Doing it in bulk
Lessons in service delivery from the bulk providers

In a competitive market for professional services, much can be learnt from firms working at low margins, which have had to innovate and transform their models for service delivery to survive and prosper. Nick Jarrett-Kerr, former managing partner of a UK national law firm and currently a partner at Edge International, examines the lessons that all professional-service firms can learn from the experience of the bulk providers.

There is a story doing the rounds about an eminent heart surgeon who every Saturday morning has twelve surgical teams conducting twelve different heart operations at the same time. He goes from one operation to another, taking a few minutes in each case to perform the incredibly intricate and specialised procedures for which he is famous. At the end of the morning, and twelve grateful heart patients later, he will have a significant sum for each operation as a consequence of applying his time and skill where it counts. Even if this story is apocryphal, it illustrates a clear point: even with the most specialised services, much can be learnt from those that are supplying high-volume commoditised professional services, that is, the bulk providers. They have responded to the pricing challenge and low margins by the following means:

Developing their business to dramatically increase the volume of work;
Standardising processes to both reduce the time involved in each step and to enable delegation to less costly staff;
Clarifying the level and extent of necessary intervention by skilled professionals in each piece of work;
Organising the work into well managed teams.

None of this is difficult. Indeed, in most cases, it is just common sense. Yet, as we go round firms, we are still struck by the cottage-industry atmosphere and general air of disorganisation that still pervades many partnership corridors. Partners are still insisting on the freedom to practise law in their own way, with their own styles, formats and tailored precedents. The way clients are dealt with may well vary considerably from one room or work station to another, and junior members of staff are expected to react flexibly to differing working practices and procedures, depending on their supervisor at the time. As an example, we have frequently elicited widely differing answers within the same firm when asking how long the same standard step takes in a transaction or litigation matter. More worryingly, some partners have no idea of the answer.

However, for the bulk providers, the old cottage-industry model has completely disappeared in favour of something far more organised, efficient and commercial. It is equally clear that the old inefficient working practices are steadily becoming unsustainable, even for firms who pride themselves on being high-value providers.

The brutal truth is that clients are becoming more prescriptive about what they want their lawyers to do and how much they are prepared to pay them. However prestigious or specialised the service, they are no longer prepared to leave it entirely to their law firm’s discretion as to how much time it spends on their affairs, especially where the fee is payable at an hourly rate.

What is interesting is that in responding to the competitive challenge, the bulk providers have been highly innovative, but have not had to entirely re-invent the service-delivery wheel. Instead, they have aggressively remodelled and reshuffled it to provide a model that is responsive to current needs. What we learn from their experience is that they have managed to achieve enormous efficiency savings and profitability improvements by radically changing – and then standardising – the way they do things.

This requires an innovative approach, from the service-strategy stage right through the process-design stage to the service-delivery methodology.

We have held conversations with a number of managing and senior partners from firms that are essentially providers of high-volume, low-margin work. From these conversations, and from our own experience, the following six essential features have emerged:

The old partnership model has to be redefined. Many firms have discussed abandoning the concept of partnership as a management structure in favour of an entirely corporate model, but this slightly misses the point. What is vital is not a change of structure, but a change in working methodology and partner behaviour. Firms can no longer act as essentially sets of chambers, where individuals are entirely free to get on with practising law in their own way as sole practitioners. Nor, in an environment where speed and flexibility are key, can decision making be channelled laboriously through partners’ meetings. Decisions, such as staffing levels, pricing and infrastructure resources, have to be made swiftly and efficiently. Accordingly, management and decision making must be delegated to an efficient-management team with the authority to bind the partnership. This is far from easy to achieve. As one senior partner told me: “Not every partner will be prepared to give up his autonomy in this way; difficult decisions have to be made and, if necessary, non-compliant partners should be persuaded to move on.” A managing partner from another firm confirmed this: “In low-margin work, every aspect of management is thrown into sharp relief – it is very easy to lose money very quickly unless you actively manage almost on a minute-by-minute basis.”
A compliance regime has to be in place. The challenge for law firms is not just to improve profitability but to also manage quality and service efficiency. In the drive for cost savings, it is all too easy to cut corners and open the firm up to increased complaints and claims. At the end of the day, successful execution boils down to the need to obtain both efficiency and consistency. Methodically applied case-management systems can help here. To quote the managing partner of one firm with a bulk re-mortgage operation: “The biggest benefit of case management is the management of risk.” But, the history of case management is littered with examples of firms where implementation has only partly taken place or is deeply flawed. This is usually because partners have chosen to ignore the new systems and carry on doing what they have always done.

