Organisational management and the re-alignment of services

Many firms have invested huge amounts in IT and marketing initiatives, but some are now realising that better service means a complete organisational restructuring. Jacquie Macdonald, head of corporate development at Blair Cadell, examines how law firms are responding to the competitive climate and asks whether they could learn anything from the organisational make-up of other professional firms.

Rivalry among professional firms has intensified over the past decade. Fierce competition has meant that many practices have been forced to redress the ways in which they operate. Investment in IT and marketing, and the addressing of organisational management are a long way from what many might regard as traditional boundaries. This is not a unique challenge to any one profession, but a universal issue, currently faced by the majority of professional service providers – legal, accounting, medical, surveying, or whatever other field.

Many firms have been quick to invest in IT, branding and marketing, but a growing number are beginning to realise that this may only be skin deep and that investment also needs to be reinforced through associated organisational restructuring programmes. Consequently, two very different approaches towards the re-alignment of services have emerged within the legal sector.

Some practices have sought to refocus the organisation’s work by streamlining to become niche players, while others have sought to integrate additional support in an attempt to provide clients with the broadest range of services. While the success of these approaches may remain debatable, there is no doubt that issues such as these reflect the challenges facing professional services as a whole.

Few legal firms today – large, medium or small – can remain competitive by offering clients an all-embracing legal service. Specialisation has become crucial to ensuring a firm’s success. The days of practitioners offering clients comprehensive advice, in areas including corporate law, conveyancing, criminal and probate, are long gone. For small firms the future might look less rosy, especially when key areas of the practice are threatened by stiff competition from larger firms capable of undercutting fees and providing clients with an equally efficient service.

These problems are not exclusive to the legal profession. Areas like accountancy and financial advice, where small firms have experienced difficulties in competing with larger and well-known organisations, are equally concerned. Clearly change needs to be addressed across the board.

Focusing a practice on a specific sector of work can allow a firm to concentrate on targeting clients and thus improve efficiency and reduce overheads. The adoption of such practices has played a pivotal role in the growth of volume-driven companies.

Such volume-based legal practices enable a firm to access a greater number of potential clients from a wider geographical base. Initiatives such as direct-dial conveyancing, or personal injury services have been popular with the general public. Legal matters may be resolved by telephone or via the internet at great speed and consequently, reduced costs.

Clearly, volume-driven practices have helped to demonstrate that the legal profession is equipped and comfortable with exploiting the latest technology to provide for clients, but the central question remains: should client care and services be prejudiced for the sake of the profit margin?

Unlike most other forms of business, the legal profession has considerable and heavily regulated ethical responsibilities and standards of conduct to maintain. Risking this to boost the profit margin is a dangerous precedent, potentially (and unacceptably) placing the firm’s interests before those of the client.

Improperly managed volume-based legal services may damage long-term relationships with clients and the personal service may no longer become possible. Ironically, it is in areas of work like conveyancing and personal injury, where clients are placed in sensitive and vulnerable situations, that the service may be jeopardised the most.

The success of volume-driven work has been seen in the ability to catalogue a given number of variables in relation to each different case, enabling standardised procedures and practices to operate: a scenario that fits well with the parallel development of IT systems and networks.

The nature of services offered by volume-based practices may, however, have the effect of preventing the practice from competing in the broad legal arena and will be dependent upon quantity, rather than quality of service offered. The prospect of a client returning in the short term is reduced. After all, buying a house or experiencing an injury are hardly everyday occurrences and both are frequently life-changing events.

It is somewhat ironic that firms with the largest numbers of clients passing through their books, often find themselves in a weaker position when it comes to successfully developing effective client relationships and maintaining clients.

Providing a specialised service in areas like personal injury, which can be coupled with attractive “No win, no fee options” have undoubtedly helped to redefine the role of the law firm. But whether this has made a positive impact upon the legal profession remains debatable. The sensationalism often associated with volume-driven practices may not enhance the reputation of the legal profession and perhaps more tellingly, other professional services have failed to adopt similar strategies.

Aside from volume markets, some professional firms are looking to widen their service base within their particular area of expertise, with the promotion of complementary, integrated services. This can significantly alter the way in which firms operate. The uptake of non-legal experts within the boardroom and the creation of specialist departments within the firm are just two examples of change within the sector that would have been almost unheard of 20 years ago.

Without a doubt, the key issue for most firms remains the ability to juggle client expectation and requirements with the profitability of the firm. A growing number of practices believe that one of the most effective ways of achieving this is by offering such integrated services.

In the professional community, this merging of expertise has been historically resisted on grounds that it may tend to be anti-competitive and that potential conflicts of interest may arise. UK law firms are currently prohibited from trading as outright multi-disciplinary practices (MDPs), but debate within the professional governing organisations is now increasing. In England, relaxations to the rule are being actively considered.

While it remains incompetent for law firms to brand themselves as accountants or surveyors, it is nonetheless possible for practices to hire qualified professionals to provide clients with a greater depth of advice within these areas.

Crossover services, where additional services are being integrated within an organisation’s core level of work, are increasing across a wide range of professions. For example, medical centres frequently offer medical and dental advice. This is not to suggest that a dentist could prescribe medication for a cold, no more than a doctor could undertake dental work, but placing both services in the same building allows the practice to build and continue to develop its relationship with the client.

In many cases, professionals working in related fields are recognising that clients often need more than one service – and it is often practical for small independent practices to combine their resources under one roof. This can offer a broader client base a wider range of professional services, while at the same time reducing the operational costs of the practice.

Solicitors are beginning to realise that an effective practice does not necessarily have to depend entirely upon income generated through legal transactions. Even within the present rules, the ability to harness the potential offered by effective collaboration and integrated expertise enables law firms to place themselves at the centre of the framework. As well as providing a wider range of services, such firms can ensure that clients are more likely to turn (or return) to the firm for guidance upon their broader needs.

Expansion through diversification has undoubtedly helped professional service firms to improve client relations, while ensuring that core values associated with solicitors are retained. Perhaps the best example of successfully integrated legal and non-legal services can be found within conveyancing practice in Scotland.

Unlike the rest of the UK, in Scotland it is solicitors rather than estate agents that are responsible for generating the vast majority of property sales. Services offered by firms may include financial advice, arranging a mortgage, co-ordination of surveys, as well as estate agency services. Although every practice differs slightly, by offering a broad range of services, a client chooses a firm to act for them on the grounds of services available, rather than simply the price of the final transaction.

Combining legal expertise with estate agency services also opens new opportunities for generating income as well as allowing firms to offer attractive all inclusive packages to clients.

The successful integration of areas such as financial advice or business consultancy can play a key role in building and maintaining client relationships. Professional service firms are often perceived as being inaccessible, simply because many people feel that they should only call upon the need of professionals at times of dire need. This perception must be changed and the best way to do achieve this is by providing a broad range of services that are relevant to the needs of the client.

There have been recent proposals to relax the rules on MDPs in England, which have generated both support and opposition throughout the legal profession. If such rules are introduced, allowing firms to combine skills for clients, this should not automatically open the floodgates and allow every legal firm to offer other professional services. If such rules are relaxed, a stringent framework must be adopted, clarifying grey areas that could jeopardise a practice’s integrity, professionalism and most of all, the high-level service offered to clients.

Jacquie Macdonald is head of corporate development at Blair Cadell Solicitors, Edinburgh. She can be contacted at: jacquie@blaircadell.com