By Jon Whittle.
Law firms need to harness the power of non-legal business talent if they are to thrive in the evolving legal ecosystem because being a good lawyer is no longer good enough.
There is, in my view, a structural flaw at the heart of many law firms. It is an issue of ethos and culture that can, if left unchecked, become the barrier that prevents talented lawyers building first class, commercially successful legal businesses.
In this piece I challenge Law Firms to test whether they know how to harness the power of non-legal business skills to advance the aims of their business. Can they build a business plan that recognises and properly utilises non-legal business skills to drive their firm forward?
For generations, law firms have been owned and run by lawyers whose primary competition has been other law firms, all of which have also been owned and run by lawyers. Additionally, regulation has actively prevented legal services being sold by firms who are not owned and run by lawyers. This has led, inevitably, to a world in which all law firms have been able to thrive and develop without having to deal with the normal pressures of open market competition.
No other commercial industry that operates on a global scale has been able to grow so big and to be so successful whilst at the same time investing so little intellectual or commercial effort in areas such as Sales, Marketing, Customer Service, HR or even Logistics.
The global legal market is now in flux and changing more fundamentally than ever before. Technology and deregulation are driving new and different forms of competition in the supply market whilst, at the same time, a new generation of clients are demanding that law firms behave like regular businesses. Clients are no longer prepared to accept the take-it-or-leave-it approach of traditional law firms.
No other industry puts their commercial strategy solely in the hands of the people that make the product and yet the legal industry continues to put 99% of the control in the hands of lawyers. Success in the new ecosystem will require this to change. Law firms must learn how to build authentic commercial skills into the heart of their operations and how to put these disciplines at the centre of a law firm’s business planning. A properly developed commercial strategy will be crucial if firms are to thrive as the market starts to rid itself of the protections traditional law firms have previously enjoyed. Every modern law firm will have to rewrite its entire business plan for the future world.
“75% of lawyers do not think that the law is a service industry”. (source: Jon Whittle, Lexis Bellwether Survey 2016)
This is an interesting statistic that often divides opinion amongst lawyers but rarely surprises those who work with law firms. For some, the statistic is a shocking indictment and axiomatic of the problem that lies at the heart of the legal industry. For others it is stating the obvious – of course lawyers don’t work in a service industry and it entirely misses the point of the law to suggest that lawyers should behave like store-keepers.
The view that the law is not a service industry leads to a mindset that promotes legal proficiency over all other considerations.
If left unchecked, this same mindset creates legal businesses missing critical skills that are essential in the modern commercial world. If law firm clients are expecting a service and lawyers are selling something other than a service, then we have a problematic disconnect. In the old world of monopoly supply this did not matter – if all law firms did not con- form to the usual behaviours of service industry suppliers then all were equally difficult to deal with. In the new world order if law firms do not build the ethos, the structures and the processes of service into their business DNA then they are going to fail.
Law firms, owned and run by lawyers, are running the risk of being left behind in the new world order. Most firms have, of course, incorporated non-legal skills into their operations and it is now not uncommon to find Marketing, IT, HR, Finance and Administration specialists working within law firms. The challenge is that firms often lack the will to use these skills effectively. In almost all circumstances the balance of power, the decision-making heart of a legal organisation, still rests, exclusively, in the hands of a management team composed of lawyers.
This means that decisions about strategy, about commercial direction, about how the firm sets itself up and goes to market are often taken in an environment where non-legal skills are not just absent but regarded as essentially irrelevant.
To build a successful commercial law firm, we need to look at the business plan. In my experience the business plans of law firms can be commercially unhelpful. Law firms focus on the development of their product (legal services) and tend to pay lip-service to areas such as market positioning, sales, marketing and commercial levers. Starting from first principles and rebuilding the business plan can help law firms structure their operations in a way that gives appropriate value to each of the commercial drivers. A good Mission Statement is the sum of the parts of a good business plan and a good business plan draws together all the elements that determine why the business can succeed. I would contend that many law firms need to invest more energy, time and resources incorporating the non-legal elements of a successful business plan into their operations.
