Meet the super-lawyer revolutionising businesses

The days of charging by the hour are over. The new generation of business lawyer is one of the team, ready to prevent a dispute rather than cure it

Super lawyer

Whatever happened to the urbane lawyer as man of affairs – the trusted business adviser who could calmly guide an entrepreneur through choppy markets and labyrinthine legal conundrums alike?

Small and medium-sized businesses will have been stewing over that question for years.

Over the last couple of decades at least, the commercial law side of the English legal profession has specialised almost exclusively on cross-border – or one-off corporate and property – transactions to the detriment of general business advice.

And there have been other factors encouraging lawyers to narrow their sphere of influence to the esoterically legal. Until relatively recently the legal profession has luxuriated in the privilege of operating in an effective monopoly market – with fees largely unchallenged for relatively mundane work – and that position has fostered a degree of complacency.

But that monopoly has for the most part been comprehensively shattered by recent legislation. The Legal Services Act 2007 has triggered wide-ranging reforms to the profession, not least spawning a new creation – the alternative business structure. While taking a variety of forms, crucially the ABS model allows non-traditional providers of legal services, such as high street retailers, to jump into the market.

That profound market disruption has coincided with the worst economic environment for law firms and legal services in at least a generation. This economic storm has encouraged innovative law firms to look for creative solutions to reconnect with business and entrepreneur clients.

“In the past, lawyers have been allowed to be lazy, offering average service for high hourly rates, often uncapped and without comeback, which many clients have had no alternative but to accept.”

Andrew Clinton, managing partner of asb law

”Any business depends entirely on its clients or customers – and many in the legal profession have lost sight of that,” explains Andrew Clinton, managing partner of Gatwick-based law firm asb law.

”There has been a rather arrogant attitude on the part of some that is ‘Look how clever we are; we sell knowledge by the hour.’ There is an increasingly competitive marketplace with external people coming in who look at things a bit differently. And therefore there are firms that are asking whether their business models are fit for purpose. And the answer for many is probably not.”

Essentially, SMEs require several basics from lawyers, but the whole lot can be bundled under the term ‘operational excellence’. Law firms and their lawyers need to do what they say they are going to do when they say they are going to do it. And, crucially, they need to complete those tasks within budgets.

“In the past,’ says Mr Clinton, “lawyers have not been good at that. They have been far too vague. They have been allowed to be lazy, offering average service for high hourly rates, often uncapped and without comeback, which many clients have had no alternative but to accept.”

Another vital issue involves depth of client relationships. Some entrepreneurs see themselves clearly as business visionaries who only require law firms to provide legal advice and not to assist with the running of wider operations. 

But many SMEs recognise that innovative and creative law firms can add multiple layers of value, not least because they will have had experience in gauging market factors across a range of clients.

”What do clients care about? They care about their own businesses, and achieving their goals, which normally means increasing profitability. And that means improving revenues, controlling costs, protecting and increasing market position and improving their own services to their clients. Our job is to be part of that supply chain,” explains Mr Clinton.

“But what we try to do is ask: what are the causes of the litigation? We invoke brainstorming techniques to ask what is going wrong with the business’s processes that keep causing the disputes and litigation”

Andrew Clinton, managing partner of asb law

So getting close to clients is crucial. Lawyers cannot understand and appreciate the daily factors and pressures bearing down on a business from an ivory tower of their offices. Spending time on the shop floor is immensely valuable for both sides, but especially for the legal team as it allows them to witness first hand the business environment and to treat any diseases affecting that business rather than fiddling with the symptoms.

Take, for example, an SME beset by a persistent plague of disputes. Initially, that business has a clear-cut need for litigation specialists. ”A typical litigation law firm would say ’That’s great, I’ll open a file and I’ll charge you by the hour – and I think it’s going to cost you this much, but I can’t really tell what’s going to happen because a judge might wake up on the wrong side of the bed, etc. …’

”But what we try to do is ask: what are the causes of the litigation? We invoke brainstorming techniques to ask what is going wrong with the business’s processes that keep causing the disputes and litigation. Does the business keep falling over the same thing? If it involves disputes with suppliers, it is probably something to do with the procurement process – you’re not doing due diligence, you’re not contracting the right party, you’re not getting the right documents done, the terms and conditions don’t say what the commercial deal is. So we’ll go in and try to cure that problem to avoid the disputes.”

Aligned to service techniques is the age-old bug bear between law firms and their SME clients – hourly billing and the inefficiencies that a time and materials model encourages. Arguably, it is the multi-national corporate behemoths that have for years propped up the billable hour method because they have been too downright lazy to challenge it. But the global financial crisis is changing even their attitudes to billing.

Mr Clinton is acutely aware of the debate and the dilemma for SMEs. “The reality about the hourly rate is that it only works for the lawyer – it doesn’t really work for clients. Clients want price certainty, and sometimes that will mean fixed prices, in which case the law firm assumes some of the risk in relation to over-runs, or what we call the ‘idiot factor’ where someone on the other side drags things out because they don’t know what they are doing or they are being deliberately difficult. But we have to factor that into our pricing. The client is saying to us: I want you to take some of the risk.’

But Mr Clinton isn’t yet sounding the ultimate death knell for hourly rates – even at the SME end of the market. “Some clients like it because they are familiar with it and it is their means of benchmarking one law firm against another. Even though in our pitches to potential clients we suggest lots of alternative structures, they will often ask specifically to know what our headline charge-out rates are because they’ll want to compare them in the market.”

However, in the long term, he predicts the days of hourly billing are numbered: “In the past, the legal profession had the luxury of being able to dictate the method of pricing – lawyers would turn the clock on and charge £250-£500 an hour with no incentive to be efficient. Suddenly that model has been rumbled – people are saying that it just doesn’t work and that in no other type of industry or business would you get away with that approach.”

This article was brought to you in association with asb law

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