Address the enemy within: the investors are hovering

By Rod Ellis

I put it to you that lawyers are their own worst enemies. Traditionalism, conservatism and cost consciousness within law firms (who supply a world that is becoming increasingly sophisticated and forever changing) means the law isn’t as fun or safe in some quarters as it used to be. Add some regulatory change into the mix and we have a professional Krakatoa brewing.

Harsh but fair, downright delusion permeates throughout all levels of many law firms – from individual lawyers’ aspirations of a “blazing” career path and remuneration to a collective mentality that change won’t happen significantly – not in their professional lifetime anyway.

It’s really interesting to see that investors are now hovering around the profession following the Jackson Reforms. Investors can see the potential – did you know the amount of revenue travelling into lawyers’ pockets nationally is a staggering £25.6bn at the last count. My mouth is watering, where do I sign...?

You hear the investors shout that awful phrase “we want game changers”. Of course they do, a “game changer” can grow and can grow quickly – it’s all about increasing capital value for investors. But we are looking at an industry that has always been about generation of income and the stakeholders (dare I say it the “oldies”) don’t want change, it’s their nature. Moreover, they wouldn’t understand what’s required in “change” anyway.

In a market which is growing steadily but slowly in size (a bit like our economy), what firms are going to grow quickly? Well the answer is no one; it’s a mature market that’s not increasing in size rapidly – meaning rapid growth is not an option. But consolidation of market position is possible and to borrow a phrase from the all dominant British Cycling team – achieving better results from the “aggregation of marginal gains” is possible, but as Wiggo says “that’s bloody hard work”.

Investors want quick and significant growth – that means one thing – changing the way people or entities buy legal services. I am deliberately ignoring acquisition of other firms and mergers – that is a way to grow and quickly but does it have a huge effect on PEP? It’s also not a new idea or a game changer.

What may drive change is the opportunity for large investors to grab huge swathes of market share quickly in a variety of areas of law. The upshot will be that certain people will start to make lots of money, but... you know what will happen then don’t you? If that money is derived from individuals someone in government won’t like it and they will change the rules and the fun will start again. Of course I should say it’s difficult to generalise because we have individuals and businesses buying legal services and their needs and budgets are different.

My point is that lawyers always talk about the value of their relationships and that remains a valuable asset but don’t hang your hat on it. If a 25-year-old set up a law firm today, they would do things differently to a 45-year-old. The crux is that lawyers with their own firms, large or small, are generally older – the 25-year-old client would be invited out for lunch and communicate with you via Facebook over the table whilst also talking to your competitors the same way at the same time! Whereas the oldies say “my business has been built on relationship building face-to-face”. Well, you would have to eat a lot of pasta to keep up with the pace of relationship building and the sheer amount of communication today. People communicate more with their tablets and mobiles now than they do with their spouse, children or friends. Change may be “bloody hard work” but unless senior lawyers look in the mirror and address the enemy within, someone may come along and sweep the carpet (albeit virtual) from under their feet.

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