A good business plan starts with a simple description of what the business is for. In head- line this will include a mission statement and will explain, in basic terms, what the company does, why it exists and why it is unique. I would challenge law firms to see if they can describe their company and its mission in a way that would pass the following test: Can you spot your own Mission Statement if all names and locations and other identifiers are removed? As a research exercise I took the Mission Statements of ten well-established, mid-sized law firms and took out the names, locations and any other ‘obvious’ means of identifying the firm. The Managing Partner from only one of these ten firms could, subsequently, recognise their firm’s own Mission Statement from the list. Essentially, they all said the same things, there was nothing unique and all described the businesses along the same lines.
If a law firm has a Mission Statement that sounds something like the example below then I would suggest that the firm is going to strug- gle to build a successful law firm in the new legal ecosystem.
“We work with our clients to deliver their business goals. Our firm uses state-of-the art legal services to support our work and everything is tailored to our clients’ needs regardless of their size. We take our time to listen to and understand our clients’ needs and ensure that they get a solution that directly matches their specific requirements.”
A law firm should be saying something about their business that is unique to them, that de- fines who they are and what they do. If a law firm’s Mission Statement could belong, equally, to any one of ten other law firms then how can a prospective client possibly choose and how does the firm know where to invest or how to build a strategy for growth? Equally, how would they defend themselves from competitor attack? A good Mission Statement needs to be written in a way that enables a potential client to understand instantly what a firm stands for. Everything a firm does hangs, directly, from the Mission Statement – it defines the business and must be unique to the business. No other firm should be able to claim your Mission Statement as theirs.
In a world of rapidly increasing choice, legal market deregulation and growing client power it is vital that law firms have a clear understanding of where they sit in the market. They need to know where opportunity lies and where threat exists. They must have a clear understanding of their strengths (and these need to be defined in relation to the market) and where there might be weakness in their total offering. If a law firm has not tested their business against these metrics, then they are exposed. Significantly, it is important that the firm tests all aspects of their operation against these metrics. All too often firms measure their strength and their weaknesses purely, or even exclusively, on their own perception of the quality of their legal work. In essence, they only look at the product and neglect to think about the market in which they operate and what their competitors are doing. They also often neglect to look at non-legal providers of legal services as competition. Again, being able to take a holistic view of the market requires a view that embraces a wider perspective than that of the legal talent.
The balance of the complementary legal and commercial skills should be determined by the nature of the firm. The firm needs to know what sort of business they are running and structure their management and operations accordingly. I would argue that law firms fall into three distinct categories, all of which require a different approach to the market and a different set of skills and operating structures.
Product Led Law Firms: Where the firm delivers its legal offering in a way that different from the competition, is defend- able and would be recognised as distinctive by the clients they serve. Such product led differentiation could be in the form of standalone technology or software, the use of AI or Big Data applications, integrations with other jurisdictions or disciplines. Anything where the legal service cannot be copied or replicated easily by a competitor.
Market Led Law Firms: Where the law firm serves a defined market niche or provides a legal service to a specialist audience. This often manifests itself in law firms that serve extremely specific industry niches, for example “legal services for vineyards” or specific legal niches, such as “employment law for the clergy”. The defendable position here is not so much the legal service as knowledge of the market and the unique requirements of the client base.
Sales Led Law Firms: Where the law firm’s success is driven by some aspect of the ‘way’ the firm works. This is the most difficult to define and, equally, the hardest to defend. Any USP that the firm may have is a function of the manner in which the firm serves the market rather that the legal ad-vice it produces or the market niche it serves.
In my experience, the overwhelming majority of law firms are Sales Led. Equally, in my experience, many of these firms, particularly those run by lawyers will shout themselves blue in the face trying to persuade you that they are not.
