The very small firm – a case history

Moorcrofts Corporate Law was founded in January 2000 just at a time when the economy was taking a turn for the worse. Businesses, ever since, have been on tenderhooks waiting for a change in the conditions. Adrian Phillips, the founder of Moorcrofts, however, has witnessed the successful growth of his small law firm and is looking optimistically to the future. Hearing some of his experiences, we must wonder, does bigger necessarily mean better?

Moorcrofts Corporate Law was founded on 17 January 2000, and is currently a two partner, five lawyer firm. We specialise in a narrow area of law, being corporate law, IT/IP, share schemes and employment law. We do not do any contentious law of any description, we do not do any conveyancing (residential or commercial) or any private client work. What is more, we are not based in London, but in Marlow, a town of 15,000 people on the river Thames, between Windsor and Henley. Marlow's greatest claims to fame are that Steve Redgrave comes from here, and that Mary Shelley wrote Frankenstein and Percy Bysshe Shelley wrote "The Rape of Islam" whilst living here.

We have grown steadily to a turnover of just under £1,000,000 in our second full financial year, have been profitable and have been run on a cash positive basis from the start. Our clients include a couple of global 1000 companies (no, we do not do all their work!) but the main part of our client base is represented by SMEs, including some relatively well-known names, such as Salter (look in your kitchen and bathroom – they probably made the scales you use), RDF (a TV production company – they make Banzai, Faking It, Scrapheap Challenge and Shipwrecked) and Video Arts (the UK's leading educational video company).

So how does a small firm like ours survive, prosper and make an impact in the market? Have we done things differently to other firms and, two years on, what do we think that we have got right and what have we got wrong?

The idea behind Moorcrofts was to synthesise what I had learnt from three very different environments. I trained at Boodle Hatfield, a mid-sized West End practice. I then moved to Pitmans, a very commercially orientated practice in Reading that was looking to grow its corporate team. Finally, I spent six years as the Managing Partner of the Reading office of Garretts, the Arthur Andersen associated law firm, in which time we grew the practice from a team of three to a team of forty . Along the way, I spent six months at Shell International Petroleum's legal department in London, and did a stint as a paralegal at Cravath, Swaine and Moore on Wall Street.

What did I learn from the places I had been to, and what did I think it was important to keep?

I learnt that there were some timeless core values that every law firm must have – integrity, honesty, decency. Without these as a foundation, the rest is nothing.
I learnt that one needs a focus, a goal, and to be single-minded without being diverted (it is a no when someone suggests buying the office building and sub-letting space in it, for example).

Running a law firm is, to my mind, theoretically a very simple task. Compared to many other businesses, the accounts side is pretty basic – the income is work in progress which must be turned into bills and then collected. Expenditure is pretty easy to forecast. Salaries, rent, rates, marketing expenses, computers etc. – these can all be forecast with a fair degree of accuracy. So, the secret of running a law firm is not in the complexity of the business model. The secret of running a law firm consists of making sure that the lawyers are freed up to do three essential tasks. These three essential tasks, which I regard as equally important, are as follows:-

Client work – obviously the key role for a lawyer is to do the client work on time, and to a high quality. Being a small firm, it is very easy for us all to know what our client needs are, and to prioritise and to assist each other as appropriate. The culture of a small firm is important here – in a big firm, the clients needs can get lost because there are so many other things going on – internal meetings, precedent drafting sessions, internal training, new initiatives etc., etc. In a small firm, we all know what everybody else is doing and we can all help out as appropriate, to make sure the client gets what it wants.

Marketing – in a small firm such as ours, everyone plays their part in marketing. Everybody goes to client lunches and seminars, everybody has ideas, everybody is involved. That is one of the key advantages of a small firm. Not only can you involve everybody, but you must. There simply are not enough people to have the luxury of a class of lawyers who never get involved in marketing and are distanced from it by partners who want to keep relationships to themselves. In a small firm, everybody has a relationship with all the clients, virtually without exception. The clients know all of our team, not just the lawyers but also our two support staff. The support staff get involved in a lot of marketing activities, as well as in producing legal documents. Having got people involved, then disciplined, follow-up and measurement are key.

Billing and collecting - generally regarded by lawyers as the ultimate nightmare. But the bigger the firm is, the easier it is to hide and put in unsatisfactory performance on this. The only satisfactory performance on billing is to bill the file as soon as the work is finished and to send the bill out to the client straight away. The only satisfactory performance on collection is for the responsible fee earner to ring the client as soon as the thirty day payment period is passed. Anything less is unsatisfactory. But in big firms, one can often get away with leaving work unbilled for months and years, and get away with leaving bills unchased for months and years. In a small firm, this is not possible. My partner, Andrew Katz, and myself know which bills are unpaid (because we do not have that many bills to know about!) and we know when a file has completed, and whether it has been billed or not. In a small firm these things are just more manageable than in a big firm. In a big firm, my experience is that billing slowly drifts and after a while becomes a problem. Managers at management meetings become increasingly frustrated as the debtor days slowly increase. After a while, the Managing Partner decides to make the issue top of the priority pile. He appoints one of the other partners as “Bills Partner.” To the fee earners, he is chief mister hassle, to be fobbed off as quickly as possible so they can get back to being lawyers. The new Bills Partner, for a month or so, applies himself diligently to the process of collecting the bills, but if he gets busy on other projects, or as a few bills are paid and the pressure is slightly off, his interest will wane. The managing partner who appointed him will get sucked into other projects (merger talks, geographical expansion discussions, new service line debates, lateral hires etc.,). The managing partner will mean to keep the pressure on, and the bill partner will also mean to do it, but it just does not happen. In a small firm it does happen, because it is simply more important.

