The seeds of change

Four months after the Legal Services Act received Royal Assent, how are UK firms gearing up for its implementation and how will such preperation affect the legal marketing and business development sector.

By Lucy McNulty

It has dominated discussion in legal circles since the Office of Fair Trading (OFT) first alluded to the need for legal service reform in its 2001 Competition in the Professions report. Later when Sir David Clementi reiterated the demand for change in his 2004 paper, the discussion turned to debate as critics argued reform would jeopardise the industry and lower the standard of legal service delivery. Yet from the moment the Legal Services Act (LSA) received Royal Assent on 30 October 2007, such opposition ceased to be relevant. The face of the UK legal profession would be changing regardless. Four months on, how are firms preparing themselves for the impending alteration of the legal market and what impact will these changes have on the marketing and business development (BD) professional?

Why is legal service reform necessary?
The 2001 OFT report was the first of many such reports to highlight the growing dissatisfaction among consumers in the delivery of legal services in the UK. Law firm clients, it seemed, no longer wanted to suffer from the poor customer service, modest return on investment and lack of transparency that they had come to associate with the British legal system. Reform of the industry was seen as the only solution. The LSA, in bringing about the establishment of an independent complaints handling service, the launch of an independent industry regulator – the Legal Services Board (LSB), and the commoditisation of the market through the introduction of legal disciplinary practices and alternative business structures (ABS), aims to encourage the development of a more standardised, consumer-focused legal industry and thereby satisfy discontented clients. For, as explained by Mark Chandler, senior vice president and general counsel at communications technology company Cisco Systems, with the commoditisation of the industry, legal services can, “be outsourced, co-sourced, integrated, aggregated, syndicated and shared. One-to-one consultative advice gives way to one-to-many information services. And the client becomes empowered.” Yet according to the Ministry of Justice the true impact of such consumer-empowering alterations are unlikely to be felt for a number of years, with the implementation of independent complaints handling service and the establishment of the LSB expected by 2010 and the introduction of ABS by 2011.

How can firms prepare?
So with a few years until the full impact of the LSA is felt can we really expect firms to make any significant changes now? It would seem the answer is a resounding ‘yes’. “The legal world can be likened to the super tanker – you have to turn the wheel a long time before anything actually starts to change it course,” explains James Tuke, head of research company Intendance, which produced the first assessment into the impact of the LSA in 2007 – the Brave new world: impact of the legal services act – in conjunction with Thomson Sweet & Maxwell and LPA Recruitment. “Although it may seem like a few years off, in business terms the dates changes are expected to come into effect aren’t that far away. Firms need to bring themselves up to speed with what the effects of the LSA are and what opportunities it will provide or they could risk being left behind.”

Indeed this is a sentiment echoed by those working in the profession. “The firms that will do well out of this are those that have prepared their businesses for the changes in advance,” says Andrew Dunn, formerly director of BD at Halliwells. “If you are prepared you are more likely to be able to take advantage of the changes once they come into effect.”

So what opportunities will the LSA bring about and how should firms be preparing for them? From a 2007 survey conducted for the Brave new world report, it is clear that many feel the greatest opportunities will be provided by, and by extension the most preparation will be required for, the introduction of the ABS. As nearly 75 per cent of participants said that within a year of their implementation they expected a major organisation from outside the profession to acquire or establish a firm.

“Of the act’s three components, the changes concerning industry regulation and complaints handling have more or less taken place which leaves ABS – by far and away the most interesting and sexiest bit of the legislation,” says Tuke. “It is this that will force a fundamental change in the way in which firms operate.”

The introduction of ABS, or ‘Tesco law’ as it is commonly referred to, will enable lawyers to form multidisciplinary practices (MDP) with other kinds of professionals, such as accountants, insurance specialists and mortgage advisors, as well as enabling non-lawyers to establish law firms of their own. It will, therefore, not only be easier for MDP to begin offering one-stop shop packages of legal and other services but new providers will also be able to enter into the market and offer a higher standard of customer service through client-focused offerings such as online or out-of-hours legal advice as well as off-the-shelf and even self-service solutions.

In the face of such competition many firms will undoubtedly have to up their game in order to survive. New providers will offer consumers legal service with brand security, first-rate customer services and modern, corporate business processes – indeed in some instances big brands, such as Co-operative Legal Services and Halifax Legal Solutions, are already offering consumers just that. It is these areas, therefore, that firms must develop in order to successfully rival their new competitors. “There is a tendency for some to pigeonhole the impact of the LSA,” warns Tuke. “But if a bank or big retail outlet decides to open up a law firm, its marketing skills and experience as well as its supply chain and brand management could easily outclass that provided by firms in direct competition. Firms, both on the high street and in the city, need to consider carefully whether or not they would be prepared for that.”