They will tell you that there is something unique in their legal service (the product) that differentiates them from the competition.
Often the argument is that their experience and seniority offer a better ‘quality’ legal service than that of the competition. Sometimes the argument is that they are bigger (and big is, therefore, better) or older (and therefore more trustworthy) or younger (and therefore more friendly). In most cases, under the lid the legal service is essentially the same.
In conventional, non-legal businesses it is entirely normal for management teams to be built around a wide range of complementary skills. Alongside Executive and Operating Officers one would expect specialists in Finance, HR, Marketing, Customer Service, Sales, Product and Technology. The management team work to balance the cost and benefit of each lever and completely recognise that the whole is, by definition, greater than the sum of the parts.
For some law firms this balance of skills and equality of representation is particularly difficult. It is often challenging for firms to get over the hurdle that the ‘product’ (the legal advice) is only one part of the greater mix. Clearly, in almost all law firms, the greatest cost and the greatest benefit comes from the legal talent and the services they deliver but that should not then dictate the business plan nor should it dictate how that plan is delivered. Particularly in Sales Led law firms the role that non-legal talent can play in the delivery of a commercially successful growth strategy is paramount. The only meaningful way to deliver a good Mission Statement is to focus on all aspects of the business offering. In this context, in the new deregulated environments, it will be Sales Led law firms who are most vulnerable to attack from non-legal providers of legal services. If a Sales Led law firm is able to pull the levers of Marketing, Sales and Customer Service effectively then it can compete with non-legal providers for whom these disciplines are already a core component of their business set up.
In an environment where legal services essentially deliver the same client benefits regardless of supplier then it becomes ever more important for marketing and sales functions to drive individual firms to prominence. Providing compelling arguments in favour of the service from a particular law firm requires a sophisticated understanding of the market and the requirements of potential consumers of legal services if one is to stand out.
It also requires a pro-active approach to marketing and sales - one which is designed to attract and retain the target customer. It is important to recognise that effective marketing and sales in law firms does not require specialist legal knowledge or an intimate understanding of the law. For the majority of law firms, marketing and selling legal services requires, first and foremost, an understanding of the potential client and an ability to talk, using the client’s language, about how the firm can address their needs and requirements.
Those who buy legal services, by definition, will be buying goods and services from other, non-legal suppliers. These suppliers will have invested heavily in developing and managing effective marketing, sales and customer support operations.
When law firms behave so radically differently from other commercial enterprises it is not surprising that their clients find them so challenging to work with.
Law firms have a tremendous opportunity to thrive in the new legal eco-system. The market for legal services continues to expand whilst the social and business disruption caused by a global pandemic will lead to increased demand for customer-centric legal solutions. Law firms that can deploy, effectively, the tools, skills and business models that have been so successful in other professional markets will be best placed to serve this new demand.
About the Author
For the last ten years, Jon Whittle has been working with law firms to build strategies and tactics that deliver sustainable, competitive advantage. Jon’s focus is on helping law firms develop into strong commercial businesses. He specialises in building value using market intelligence and customer insight and runs his own consultancy business (jonw@jonwhittleconsulting.co.uk) whilst also working with Viv Williams Consulting (www.vivwilliamsconsulting.co.uk).
Jon previously spent nine years in a senior leadership role at LexisNexis and is a recognised authority on how law firms can develop and grow. Jon is also the architect and author of the widely read LexisNexis UK Bellwether Reports, which have played an important role in shaping the strategic development of many law firms.
Prior to LexisNexis Jon ran a start-up and worked in management consulting having previously worked for two decades in board level positions driving commercial growth for some of the world’s largest intellectual property and media companies. Jon also has extensive M&A experience both in the UK and Internationally.
As well as providing consulting services directly to law firms Jon is a regular speaker at legal conferences and seminars and is frequently invited to contribute thinking on the strategic future of legal markets.