Posted by Simon McCrum, a member of Legal Futures Associate Law Consultancy Network
McCrum: It doesn’t have to be this way
It’s slightly tongue-in-cheek, but let’s see if we can design a business model that is doomed to struggle and which will ensure that we miss out on the profit and cash opportunities that come with providing high-value services at high prices in a near-monopoly situation.
I think if we wanted to make sure that we missed out on the fruits of what looks like a very healthy set of circumstances, the first step would be to make sure that we didn’t stand out from our competitors. The last thing we’d want would be people think there was something different and special about us.
A key tactic after that would be to make sure service levels across the business were patchy at best and awful at worst – and make that part of a wider culture where individuals and teams could behave as they wished.
We could build in features such as not keeping the client posted, using jargon, not returning calls, making sure our bills were surprisingly big, and not dealing with work in a timely fashion. If we rewarded lawyers for their personal billings, that would ensure that files weren’t delegated to a team that could keep them moving.
All these features of our business would guarantee that clients would leave us, or certainly not come back to us next time they needed help. We might even be able to get them bad-mouthing us in their local personal or business communities.
The next step would be to ignore the potential value of everyone we acted for. We’d ignore the fact that everyone who bought one thing off us would almost certainly need other things that we could supply – either right now or at some time in the future.
As well as not delivering a good service to them, we could also avoid the value that this would bring by making sure that every client was put into a ring-fenced silo rather than being feted by the business as a whole. That way, they wouldn’t become clients of the whole firm, which would of course bring the risk that they’d start using us for a range of services.
Going further, if we were hell-bent on undermining our business, an added problem we could introduce would be to allow individuals amongst our staff to build up good relationships with clients so that when they left they could take the clients with them.
Whilst on that, we could hasten the departure of our good people (with our clients) by making them unhappy.
This isn’t just about paying them less than they’d get elsewhere – we could also do it by not having a fair and transparent career ladder, by having a culture where ‘favourites’ blossomed and others were overlooked, not involving them in wider team and business dimensions (thus ensuring their development was limited) and by moving the goalposts when it came to promotions criteria.
Of course, even despite our best efforts on these fronts, some clients would get through the net and some work would get done. We would have therefore to make sure we didn’t make any money on that work.
Money is split into two parts: profit and cash. We could make sure we made no profit by charging low prices even for high-value work. We could make sure that our low price covered all work on a matter, even unexpected and extra work.
We’d have to avoid the efficiencies that come with technology. We could make sure that time spent on files was not recorded, and that recorded time was not all billed. That’d all get profits down nicely.
We’d have to avoid looking at which parts of the business were and were not profitable, and would have to avert our eyes from the cash impact of each part of the business (taking into account their salaries, write-offs, unbilled disbursements, VAT on their unpaid bills, their marketing spend etc).
To be honest, we’d be better off not looking at profit at all – that’d be far too careful an approach. We could just focus on turnover; after all, that’s easy to get up and easy to boast about. We could then worsen the position by allowing clients a long time to pay their bills.
And no problem with the VAT that would have to be paid to HMRC – we’d pay that. And we could make sure that the firm paid disbursements rather than getting clients to pay these. It goes without saying that even though clients hadn’t paid bills, we’d carry on working for them.
In these ways we’d get the business into a nice mess, which we could worsen by taking out cash even though the profit and cash wasn’t there for the taking.
Although any normal business would want to make sure that their lawyers sell as much time as possible and get paid for it as quickly as possible, we could do some real damage to our business if we reward them for doing something else – for example, just for sending bills out, but only up to a fairly low level so that in effect they’d only need to work part-time to hit those billing levels.
A heaven-sent opportunity to damage the business then comes from making mistakes on files. It’s not widely realised that law firms are year-to-year businesses – if we don’t get professional indemnity insurance each October, of course the lights get switched off.
We can make sure we don’t get our insurance renewed by allowing our lawyers to take on any case without controls and risk assessment, and to let our junior lawyers deal with complicated cases without supervision.
If we add further risk to that by making no mention in our retainer letters of what we are and are not dealing with, and not keeping notes and letters on files to show who has said what, we’ll be well on our way to seeing our claims record go South.
Of course there’d always be some clever-cloggs who wanted to change things for the better. Partners meetings would make sure nothing would come of this though.
It’s hard to believe that all of these aspects are abroad in our profession right now. It’s hard to avoid them all, as I know from personal experience. It doesn’t have to be this way though. A bit of focus, clarity of thinking, time, and money, can bring real change, and quickly.
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