Date: 06/07/2012
Subject Area: Strategic Planning, Administration and Support
We are witnessing structural change in the legal industry at this time. The advent of ABSs, LLPs and ProcureCos are all possibilities for providers of legal services. However, they are in themselves not a strategy but simply possible structures which may or may not be beneficial in the operation of chambers. Rather than select a structure, chambers need to identify a sustainable strategy and consider an appropriate structure after they have made these initial important decisions. They need to understand the likely direction of the market and be prepared to differentiate based on their real strengths. They need to decide which direction they are heading and how they are going to get there.
It is a simple fact that a £4bn profit legal market is bound to be attractive to new entrants with low cost operating structures. These new entrants bring with them existing large loyal customer bases. The questions we should be asking ourselves are: How do we react? Do we work in co-operation? Do we compete head on? Do we adopt a mixture of both? Or do we firmly stick our collective heads in the sand and hope it all goes away?
The last of these really isn’t an option if you want your chambers to survive these increasingly competitive times.
According to Professor Stephen Mayson, the impact of these new entrants could be catastrophic with the shift of over £1.5bn from traditional legal practices to them. This would primarily impact the provision of retail legal services, and could bring about the potential demise of over 3,000 law firms. These law firms tend to be multi-disciplinary high street practices. What’s more, these law firms are the Bar’s clients. So what is the impact on chambers and what are they going to do about it?
The market is also likely to see an over supply of law graduates, some of whom will join the ranks of the new entrants offering a more commoditised version of law, whilst some will follow a more traditional route into law firms the length and breadth of the country. Others will struggle to find work. This could present an opportunity for chambers who are considering the hiring of paralegals for high volume, low value work. Effectively chambers would be getting relatively cheap labour and have the ability to provide an end-to-end service to the client. For example, it is possible to use paralegals as the front end for Direct Access where there is a lot of preparation work and liaising with members of the public. There is also space in the market for the establishment of paralegal businesses who would then be able to outsource their skills to chambers as and when required.
Simultaneously, we will see the increase of legal process outsourcing and off-shoring, where firms engage with overseas suppliers to handle cases in order to maintain a low cost base. Again, this is an option for chambers seeking to establish a ProcureCo or other such ABS style business where they could run the whole supply chain, outsourcing the routine legal processing. However, this would require a significant understanding of the legal process outsourcing market and a great deal of time management to ensure quality and service standards are maintained.
Client expectations are also evolving more rapidly than before. I must agree with Chris Kenny, Chief Executive of the Legal Services Board in his recent address to the Westminster Legal Policy Forum when he spoke about the changing expectations of clients and the legal industry's need to meet them. Today’s technologically-savvy consumers expect their lawyers to utilise a mix of face-to-face correspondence, telephone and online advice. As many as 50 per cent of individuals make their initial contact by telephone, many having previously used search engines such as Google to establish an understanding of the chambers and members' expertise prior to calling.
The urgency around their services search is also increasing. Chris Owen, Chief Executive of St Philips was correct when he stated some time ago that clients want “a good service at a good price … and they want that service now”. The world we live in is information based. People are used to having information at their fingertips and are impatient if it’s not forthcoming. They no longer sit around and wait for information to come to them, they actively go and get it, usually via the internet and peer recommendations.
Another thing to remember is that clients are consumers, and as such behave in the same way. Consumers are much more likely to shop around based on a priority list which includes quality of customer service, recommendation, timeliness and price. They do not necessarily make a decision based on price alone, particularly if their matter is one of great importance to them. This is where chambers need to be more proactive in marketing their wares, providing full details of the services they provide.
Disruptive technologies are also driving change within chambers. The advent of social media is changing the way we do business. Chambers need to be much more reactive to the needs of clients. How do those clients want to be communicated with and more importantly, when? What technologies do fee earners need? Do they need to be truly mobile?
It is inevitable that there will be other technologies invented that will require chambers to rethink the way they work, the services they provide to their staff and their engagement with their clients. Chambers need to be keeping an eye on those service industries that are further developed to research which technologies are being used that could be of benefit to them.
Finally, for those involved in public-funded work, there are likely to be significant changes ahead. How chambers decide to deal with Legal Aid could be crucial to their success. Bidding for contracts outright would not be recommended. Having organised numerous ProcureCo events in the last year to look at how chambers could manage these competitive processes, it became evident that bidding for a whole contract alone is not considered to be a sensible option. The tendering process is not an easy one and the requirements for supervision would increase the cost base of chambers to such an extent that benefits of winning the contract would be eroded. Therefore, tight collaboration with other law firms and providers seems to be the most practical way forward.
The probability of an NHS Direct-style Legal Aid operation looks increasingly likely. This will undoubtedly provide public sector cost savings for the Government in the long-term, but who will run the service, who will be given access to Legal Aid and how will it facilitate the needs of the most vulnerable in society?
Many questions currently remain unanswered. However, one thing is clear: chambers need a business and marketing strategy to enable them to survive and thrive.
We are witnessing structural change in this industry now. The advent of Alternate Business Structures, LLPs and ProcureCos are all possibilities for providers of legal services. However, they are in themselves not a strategy. They are simply possible structures which may or may not be beneficial in the operation of chambers.
Rather than select a structure, chambers need to identify a sustainable strategy and consider an appropriate structure after they have made these initial important decisions. They need to understand the likely direction of the market and be prepared to differentiate based on their real strengths. They need to decide which direction they are heading and how they are going to get there.
What market are they in? What do they want to be in? What is their competitive advantage? What do their clients want?
Chambers must be clear about their real strengths and be prepared to build a strategy around them in order to survive. Equally they need to acknowledge their weaknesses and determine a strategy to improve them, or to actively avoid that part of the market entirely. They must fully consider what they need to provide for clients who are prepared to pay for their services. That might include the provision of integrated services with other professionals such as accountants, insurers, surveyors and others. It might be as simple as finding a niche close to chambers and then recruiting the relevant Barristers to service that niche, thus building a specialism in that area and marketing the service as experts in this particular field.
Clients’ desire for online legal services also needs to be addressed by chambers. We are now at a point where the users of web-based technologies have exceeded the more traditional clients. This is an opportunity for chambers to match client desire and provide cheaper online services. It is an example of the need to place clients at the centre of a law firm’s strategy, and to appreciate how technology is an enabler to this strategy.
Chambers directors need to look at how they put the client at the heart of the operation and determine what really “adds value” to the client and the client experience. They need to find ways of achieving this without increasing the cost base to chambers significantly.
We should also not dismiss the possibility of established law firms, new entrants, funders, technology partners or ProcureCos driving joint ventures. In the chambers of the future, there is no one-size-fits-all, but what is clear is that the established and traditional method of providing legal services must change. It must change because new lower-cost entrants will cause it to. It must change because clients demand it. And it must change if chambers want to survive and maximise upon the opportunities presented to them within the evolving marketplace.