Opinion: Efficiency – your starter for 10

By Simon Slater, managing director of First Counsel Consulting Limited and a founding member of the Legal Practice Group

The legal service reforms will pave the way for new entrants to the market and competition the likes of which law firms have not yet seen. For many firms the key to survival in the new legal landscape will be investment in efficiency, but where exactly should that investment be made?

“A single key decision we made recently will be the difference between survival and failure,” said the managing partner of a small, progressive law firm last year. His board’s decision was to invest no less than £400,000 in technology to streamline its processes and improve the delivery of legal services. When probed, he said the firm could only succeed in a post-Clementi, post-Carter world by becoming truly efficient. Intelligent deployment of technology was key.

The investment was the equivalent of 15 per cent of budgeted revenue in the same year – a bold move for any firm. I was so impressed it led me to review the evidence garnered from working with other clients to arrive at ten top tips for any firm looking to protect and enhance its market position through efficiency:

Ensure you have integrated client teams with a sharp focus on customer service, process improvement and value. If you have professional support lawyers, turn them into client-facing members of the team;
Use the right technology to support the streamlining of processes in the delivery of legal advice and client service. Don’t over-engineer and recognise that all services commoditise in time;
Support the increased dependence on technology with an investment in training for your people. Help them embrace change and new working practices positively;
Be more ambitious in the use of value billing. Businesses prefer to buy on a fixed-fee basis. There’s nothing like an aggressive fixed fee to concentrate the mind-set of efficiency. While you’re at it, reward partners on bills paid;
Introduce professional procurement practices to get overheads under better control. Your clients are several steps ahead of you and now utilise their own procurement professionals;
Take radical steps to professionalise your bid-management strategy and processes. Pitch less
but better;
Improve gearing. If it is currently 3:1, have a medium-term plan to improve it to 4:1; better still, think differently about gearing. You could transform it by relating it to chargeable time recorded. Taking the 3:1 example and assuming that all four team members are currently expected to bill 1,500 hours a year: reduce the chargeable-hours target of the equity partner by 25 per cent (so that (s)he can devote more time to business development and team management). Then increase the chargeable-hours target of each of the three assistants by just five per cent. You will achieve gearing of 4.2:1 (a potential 40-per-cent efficiency gain);
Adopt Six Sigma thinking without the dogma. Six Sigma is simply a process used to identify and eradicate defects in manufacturing. Typically, a car maker might set itself a target of reducing defects in a particular part from 1,000 per one million (0.1 per cent) to 250 per 1 million (0.025 per cent). On a smaller scale, the same philosophy can be adapted to precedents, knowledge and legal processes;
Maximise space utilisation. Many law firms are still too generous (and wasteful) in their use of office space;
Think about lean management. Law firms are fundamentally simple businesses, but they are often over-managed. Keep management small and ‘local’. Consider partial outsourcing, but with care. Control directly what you must. The key test? Is the value people add greater than the paper they push?

Back to my small law-firm client – a business facing the prospect of competing with high-street banks, major retailers, motoring organisations and national estate agencies – all with significant financial muscle. It knows it has to tick most of these boxes to become efficient and to survive. Then it can refocus investment on building a brand fit to compete. After all, its £400k investment in technology is just the start of a longer-term investment strategy to transform the business. Firms of all sizes in this polarised market should take note.

Simon Slater is managing director of First Counsel Consulting Limited and a founding member of The Legal Practice Group. He can be contacted at simon.slater@first-counsel.co.uk