We have seen two possible change-management approaches here. The first is consensual, where it is a major hearts-and-minds exercise to get people to change their ways and use new processes and systems. It not only needs them to do things differently, but they also have to adapt to the case-management system doing things for them in a way they are not used to. The key is to have champions to blaze the trail. The second approach is more brutal, with the introduction of a well enforced and disciplined regime where compliance becomes obligatory, that is, shape up or ship out.
Efficient management of time and money is critical. In the firms that we have spoken to, it is quite noticeable that much emphasis is placed on the management of both time and money.

In most cases, fixed fees are involved, and the responsible partner will spend a great deal of time trying to figure out ways to cut an extra few seconds of time out of each stage in a transaction or project. As an example, we were told that in one case, a 25-minute process had now been engineered down to one-and-a-half minutes. The problem (away from the bulk providers) is that law firms have become accustomed to regimes that place a huge reliance on measuring inputs (chargeable hours recorded) rather than outputs (successful outcomes). This is fine when the client will pay for every hour spent and billed, but is not sustainable in an era when more clients want to know exactly what is achieved with the time spent on their affairs. In addition, in low-margin work, pricing and base cost are absolutely key and both have to be watched like hawks.

What is of even greater importance is the management of workflow. Managing the numbers is a major issue for law firms. If too much work comes in, it is difficult to cope. If there is too little, people are sitting idle. You have to have reliable knowledge of the volumes of work being introduced. According to one senior partner we spoke to, it takes an average of six months to staff up for a doubling of volume from any of their institutional clients. What is more, the processes and procedures have to be constantly revisited and re-engineered so as to adapt to new client requirements and different client preferences, and to ensure continuing cost effectiveness. Most low-cost providers therefore find that they are devoting considerable resources and energies to the continual task of trying to find ways of doing more for less in a shorter time.
Client relationships are nurtured on an ongoing basis. Doing large volumes of work for big institutions requires, among other things, a sustainable and close relationship to ensure that the service continues to meet changing client and industry requirements. A recent UK example of this is the recent introduction of demanding money-laundering regulations.

It is encouraging to see that the more proactive firms seem to regularly discuss all aspects of their relationships openly and regularly with their clients. An important aspect of this is to agree and refine processes and methodologies, a practice which not only helps to cement relationships, but anticipates possible future trends and ambushes as well.
Training and development is essential, not optional. One law firm told us that, at any one time, they have 35 new members of staff undergoing initial training, aimed to induct non lawyers in the technology, legal process and systems of their business. Another firm finds it so difficult to find, train and retain good people that they are contemplating head-hunting the best lecturer from the local law school and starting up their own academy. The challenge is to keep staff interested and motivated in work, which can quickly become repetitive and dull, and to provide them with sufficient career development to enable a good level of retention. We were told: “How you treat people is key. You need a fixed regime that is tough but flexible and relaxed. A brutal atmosphere, where people have to put their hands up for permission to visit the bathroom, does not work.”
Trends must be persistently tracked. In the case of most firms we looked at, the original route to the provision of bulk services seems to have emerged as a strategy over a period of time, from the intuition of the partners and from actions taken piecemeal over a period. Those actions then converged over time into some form of consistent pattern, which was then reinforced and accelerated. But, in all cases, what was needed in the first place was a deep understanding of the marketplace and its opportunities, the ability to discern trends before they arose, and then the courage and conviction to exploit those trends. This trend-seeking formula of analysis and intuition is equally important during the journey as at the start of it. In law firms, there are many obstacles to any form of planned approach, not least the reluctance of partners to give up some fee-earning time to think about long-term objectives. But, in the context of service delivery, new and anticipated trends – whether industrial, technological, economic or legislative – need to be filtered and synthesised almost on a daily basis. Different ways of doing things need to be identified and piloted. New technological developments have to be investigated and assessed. Innovative business models must be unearthed. Industry meetings should be attended. In the successful law firms that we looked at, one feature was absolutely clear. Somebody (in some cases, more than one person) took on the responsibility for achieving all of this.

For the bulk providers, the six features outlined above have been introduced and managed aggressively and commercially. Although the specific models for service delivery are not generic for all types of professional-service firm, the innovation and implementation of the strategies for successful execution apply universally.

Nick Jarrett-Kerr is a partner with Edge International. He is a solicitor and former managing partner of a large UK national law firm. He specialises in professional-service-firm leadership and strategy. He can be reached by e-mail at jarrett-kerr@edge.ai.

Doing it in bulkLessons in service delivery from the bulk providers

Doing it in bulk
Lessons in service delivery from the bulk providers