Going beyond 2010
Some practical steps to help legal firms analyse their situation in relation to the new market in legal services, and identify the best course of action
As we face a General Election, one of the few things that seems certain is that the professional services market is facing real and radical change. Most firms have made it through the past couple of years by cutting overheads to the bone and battening down the hatches. This has allowed them to “survive”, but little more than that, so it is important as we move into the upturn that firms look to the future and take proper and effective control of their business direction.
There will be a number of new strategic options available related to alternative business structures, and in this article I will argue that successful firms will be those that make the most of these opportunities. However, effecting change is never easy and senior people must provide strategic leadership and a consistent and positive message to both their staff and their clients.
Take a proper look at our businesses
We have the opportunity, ahead of the distraction of the election, to take a strategic look at our business and personal direction. The professional services market is unlikely to see a significant increase in business in areas that have been most affected by the recession, so property-related work will continue to be slow. In addition, public-funded projects are likely to be reduced, so firms will not see much new work from this sector. However, the stable areas of business such as family work will continue.
The legal services market is about to be opened up, providing opportunities for new business structures and for people other than solicitors to share profits in law firms. In my view, these changes offer a chance for some radical thinking about how the whole provision of legal and related services can be improved, rather than simply concentrating on doing what we currently do. The firms able to do this will gain a significant competitive advantage by identifying and implementing unique ways of providing clients with increased value and service. For example, it will open the door to bringing in accountants as partners into your commercial department and surveyors as partners in your property department.
Good strategists are able to combine clever analysis and interpretation of market changes with creative and innovative thinking. It is not always easy to find the time to do this, but with the right tools and some time commitment it can be done. I will now offer a summary of five steps that you can take to identify the correct development option for your firm.
Step 1: analyse the market
The first step is to undertake some structured market analysis. You know a lot more than you think you do about the marketplace, the economy and the pressures facing your clients. Having all of this running around in your head often means that you can do no more than worry about it. Taking a few hours to use some simple strategic analysis tools will allow you to sort and prioritise what will have a direct impact on your firm.
For example, an EPISTLE analysis identifies the economic, political, intellectual, social, technological, legal and environmental changes that are likely to impact on legal services in Scotland and your firm in particular.
These might include:
- Economic – the economy slowly coming out of recession, low interest rates continue, bank lending still restricted
- Political – public sector spending reduced, impact of the Gill Review in Scotland and the Jackson Report in England
- Intellectual – more need for specialist legal advice for all businesses
- Social – growing gap between rich and poor results in three distinct legal services markets, more debt pressure and unemployment
- Technological – more buying of services online
- Legal – increasing external regulation for all businesses
- Environmental – more topical for most businesses.
Another way to assess the potential impact of external marketplace changes is to use the scenario planning tool developed by Royal-Dutch Shell some years ago. For example, the worst case scenario for High Street firms may be that Tesco or some equivalent takes away all the basic “easy” work such as wills, executries, routine claims and simple divorces. The best case scenario may be that clients realise the importance of having independent and expert advice from professionals they can get to know and trust. As a result, you can decide whether you want to try to compete with “Tesco” (unlikely) or whether you will concentrate on building your “brand” of approachability and direct practical help with your current client base, as well as building up your reach of the market through bringing in a local accountant as a partner.
Step 2: identify what you are good at
Having worked out the marketplace changes that are likely to have the most impact on your firm, the next step is to identify what your own firm is good at and what the people that work there enjoy doing.
This discussion can be achieved by identifying the core values that everyone believes in and adheres to, so that you know the essential elements that you are not prepared to compromise on. It is also important to ask your clients the same type of questions – why they chose your firm and why they continue to use it.
Step 3: develop options that suit you
The next stage is to combine what you have discovered about marketplace changes and what your firm is good at, to identify the strategic options available to you. Your area of the market may seem to be pushing you in the direction of commoditisation for example. However, if you enjoy dealing with your clients personally you will not want to work with a large number of clients in a “remote” and online way.
I appreciate that some of you will be saying that you enjoy doing large commercial, property deals yet there seems no chance of these happening to any extent in the immediate future. However, if you combine this area of expertise with the elements of ABS that allow you to get new property business partners, you may be able to attract institutional investors who want to be able to run all of their professionals under one fully costed project. You also have the opportunity to do some market research with your existing clients to see what they would like to get out of these new structures, which will help to maintain their loyalty and connection with you.
Step 4: choose what is feasible
It is important to align your strategy with two other important elements – your resources and skills. For example, there is no point in deciding to realign your firm along remote online access by clients to your services if you have neither the IT skills nor the resources to implement it. Under ABS, the new business structures will not be easy to manage and will require that you have high level and sophisticated leadership skills to manage a diverse group of highly geared professionals.
Step 5: implement it
You now need to make all of this happen. It is vital to identify what additional resources and skills you will need and take definitive steps to achieve them. This should be turned into a detailed action plan with a task force set up to achieve it. Once you know where you are going it is much easier to keep focused on what is important to you and not worry unnecessarily about things you cannot control. It also gives you something to look forward to.
- Fiona Westwood runs her own management and training consultancy, specialising in working with the professional sector. A solicitor with 20 years’ experience of private practice, she established Westwood Associates in 1994. She is also a founder member of the Law Consultancy Network (www.lawconsultancynetwork.co.uk). For more information see www.westwood-associates.com .
October 2011 start date for England
New forms of legal practice will operate in England & Wales from 6 October next year, the Legal Services Board has confirmed.
Announcing the timetable, LSB chairman David Edmonds described it as “challenging, but realistic”. He commented: “It gives certainty to the approved regulators, the firms they regulate and to potential new entrants alike. Moreover, it paves the way for real benefits to be delivered to consumers on the fastest possible timetable.”
Businesses hoping to provide legal services will be able to apply for licences from mid-2011. The LSB will consider applications from those seeking to become licensing authorities later this year.
Mr Edwards added: “We have been clear that we want traditional firms to have similar flexibility as well. So we welcome the commitment of the Solicitors Regulation Authority to move ahead with outcome-focused regulation on a similar timetable.
“But we will also work with all potential licensing authorities to ensure that they have not just the framework, but also the skills and infrastructure in place to monitor these new businesses to give consumers confidence that necessary safeguards are in place.”
The LSB will shortly publish guidance explaining how applications for becoming licensing authorities for ABS from approved regulators will be evaluated, following a consultation exercise. This will be followed by final guidance to potential licensing authorities on the content of their regulatory frameworks.