The gain is not without pain when it comes to overhauling legal services but those willing to push on are in better shape for the increasingly tough market
The Lawyer: The advent of the Legal Services Act, the financial crisis and a continued demand for efficiency are all impacting on the legal services market in the UK. What were the drivers behind your decision to depart from the traditional way of delivering or using legal services?
Chris Vaughan, general counsel and chief corporate officer, Balfour Beatty: The main drivers for me are not the Legal Services Act, or the financial crisis, more a desire to structure the provision of legal services as efficiently and effectively as possible.
Despite following best practices such as putting in place panels, agreeing rates, negotiating fixed fees, our annual spend was not reducing. To reduce the spend, we needed to think differently, to move away from traditional delivery methods, and to price the work in a new way. This we did in the new deal with Pinsent Masons, but to do so required both us and the law firm to treat the arrangement differently, and to develop a much closer -relationship, where our interests are properly aligned.
Richard Tapp, general counsel, Carillion: Complex and novel contractual solutions are central to Carillion’s business. The nature of what we do is very law-intensive, and we have developed a range of innovations to meet our legal needs over the past decade, from the Carillion Legal Network, which provides a managed network of law firms to meet our external needs, through to internal design efficiencies that focus on quality programmes such as Lexcel. Carillion Advice Services has allowed us to take this to the next stage by giving us a managed service centre which we can run to our own standards ensuring that we have control and flexibility.
David Pester, managing partner, TLT Solicitors: Right from the outset, when we formed in 2000, we knew we wanted to do things differently. We did not want to follow the traditional law firm approach. We were very clear from the start who we wanted as clients, where in the market we wanted to be and that excellent client service had to be a given. We knew that we would only be successful if we built our business around our clients and worked collaboratively with them and other providers to help them achieve their goals.
TLT has real strength in challenging existing ways of working and resourcing innovatively to deliver a better result for the client. We drive efficiency through extensive use of IT and effective project management and we operate a whole range of flexible resourcing models so that we can quickly upscale for specific projects and to meet client demand. From this base we have developed a model of collaboration with other service providers including magic circle firms. As the market has changed, with increased competition and with clients rightly becoming more demanding of their providers, we’ve found that our approach is paying dividends.
Neville Eisenberg, managing partner, Berwin Leighton Paisner: The main drivers behind our innovations are changing client needs, which have led us to offer some alternatives to the traditional model.
The factors you mention have created a climate of change and clients are showing increasing interest in finding alternative ways to meet their requirements for external legal support. While I certainly would not say that the traditional model is no longer relevant, it has come under pressure and is having to evolve in order to deliver the efficiencies. However, that evolution is not sufficient for a growing number of clients who are interested in testing different models. A good example might be the Lawyers on Demand service, which we started before the financial crisis but has grown considerably over the years.
The Lawyer: What are the benefits of your particular model?
Vaughan: As well as significant cost savings – more than we had originally targeted – the arrangement should help us to manage legal risk in our business better. If I take the example of employment tribunal claims, it is structured so that it is in both of our interests not just to do the employment tribunal work in front of us, but also to reduce the number of employment tribunals each year. This creates the biggest benefit for us both. It also means that Pinsent Masons lawyers are closer to our business, understand it better, and can help us improve our business processes, as well as providing great technical advice.
Tapp: Our model allows us to ensure that all parts of our work are done by the right people – either internally in Carillion Legal, in a Network firm, or by Carillion Advice Services, which can manage elements of our work where we can bring process or standardisation. This allows our people to work more effectively. With that comes significant cost benefits as well as freeing up lawyers to carry out the more complex and novel elements of the legal work.
Pester: Our approach is enabling us to deliver strong sustainable growth through winning significant new clients and major new work. We’ve developed a national reputation for having strengths in key sectors and service lines. A good sector-led win recently has been our appointment by the BBC to advise on property legal services across its property estate in England and Wales.
Eisenberg: Clients have more choice in deciding how to deal with particular assignments or requirements for a stream of legal support. Rather than engaging several organisations to provide this support, we offer an integrated and flexible service within the firm. This enables the service to clients to be more joined up and also makes it easier to manage the consistency of service quality.
The Lawyer: And where are the challenges in your model?
Vaughan: The main challenge has been cultural. It is the move away from the traditional focus on hourly rates and the move towards risk management and continuous improvement. Lawyers don’t always think this way, particularly when they are used to charging as many billable hours as they can.
Tapp: At present, ensuring that we match our service to the demand we see – the opportunities for the model are developing significantly.
Pester: On occasion those you are trying to form a collaborative relationship with – for the benefit of clients – see you only as ‘the competition’. Times are changing and firms are becoming more open to a collaborative approach but it requires a different way of thinking that some are just not used to. We collaborate with clients, other legal providers and a whole range of other service delivery stakeholders to ensure we’re able to provide the best commercial solution for clients and this requires us to be supremely efficient, clear in our communications and results-driven.
Eisenberg: The market for legal services is still evolving and as other law firms and other legal service providers experiment with different models, clients are learning and testing what is available. Periods of change are always challenging.