You can see that I am an advocate of the 'small is beautiful' approach. I learnt a lot from big firms and have great admiration for the large accountancy and legal practices. The level of organisation and determination to keep it all together and to progress and to improve is astonishing. The vigour of top management and the professionalism that these firms show is truly outstanding. But the quality of service must be patchy simply due to the size and the number of people employed. The advantage of the small firm is that we can cut down on the distractions. At Moorcrofts we have as little bureaucracy as we can get away with. If we have an idea that sounds good, we can all talk about it quickly and either go forward with it or jettison it. We do not have committees, we do not have reporting lines, we simply talk. If we like an idea, we pursue it. If we start something that does not work, we can abandon it quickly without having to wait for the next month's committee meeting. We do not have to keep something alive in a semi moribund state because it is the pet project of an important partner who no one dares to offend by doing the decent thing in applying the coup de grace to the project!

We can use technology efficiently. We have a precedent system which we have developed ourselves very quickly. My past experience of this has been painful – there really is something called 'precedent wars' where different partners fight for ownership of important documents – somehow the fact that the share sale agreement is drafted in the way that one particular big beast likes becomes incredibly emotionally important. At Moorcrofts, we just want something that we can use to get the client's job done quicker and more effectively. Amending and creating precedents is very quick. Again, I know this is simplistic – it is quick because there are not many people to consult with. I appreciate that the more people there are and the more talent that one can tap into, the longer the consultation process takes. Big firms suffer from the need to do this consulting and achieve this harnessing of talent. Perhaps consultation paralysis is the term for it?

Our management structure is very flat. We have a monthly sandwich lunch for everybody just to run through new client files (just to make sure nothing falls through the cracks), discuss any new law that we ought to be aware of, and generally have a chat. We have marketing meetings of the whole team probably once every two months, to plan and review what we have done on the marketing front. That is it on meetings.

We have two rooms – one in which our support staff sit, and one in which the fee earners sit. We have a common IT infrastructure and a very easy knowledge management system, using powerful index software provided free with the Microsoft Back Office package. Making the best use of existing resources is key to a low IT spend – most businesses do not know they may already have a fully featured knowledge management system provided with Microsoft Back Office as it is always in an IT supplier/consultant's best interest to source and implement an expensive third party offering.

Being a small firm there are a lot of things we cannot do and would not do. Certain types of legal work we just do not know enough about to tackle. Certain types of deals would simply be beyond the resources we have.

We believe that the advantages we have are that:-

We are self-aware
We know what we can do and we know what we cannot do. If we cannot do it, we do not do it. We are not afraid of turning away work.
We have a flat management structure, an open plan office and, cliché though it is, dress down. It is all aimed at an open approach.
We have a co-operative, rather than a blaming culture. Things go wrong every now and again here, as they do everywhere. However, we try to find out why, learn lessons for the future, but not to finger point. People give me suggestions for improving what I do (as they should) even though I am in theory the founding partner and the managing partner.

So the philosophy of the firm and the culture of the firm feeds through into our core three areas - getting the work done, billing and collecting for it, and marketing.

So what is the future for us - what happens when we grow? Is it easy to believe that we have a better way of managing a firm than others do, or is that just ridiculous arrogance? Of course it is - we have the benefits of size (speed of response/lack of political in-fighting/entrepreneurial comradely feeling) and the drawbacks of small size (cannot do bigger deals, narrow sphere of work). If the firm grows, we will undoubtedly begin to inherit some of the problems of bigger outfits. But it is all about self awareness. We do not want to grow beyond say 20 or 25 lawyers, because we believe that much beyond that, the problems really begin. I do read management books from time to time, and I did like David Maister's reference to walking the floor management. You cannot walk the floor, in my view, with more than 20 lawyers. After that, department heads walk the floor, not the partners as a group. Department heads report back to other department heads and to managing partners and to senior partners. Rigidity sets in, bureaucracy sets in, self interest and empire building set in. When there are 20 lawyers, the partners (who probably comprise 6 or 7 of those lawyers) know each other and know all the lawyers and all the support staff on a personal basis. It works on a walking the floor basis. It works on an individual trust and confidence basis. For what it is, and for the markets that are appropriate to a firm of its size, I believe it is a more efficient structure than large firms are.

That is my belief, and that is what, when I was forty, and set up Moorcrofts with a mobile 'phone, a plastic garden chair and an empty Victorian room in Marlow, I believed in. We have grown, we are now in modern offices with more equipment, and I save the mobile 'phone for when I am out of the office! The garden chair is back in the garden. So far, so good. Clients seem to like the proposition - a less expensive, friendly alternative to London and Reading firms.

So if I could put it all together and pull out a punchy phrase that describes what I have learnt (so far - I am only forty-three!) about law firm management, what would it be? I like "keep it simple, stupid" and "think straight, talk straight" , but I guess I will plump for "small is beautiful".

Adrian Phillips is managing partner and founder of Moorcrofts. He can be contacted at adrian.phillips@moorcrofts.com.