Is it Time for Law Firms to Remodel?
Legal services contributed £20.3 billion to the UK economy last year. The biggest consumers of legal services are the financial, insurance and pensions sector (17%) followed by construction, IT services, and trade. Of the small business sector, 38% of services consumed relate to trading, compromising of tax, employment and intellectual property. With the rising number of female lawyers, together with cloud based technology and a growing realisation that the rainmakers in a law firm should be properly rewarded for their contributions, the traditional model of a law firm is looking more and more archaic in a more commercial age. We speak with Bhavini Kalaria, who founded a unique law practice; she believes there is little doubt that unless firms change, succession will become increasingly difficult.
The London Law Practice is a virtual firm working with consultant solicitors – how does this work and how is it different from other similar models out there?
The firm is regulated by the SRA and so the issues that most firms concern themselves with, remain the same for virtual practices; the key difference is how we work.
We have to be far more communicative, and find better ways of keeping in touch and making information available. This is much easier to do nowadays because there are so many cloud-based case management systems, and what I call “low tech” solutions that any firm can use and operate virtually should they want to.
The advantage for fee earners is clear – the work can be done from anywhere, so they are better able to work around other commitments.
What sets the firm apart from other virtual models is our incentive scheme which rewards fee earning and business development. The firm is founded on the principal of collaborative working, and so the scheme is an important value statement for us.
As your practice is a unique one, what other reforms do you think the legal industry need – for their clients and the professionals working in the legal sector?
Of all the changing nature of delivery, the one key and most significant issue facing law firms is only now being addressed – that of a traditional practices’ legal structure. That said, many firms now operate as LLP’s, but do so based on a “hourly rate” model which premises any business development on fixed overheads and time based billing.
Unless law firms and lawyers now start to adapt to a very new commercial environment, the people they are there to serve will simply go elsewhere. It’s of note that 95% of clients want fixed fee billing, but only 14% offer this.
A further consideration for law firms is the recruitment and training of new solicitors. The cost of recruiting and training a new Solicitor can be up to £71,000, together with an average salary of £50,000, which is a significant investment by a law firm. Firms are also finding that formal training is unsuited to business needs.
In addition, with the rise of flexible working, law firms with talented rainmakers are at the risk of losing good lawyers because of an unwieldy partnership structure and sometimes the inability of the decision-making process to allow an individual to innovate internally. Having a flexible working model tied to incentives and remuneration as The London Law Practice does, goes some way to allowing creative talent to adopt new legal products. A firm that can manage to train and retain good talent in a competitive environment will be well rewarded.
In summary, the industry does need to re-think the commercial model to be able to better serve all the stakeholders – clients and professionals.
Have you seen any trends which have worried business owners in London?
Many of our clients operate from serviced offices or are somewhat immune from changes to business rates (though eventually these rents will rise); however, retail clients are often impacted much more quickly.
This, and the impact of the cost of housing is causing businesses concern (I understand that the FSB did a study recently which found just that). For example, if you run a café and you can’t afford to pay staff over the minimum wage, it is difficult to recruit. Not many people can afford to either live/rent close to or travel to a place of work in London on that salary.
I’m also acutely aware that London will need to ensure that it can access global tech talent post-Brexit on easy terms if it wants to maintain a leading position.