Many firms will little-known brand names and poorly-developed CRM processes may find it impossible to compete. Some have, however, already taken such considerations into account and begun the necessary preparations to adapt accordingly. Regional firm Russell Jones & Walker (RJW), for example, has begun both boosting the RJW brand with the re-launch of the well-known personal injury compensation brand Claims Direct, and gearing up for restructure to encourage the development of more streamlined corporate processes across the firm. In addition, UK firm Halliwells began investing in a CRM programme, to improve the service offered to clients, in 2004. “The emphasis placed on client service will become a big differentiator,” says Dunn. “Halliwells’ CRM programme, which includes a key account management system for its main clients, has helped enormously in bettering its understanding of what its clients need and expect from the firm.”

How will the marketing and BD professional be affected?
With re-branding, CRM intiatives and even firm-wide restructuring on the horizon, the legal marketing and BD professional can expect to adopt an increasingly important role in the UK law firm. For, not only will the changes initiated by the LSA foster an increased emphasis on firm branding and marketing strategies in order to retain existing clients and win new custom but marketers and business developers are also now faced with the possibility of acquiring partner or ‘equity status’ if their firm adopts ABS.

“The ability of law firms to offer a slice of the action to non-lawyers opens up huge opportunities for both the firm and the individuals concerned,” says Tuke.

Firms will be able to utilise the situation to raise the bar in terms of the level of professionalism within the business in competing with other sectors to attract the highest calibre of professionals to the firm while ambitious non fee-earners will be able to, should they wish to, choose which firm they work for on the basis of the equity options on offer to them. Indeed, many have predicted the implementation of the LSA will engineer a ‘coming of age’ for the legal marketing and BD sector and encourage a significant change in the working relationship between non-lawyers and fee earners. “There are still a large number of people who don’t appreciate the importance of key support functions within a law firm and most tend to pay a certain amount of lip service to marketing and BD people,” says Dunn. “The LSA will change that by giving those people who make a contribution to the business, be it through BD or fee-earning, a chance to become more intertwined and operate on a level playing field.”

It would seem, therefore, that there are exciting times ahead for the law firm marketer and business developer. Reform of the legal service will provide a huge amount of opportunity for those in this sector, perhaps changing the landscape of their profession entirely. But will the support staffer accustomed to the back-office environment be able to cope with such change? “People, from outside the profession, who are prepared to invest heavily in law firms will be looking at the firms in terms of a typical business, so people operating within the BD function, for example, will be expected to contribute to the profitability of the business,” says Dunn. “It is here that the problem lies, because if you look at most BD teams within law firms most of them tend to be rebadged marketing teams.”

Some BD and marketing professionals might, therefore, need to develop their skill set further if they are to meet this new high level of expectation. “Those that aren’t as high-calibre as they might need to be may feel threatened by the changes brought about by the LSA and feel they need to raise their game a bit to effectively rival the new competition,” says Tuke.

This pressure to ‘raise their game a bit’ could be further intensified by the growing public demand for consumer-focused legal processes. “We live in a totally different society now to the one we lived in thirty to forty years ago and it’s right that all professions change with it,” explains Ian Welland, an insurance specialist and partner at Fishburns Solicitors. “These days there is more expectation from clients. One has to change one’s professional modus operandi in order to meet those expectations.”

Such expectations could also be affected by economic influences. For, although the LSA, and the commoditised legal environment which it will foster, may have placed a whole new emphasis on CRM, the current uncertain economy has also encouraged law firm clients to increase their demands in terms of the service they expect to be offered to them.

“For the first time in living memory some firms are having to pitch for client work even to existing clients,” explains Tuke. “The credit crunch has caused clients to feel the pinch and they now expect their advisors to work harder for their custom and particularly to demonstrate a very detailed knowledge of and appreciation for their business. Improving CRM has become a serious concern.”

Indeed the credit crunch could affect the legal marketing and BD spheres just as greatly as the LSA is expected to. “There is a tendency in many businesses to cut marketing and BD because they are seen as an overhead,” says David Rough, head of BD at Berwin Leighton Paisner. “I think it is important to keep investing in these areas but it’s also important to be aware of how you are spending the money and to squeeze out any wasteful activity. Things like client panels and feedback schemes are worthwhile but don’t necessarily involve lots of monetary expenditure.”

The future…
The marketing and BD professional can clearly expect their role to alter considerably in the foreseeable future, be that as a result of market changes influenced by the LSA or the uncertain economy. and no matter how law firms or their employees embrace these changes, it is clear that awareness of them is key.

“When the former Law Society president Fiona Woolf first set about educating the top 100 firms about the impact of the LSA I imagine there was a lot of ignorance and apathy about it at the time and that quite a bit of that still remains,” says Tuke. “Awareness, in terms of how firms should embrace the anticipated changes, is vital. You must be aware of what is going and above all don’t be terrified by what is happening - the ‘rabbit in car head lights’ reaction is not the way to do it”.