Monthly Archives: May 2011

Eversheds reduce operating costs through outsourcing

The big firms are getting leaner, so smaller firms need to take note and  react to stay competitive.  This is not just about reducing the base cost of the people, but it is also a catalyst to improve business processes and the way people work; whether they are in the UK or abroad.

Eversheds has completed its outsourcing programme with the axing of 75 jobs – including 30 in Birmingham – as a result of the back-office agreement with Accenture it announced last year.  The outsourcing, which has seen more than 350 of Eversheds’ financial support processes taken on by Accenture in Bangalore since the deal was agreed, is due to be completed by September, with the firm predicting no further redundancies.

The bulk of the job losses were in Birmingham with 10 posts lost in HR and 20 in financial services. A further 15 staff have been lost in financial services support in Leeds and 20 in Cardiff’s financial services team. The back-office team as a whole has been reduced by 88 roles with 13 departures coming from natural wastage. It was originally thought that around 100 jobs across human resources and finance teams would be lost.

More of the HR processes are expected to move to Bangalore in due course.

LSB conclusion on referral fees; leave it to the SRA!

The Legal Services Board has dropped plans to force law firms to publish their referral fee arrangements on their websites, in its final decision on the regulation of referral fees published today.  The LSB said it would no longer seek to prescribe the precise measures that law firms and others must take to achieve greater transparency over referral arrangements.

Instead, it has set out what frontline regulators such as the Solicitors Regulation Authority must achieve by 2013, but it will give the regulators freedom to decide themselves what measures they want to impose on firms to reach this position.  It will still be open to the SRA to oblige firms to publish referral arrangements if it chooses to do so.

For more go here >>

Are you sure you deliver what clients really value?

By Allan Carton  – First published by Linetime

2011 is a crunch year for all law firms, when some will grow and tap into new opportunities while others will be swallowed up or go out of business, creating more opportunities for the more business-capable firms and new entrants entering the legal market for the first time from 6th October this year.  Our April 2011 research found that more than 74% of firms have been involved in merger discussions in the last 12 months, but only a fraction of these concluded in successful deals. 

In my view, any legal business that has satisfied clients who are willing to recommend their business colleagues, relatives and friends to them will be successful.  But the stakes are being raised on client expectations.  Historically, consumers have struggled to be able to compare one law firm to another … and they still do; but information and comparisons are becoming more visible and easier to make.  The recession and availability of information on the Internet in particular – alongside suppliers in every other area of life constantly competing to produce better value to customers – has raised expectations of value for money from lawyers.

So successful law firms now have to work hard on providing better value to clients – which can mean the cheapest price if you want to sell services to consumers where price is really all they are interested in; more likely, it’s a competitive price with a service that caters for the added value elements of a service that clients  are prepared to pay some premium for.  Different clients are looking for different things in their lawyers and that needs to be understood, so a focus on which clients to work with is essential.

To achieve a competitive price at a margin that generates an acceptable profit, every law firm should be focusing hard on their internal operations to streamline the way people work; getting the right people, with the right level of skills, trained and motivated effectively to handle the work that is needed – cutting out waste wherever possible, making use of technology at every opportunity and making sure they build in additional components to the service that clients value and are prepared to pay for.  This applies to both commercial and private legal services.

Efficient legal and business processes need to become routine to a much greater extent than I see currently, which could enable most legal practices to reduce their cost base by between 5% and 15%, which goes straight to bottom line profit which can be used to invest in developing the business – always being careful to ensure that these improvements in the business operation also improve the client’s experience of dealing with the practice.

The key element of business development should be about enabling the people at the practice to understand and deliver what clients value.  Lawyers should be getting closer to clients, going beyond handling day-to-day transactions to find out more about how lawyers can provide more value … and then deliver it.  As examples of what can be achieved;  for commercial lawyers – with the benefit of better understanding and control of internal costs and better, more clearly defined processes in place – there are opportunities to agree competitive pricing based on better understood perceived value to the client.  For private individuals, there are opportunities to deliver an extended range of services including non-legal that can help establish and maintain a life-long relationship.

Much more can be achieved by creating an agile legal business where the people delivering the service at all levels understand the concerns of the people they want to work for.

Law firms on the upturn

SMALL and medium-sized legal firms are seeing signs of an upturn in fortunes, according to a Law Society survey.  Research from the Law Society Law Management Section’s annual profitability survey, reveals that on average fee income rose slightly  – by 0.2 % in 2010 – a significant improvement on the 6.5% fall seen on 2009.

The survey, sponsored by Lloyds TSB Commercial, shows that employee costs fell last year, but average net profit per partner rose 18.6% to £106,297.  Median fee income per equity partner was £455,650, down from £469,666 in 2009, while the average cost of a fee earner was £40,240 compared to £43,938 in 2009, a fall of 8.4%.

