(An edited version of this post first appeared in The Times‘s The Brief on 8 January 2016)
As 2015 slides inexorably into 2016, we can ponder what differences this might bring to the world of legal services. The sands are definitely shifting, and the foundations of ‘old law’ continue to crumble as ‘new law’ takes greater hold. Let me explore three themes: demand, supply, and independence.
I’m not going to try here* to cover the waterfront, but rather offer a few observations and reflections on the turn of events that prompts us to be considering so seriously the process that leads to the delivery of legal advice and representation to clients.
Part of the challenge here, it seems to me, lies in the nature of the four principal factors or ‘moving parts’ that form the backdrop to procurement. These are: cost; price; value; and relationship. There are different types of legal services – ranging from highly bespoke and ‘bet-the-company’ issues to routine, standardised and commoditised offerings. And there are different types of procurement – ranging from personal engagement, through professional procurement and tender processes, to buying online with no human interaction at all.
What is clear is that not all types of procurement are appropriate to all types of services. The real issue, as I see it, lies in the potential disconnects among cost, price, value and relationship. There is an inevitable tension between short-term procurement wins and longer-term legal or relationship consequences. There are times or circumstances when cost-cutting just isn’t worth it. Continue reading →
It might not feel like it to some, but the economic environment for large law firms has been benign for a long time. It has been difficult not to make money. According to Legal Business, the top 100 UK law firms (that is, less than 1% of the 10,000 or so in the UK), still manage to gross over £17.5 billion, even in these supposedly tough economic times. That’s at least 50% of the total value of the legal economy. And for the more than 8,000 equity partners in those firms, this produced an average net profit share (PEP) of almost £650,000. By most people’s reckoning (even in the world of clients), that’s a lot of money for a lot of people – and it is only an average. It’s not so much the size of any individual reward that’s the issue (the range is reported as £138,000 to £1,840,000 – and it’s no longer Slaughter and May, or any other Magic Circle firm, at the top): rather, it’s the sheer number of people who are able to extract this level of averaged reward in a reactive service market that is dependent on client activity.