, if making a will, you might ask the client whether, as a business owner, they protect their business – two-thirds don’t have trademark protection. It’s a matter of saying ‘Let’s just have a talk because it’s more affordable than you think; when’s the right time to have this conversation with you.’”
There is one last piece to the Carbon jigsaw. Just as the number of smaller financial advisers has shrunk, Burne says the number of smaller law firms will shrink too under the combined pressure of regulation and technology.
“There were 784 new firms created last year. Why? Did so many people want to become a COLP, a COFA, an MLRO, the person organising the PII, etc. I can’t imagine consolidation not happening in the legal profession eventually,” he says.
Carbon, he muses, could be to legal services what Intel has been to computer makers, a neutral process allowing providers to deliver their own branded services, whether they’re a boutique firm or a team coming out of a top 100 firm but not interested in running a firm as such.
“If you’re one of the new law firms – even those going down the ABS path – the fundamental question is whether you want to run a law firm or whether you want to provide great advice to clients who want to work with you,” he says.
“Actually, you probably want freedom and if you’re a quality brand – lawyer, accountant, corporate finance – Carbon can give you that”.
With a seemingly service-neutral approach, Carbon could be the perfect business to float but Burne isn’t sure yet. Perhaps if there were a change in how financial markets categorise legal services based on their structure – are they a professional services business or are they a platform – rather than purely their sector – law.
Either way, external investors look for return on investment that could change the nature and spirit of the organisation, he comments.
For now, though, Burne is happy to grow the business as it is, recruiting more lawyer ‘partners’ and extending its client base.
Carbon’s approach is undoubtedly of its age, part of a wider turning point in the sector where entrepreneurial lawyers seek to develop new thinking and create different models.
It may not be the first organisation trying to breathe new life in the law firm model, but it has perhaps pushed the alternative model a little further.
It if succeeds, it could be the evidence that the liberalisation of legal services could benefit not just clients but lawyers too, who could once again be allowed to do lawyering.
Jean-Yves Gilg is editor of Solicitors Journal