Law Society President Linda Lee sayid: “Although there are signs of recovery, progress is slow and firms will be looking at how they can continue to grow as we emerge from the recession.”  Christopher Parker, senior manager, specialist markets for Lloyds TSB Commercial in the North West, says: “In many ways this year’s survey shows a steady, consolidating scenario, but two things struck me.  “First was the increase in median net profit per partner from £89,621 to £106,297. But more important for me was the measure of profit after deducting a realistic notional partner salary – at 7.3% of fee income this is a terrific improvement on the 2.3 per cent shown in the 2009 survey.”

In its 11th year the survey,  is widely regarded as the annual health check report for the smaller end of the legal profession.

Really useful research on use of IT here from LSN

Feedback from  712 legal IT people worldwide on the IT challenges law firms face – and the results might surprise you, whether you work in legal IT or in the IT business.

Download LSN’s FREE Legal IT landscapes 2011 report.

  • Social media use in law firms for knowledge sharing and collaboration
  • Tablet computers in law firms: Fad, or finally here to stay?
  • What’s stopping law firms from moving into the cloud?
  • Business intelligence: Now the norm, or still just for the ‘clever’ firms?
  • Document management: Is SharePoint finally ready to take on the world?
  • Changing up to Windows 7 and Office 2010: Challenges and opportunities
  • Legal IT people: How do they feel about their role, and is it valued?

If you want to help your lawyers make better use of some of the technologies discussed in the report, contact Allan Carton.

Merger pressure building, impacting on 74% of law firms

It’s not a big surprise – but why are so many partners’ ambitions thwarted when negotiations fail; and how can partners focus and prepare better to tap into the right opportunities?   Whilst some firms have genuinely become their own merger specialists and have learned how to set about it in the right way, most still leave far too much to chance.

The majority of law firms in the UK (74.2%) have approached or been approached by another firm with a view to a potential merger or acquisition of the business or a team in the last 12 months – according to our research with the UK’s top 200 law firms ranked by turnover during April 2011 to ascertain their views in relation to market consolidation and trends.

Our research suggests that nearly three quarters of UK law firms have had a potential merger in their sights over the last twelve months, even though only a small proportion of these discussions have resulted in a completed merger or acquisition.  A huge amount of time is therefore being invested but often wasted due to lack of effective preparation by senior management in legal practices across the country.

However, if ever there was an indicator that the UK legal services marketplace is set for major consolidation, this is it – particularly as we approach a period where a late surge of interest in ABS opportunities will arise in the run up to October – so there is going to be a lot more activity going forwards.

The legal services landscape is changing.  Being a successful law firm will increasingly be about creating ‘business agility’ where the ability to shift track and adopt new ideas quickly will enable the fittest to thrive

Being able to scale up or down will impact on margins and there is a growing realisation, particularly amongst the mid-tier firms, that bigger can be better – although we are also working with firms on other options that already deliver scale with improved margins in other ways.  Options to outsource management of IT services and legal processes should be explored now.

The findings are no surprise – or negative – for the UK legal sector. Law firms are now more open to change – that’s a positive.  Top firms aren’t burying their heads in the sand trying to ignore the impending ‘Big Bang’, instead they are facing it head on and demonstrating greater commercial awareness.

The same cannot be said for all the smaller firms, where there is a dilemma with many partners struggling to see a future when they could be more pro-active in getting organized.  Attractive options are available to most practices, it is just a case of unearthing them.

Our research also indicated that senior management at law firms believe that changes in regulation and bank pressure will be the two main drivers of merger activity during 2011.

There’s certainly no room for complacency with regards to financial management anymore.  The real prospect of a merger or buy out is a great opportunity – if utilised rationally and early enough – to tackle inevitable gaps in financial information and quickly improve financial performance.

How should lawyers respond?

Law firms looking to merge or buy out another firm must ensure the best deal and agree exit routes, whilst setting realistic financial expectations for partners from the outset since finances can often scupper the deals.  A bit of pre-emptive work here can work wonders – particularly when there is a clear financial incentive for partners to introduce meaningful improvements.

Banks no longer view law firms as a safe bet.  The high profile demise of Halliwells has shown what can happen.  I’m not sure anyone really expected such a major firm to fail – the shockwaves are still being felt.  With the Legal Services Act coming into force in October this year,  further attempts to consolidate are likely.  Small and mid-sized legal firms are likely to join forces.  More joint ventures and collaborations between small legal firms and large organisations are expected, allowing them firms to take advantage of the larger company’s enhanced marketing clout.

Inpractice UK is a full service consultancy for legal practices, working with law firms to increase margins and profits through critical review and a focus on KPIs.  Comprising a team of specialist independent consultants, we advise clients on their strategy and development, marketing and business relationships, finance, technology provisions and improving productivity and risk management.

Our specialist merger team advises legal clients on all aspects of a merger; from a high level strategic approach to the practicalities of consolidating databases to facilitate mergers on any scale.

Allan Carton