Lawyers are bad at business? Think again
THIS paper recently ran an article warning that for lawyers “doom is nigh” and that they should shape up or ship out. The context was the Legal Services Act and its welcome shake up of the way in which legal services can be delivered.
The article had many solid, good messages: in summary, cutting overheads and office costs, analysing profitable and unprofitable clients, understanding clients’ businesses and planning your growth in harmony with their own. And these are good housekeeping tips for any business.
BUSINESS PLANS
But most, if not nearly all, law firms of any size already do all of these things. Some better, some worse. We have gone on the Harvard/Cranfield/AN-Other business school training at vast expense. We have analysed our clients and written detailed strategic business plans. We have senior strategy meetings and pore over detailed diagrams showing client value and profitability. We outsource office services and employ professional office managers. Why? Because lawyers are business people just like their clients.
The article truly refers only to those law practices where the “pile it high, sell it cheap” approach will work. Quill tipped conveyancing pens scratching in the candlelight which can be done in bulk by “Tesco Law”, cheaply outsourced to India. The mythical legal factory in an industrial park. If it was such a good idea why haven’t things gone that way already? It was possible before the Legal Services Act. And for many of those who have tried that model it has not always been a happy experience. Remember conveyancing wholesalers Hammonds Direct? They went into administration.
The truth is that most legal firms do not do this kind of work. And if they do, they add value with services that are either deeply personal or provide wider advice and guidance. More the adviser or friend than the conveyancer. In the City, most law firms undertake bespoke complex work that would not fit into a Tesco, buy-it-off-the-shelf model. Clients will not and do not pay for piles of documents. Good lawyers don’t just draft – indeed the best lawyers draft very little.
In my own firm, I spend far more time advising on how complex finance is to be raised in different ways to the past, connecting clients with people they need to know for the future success of their business, thoughtful solutions to tricky business problems and making it easier for businesses to operate day to day. My experience is that there are two key themes to making money: the trusted adviser and the innovator.
Trusted business adviser has been the dominant theme for most established firms for the last few years. It means understanding your client’s business, making sure that you are helping them to make the right decisions for their business. Not just legally but in terms of market trends and opportunities. It means being involved in planning and strategy, not just execution. Giving strategic advice. Not just responsive advice.
Innovation and creativity are not words generally associated with lawyers! Yet to lead the market, lawyers have to be extremely creative and innovative to help create new products and find ways to generate wealth for our clients. Last week, I won a major legal award for innovation (the “Hot100”). My innovation is to set out a blueprint for bringing new sources of finance into housing associations when public money is in short supply. In addition, I designed a legal structure for a client where you can buy a home without a deposit or conventional mortgage.
When mortgage funding is scarce and first time buyers can’t raise a large deposit, and where it doesn’t look like that situation will change very quickly, new ways of getting people into home ownership are required. We achieved this through collaboration and cross-practice group thinking. As a firm we aren’t alone in creating solutions for our clients and it is time that the outdated perception of the legal sector changes.
Natalie Elphicke is a partner at Stephenson Harwood. [email protected]