Law firms act as beacons to show the way
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“When you think about the legal profession, what is remarkable is how little it has fundamentally changed over such a long period of time,” says David Wilkins, faculty director of the Center on the Legal Profession at Harvard Law School.
Law has been resistant to some of the bigger changes sweeping the world economy. Globalisation, the rise and speed of new technology, including mobile technology — “all these things are transforming the economy, but they aren’t transforming us”, says Prof Wilkins. “Law is a lagging indicator.”
Submissions for this year’s Innovative Lawyers report for Europe indicate change at law firms is gaining momentum as they navigate a rapidly evolving legal market. Whether integrating back-office staff into client-facing teams or lending trainees to clients to add value, law firms are redefining the capabilities of their people. Other ways in which they are adapting include the decline of the billable hour and streamlining procurement to cut costs.
The financial crisis of 2008 was a catalyst for change. The growing power of in-house lawyers put greater demands on firms, including pressure to cut costs. “Firms have had to figure out how to improve efficiency to maintain margins,” says Prof Wilkins, adding that many global firms have been posting record profits. For some, however, “it is because they’ve been cutting costs rather than growing revenue”.
Pinsent Masons, after years of acquisitions, realised it had no standardisation across departments for procurement from suppliers. Each team, from information technology to human resources, handled its own procurement, with its own contracts and unaided by the firm’s own lawyers. “It was like the cobbler’s children,” says Myles Blewett, legal director responsible for procurement. “They weren’t getting the same expertise that was applied to client contracts.”
Now, a team of 10, including lawyers specialising in contracts who are allocated exclusively to procurement, work with 50 employees from various teams who are responsible for their team’s purchases. One benefit of this approach, says Mr Blewett, is the ability to apply the firm’s values to all purchasing decisions. “Growing a business responsibly is a key issue and something our clients expect,” he says.
Pinsent Masons ensures procurement follows best practices on modern slavery and anti-bribery measures as well as diversity, inclusion and the environment.
The new approach has allowed the procurement team to reorganise and simplify supplier relationships. Previously, nine suppliers handled document archiving, for example; that has been reduced to just one — at a significant saving. By streamlining its procurement spending of £72.6m, the firm has saved a total of £10.5m since 2014.
As well as cutting costs, firms are rethinking how they attract and charge clients in a competitive market. “The amount of work clients are willing to pay a premium for is shrinking,” says Prof Wilkins. “The more sophisticated clients get, the more they see that actually a lot of legal work is repetitive and can be standardised.”
Number of suppliers handling Pinsent Masons document archiving before streamlining
Firms are being squeezed by new competitors that are rejecting the traditional law firm model, he says, from start-ups offering legal staffing and electronic discovery platforms to multidisciplinary law firms that cover a wide range of client needs.
ASB Law, a self-styled “progressive law firm” with two offices in south-east England, has done what others have talked about for decades, says managing partner Andrew Clinton, by moving away from the billable hour. The move, says the firm, has saved its top 30 clients a third on legal costs.
Cost certainty for clients is part of ASB’s strategy. This includes fixing prices with clients at the start of a transaction, based on client needs and a sales decision on the long-term value of the client relationship to the firm. “Strategically, we are trying to achieve more predictable revenue from fewer relationships,” says Mr Clinton.
The firm uses a cross-departmental approach to providing services, liberating each department from the need to track its own transaction revenue as a measure of performance.
This blended approach has helped ASB diversify its offerings, even if it means looking outside the firm. “We don’t have all the answers,” Mr Clinton says. “Our role is to uncover a need and harness the resources in our organisation, and to work with other, external service providers.”
Cuatrecasas in Spain has also looked in on itself to add value for clients. When the country changed its VAT regulations and set an ambitious deadline for vendors to comply, Cuatrecasas turned to its internal accounting team. Having taken part in two pilot programmes, the firm realised it could use its experience to clients’ benefit, says Meritxell Yus, head of the firm’s indirect taxation practice.
She notes the collaboration between the firm’s accounting department and its IT team. Client meetings would involve “not just our tax advisers but our accountants and IT guys”, says Ms Yus. “Our back-office team — which is huge because we are a big law firm — became a front-office team.”
The firm was able to provide cross-departmental advice to clients. The accounting team added so much value for clients that the firm was able to make significant profits billing for their time. Ms Yus is confident departments will continue to collaborate. “I was very proud of giving visibility to our back office to clients, because they are working but you don’t see them,” she says. “And they became known among the lawyers and our clients, which reinforced the sense of collaboration as a company.”
Creating value for both clients and the firm was also behind the decision by Foot Anstey, based in south-west England, to redesign its programme for young associate lawyers to include a “virtual traineeship”. This allows trainees to spend a day a week on in-house projects for clients, free of charge. The trainees gain experience in diverse areas and stretched in-house teams gain a resource to handle smaller legal requests. Partner Patrick Howarth, the originator of the scheme, says it has led to more collaboration among legal trainees, and exposed them to new and complex problems as well as to clients.
“The mystique that used to insulate law, that made people think it was different and that only someone who specialised in the dark arts of law could understand, is being rapidly eroded,” says Prof Wilkins, who warns that firms should resist the temptation to throw innovative products at legal problems without them being a considered part of a solution. “If you take the mentality of tech and apply it to law, you risk thinking that the only thing that matters [is] shiny new toys.
“Clients don’t have legal problems, they have ‘problem problems’, of which they would like to make the legal part as small as possible so they can focus on the business part.”
Business of Law
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- Managing and Developing Talent • In-house
- New Business and Service Delivery Models • In-house
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- Strategy and Changing Behaviours • In-house
- Technology • In-house
- Accessing New Markets and Capital • In-house
- Dispute Resolution
- Enabling Business Growth • In-house
- Managing Complexity and Scale • In-house
- Creating a New Standard • In-house
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