We find that not all clients are necessarily geared up for new methods of service delivery. Some prefer to stick to a more traditional model with improved efficiency to deliver them cost savings. This brings one back to the importance of being able to offer a choice which allows clients to select the mix that works best for their business.
The Lawyer: How else do you expect the landscape to change in the future? What other types of innovation do you expect firms and companies to introduce?
Vaughan: I think we will see more deals like the one we have done, probably involving more legal process outsourcing, and greater use of technology. But it is horses for courses, and while what we did won’t suit everyone, it probably needs more general counsels to take risks with their model, and more law firms to develop innovative solutions.
Tapp: We expect the landscape to continue to diversify – with greater differentiation as firms come to identify their core skill-sets and -develop them rather than trying to offer everything to everyone. We also see greater opportunities for the new providers to interface with law firms and the range of clients to deliver services more efficiently and effectively using process and technology wherever possible.
Pester: With challenging market conditions set to continue; clients wanting to work more closely with fewer advisers meaning fewer places on panels; increased competition from new market entrants as well as many existing firms changing their offering and capability through merger or acquisition, now is a tough time to be in the legal market and law firms will need to be very clear about their strategy and what it is they want to be known for.
Firms will need to be far more flexible in their operations and add value on the client’s terms in their service delivery. I think we’ll see greater innovation in resourcing and service delivery, use of technology, and pricing and fee structures, and greater transparency in operations.
Eisenberg: I expect clients to continue to seek solutions which offer both efficiencies and a high degree of service quality. This will offer opportunities to both law firms and other providers willing and able to be creative to gain market share.
I think we will continue to see a growing number of ‘alternative’ legal service providers appearing in the market, with lower cost structures than traditional law firms and therefore able to offer lower pricing structures, especially for work streams that are susceptible to process management.
Many traditional law firms will, over time, expand their capacity to provide lower cost services. The drive for efficiencies may well fuel the trend of consolidation in the legal sector as firms seek economies of scale and the money to invest in the technology, systems and expertise which will be necessary to achieve greater efficiency.
Balfour Beatty took the decision to outsource all of its “day-to-day” legal work to Pinsent Masons earlier this year in an attempt to cut costs and increase efficiency. General counsel and chief corporate officer Chris Vaughan, who has responsibility for ethics, compliance, communications, secretarial functions and corporate affairs at the infrastructure giant, hopes the deal will enable him to focus more on risk management while encouraging Pinsents to be as efficient as possible in the way it delivers services.
Carillion general counsel Richard Tapp started revamping the way the company’s legal function worked when he joined in late 2001. He started by cutting the size of the panel and the cost of legal spend. In 2009 Slaughter and May outsourced work to a legal process outsourcing provider, at Carillion’s request. The company has a managed network of law firms to advise it and Tapp has also introduced a managed service centre, known as Carillion Advice Services.
Berwin Leighton Paisner
City firm Berwin Leighton Paisner (BLP) launched ‘Lawyers on Demand’ (LoD) in 208, a service to provide freelance lawyers to companies that need extra bodies to cope with spikes in work. LoD began with a pilot of eight lawyers and has since grown to over 100, with revenue exceeding £7m. Clients such as Orange, BSkyB, Cisco, the Financial Times and a number of banks have used the service. Last year BLP voted to spin off the company, retaining an 80 per cent stake.
Bristol firm TLT has pioneered the use of technology and systems to help the way it advises its clients, helping to push up turnover in recent years as the firm has grown. The firm also has robust human resources and partnership programmes, helping it to retain a good number of lawyers through to the partnership. Recent mergers have been targeted to securing client wins and deepen expertise in specific industry sectors.
Sponsor’s comment: doing it differently
A revolution is brewing in the world of the General Counsel (GC). Difficult times lead to new thinking and the redefinition of roles and responsibilities. Questions arise about where new accountabilities lie and who ‘carries the can’ for whatever issue is currently under scrutiny. In an increasing number of companies, the GC is emerging as a trusted partner of the internal client and a key member of the executive management team. This change is driving GCs to rethink some important strategic relationships, most notably the relationship between a law firm and its in-house client.
Phrases such as ‘we need to think differently,’ ‘range of innovations’ and ‘challenging existing ways of working’ leap out of the interviews on these pages, clear signals that this critical relationship – the plinth on which the provision of legal service delivery to corporates is built – is undergoing its biggest change ever. Challenging financial conditions have increased pressure on GCs to cut external costs and increase efficiency. Alternative fee arrangements have made inroads into dispensing with the hourly rate once and for all; legal process outsourcing has increased in popularity; and ‘project management’ is a term that law firms are adding to their vernacular. These changes are without doubt important, but to some extent they are a natural evolution in the lifecycle of a mature relationship – a precursor to the actual revolution. The real revolution will take place when law departments and law firms throw away the rule book and do things totally differently.
GCs and their law firms are going to learn to work in partnership using the range of tools available, from the most technical e-billing platform to the most sophisticated emotional intelligence frameworks; the disaggregation of legal services will mean that everyone buys into ‘horses for courses’; and effective project management (a new skill for everyone) will be mainstream. Active collaboration is the basis of this revolutionary relationship – being on the same side, being totally transparent and being real partners. Now that’s what we call change!