Many Scottish firms are in commercial trouble. Their decline can not only be halted, but with some fresh ideas, can be turned around, says Fiona Westwood. Fiona Westwood is a partner at management consultancy Robertson Westwood. Scots are known throughout the world for their inventiveness and commercialism, yet the Scottish legal market is showing all the symptoms of decline, with price cuts, outdated products and little innovation. But how have Scottish firms got themselves into this situation?
First there are external factors, including a rapidly changing marketplace. Clients are becoming more “promiscuous”, shopping around for the best price. They are also increasingly likely to complain if not satisfied with the service provided. Client loyalty is a thing of the past, with solicitors often too far down the purchasing chain to ensure that existing clients are not tempted away by other firms.
Fee cutting and the decline of activity in the property market have considerably damaged fee incomes. A secure income is no longer guaranteed simply by being a partner in an established firm. Traditional areas of business, such as conveyancing, have become unprofitable.
Non-professionals, not tied by the regulations of professional bodies, are marketing themselves aggressively and providing professional services with increasing use of new technology at lower prices.
In addition, professional lines are becoming “blurred”. Accountancy firms are offering clients “one-stop shop” facilities and buying in corporate lawyers. Clients are also seeking advice much further afield than the narrow confines of Scots law.
Then there are internal problems. Lawyers place considerable emphasis on professional values and complain that these values are under threat. They are unhappy about the need to be competitive, to market themselves and to provide a client-responsive service.
Yet clients continue to demand more for less and assume that a high quality service will be delivered as a matter of course. They are also likely to undertake more of the basic work themselves.
In addition, firms function as partnerships and have little formal management, with considerable emphasis being placed on consensus. As a result, they are slow to respond to market demands and they have limited resources to invest, especially in new technology.
A further problem is the restrictions imposed by their professional body. At present, Scottish solicitors can share profits only with other Scottish solicitors. In a marketplace which is becoming more global, this is depriving firms of the opportunity to grow.
Solving these problems will take a multi-faceted approach. First, Scottish solicitors have to change their attitudes professional values and work practices have to be altered.
There is no dichotomy between running a business and providing proper professional services. It is not unprofessional to market your firm. Instead, it provides clients with background information about the services on offer.
Effective management can be achieved while maintaining the autonomy of fee earners. Partnerships do not need to be run by involving everyone. With trust and mutual values, it is possible to delegate operational management to allow the professionals to get on with what they are good at the provision of client services.
It is not unprofessional to consider diversifying from the core services of private client, litigation and company/commercial work. Multidisciplinary partnerships can be achieved without a decline in professionalism or the quality of service provided to clients.
Second, there has to be an acceptance of change. There will be no return to the days when the conveyancing fees earned by junior fee earners provided the core and stable income for the firm. Court rates will not be increased to a profitable level and there is every sign that legal aid will be removed completely.
It is no longer sufficient to “learn the trade” during an apprenticeship and not receive any kind of formal training after that.
But it is not easy for many Scots lawyers to change their attitudes. Many chose the law because they saw it as a profession not a business. They sought the status and lifestyle that it offered. They enjoyed a “good debate” and/or wished to help people who had problems.
But this is no longer the case. Solicitors increasingly get a bad press, with the fraudulent behaviour of a tiny minority getting a disproportionate amount of attention. Wearing its two hats of trade union and prosecuting authority, The Law Society of Scotland has limited credibility with either the public or its members.
In individual partnerships, previously good working relationships break down as profits drop. Fee earners are not replaced because partners take on more client work themselves in an attempt to maintain profit levels. This results in reduced time for managing the practice to ensure good cash flow and fee recovery, and leaves no energy to think creatively about the longer term.
Scots lawyers used to describe themselves as “men of business”, priding themselves on the pragmatic approach that Scots law allowed compared with its English cousin. Based on Roman law, it is more in tune with European law than common law systems.
The new Scottish Parliament should provide an opportunity for raising the profile of Scots law. In addition, it creates opportunities for the country to become a unique provider of commercial solutions.
The current restrictions imposed on solicitors by The Law Society must be reduced to allow multidisciplinary and multinational partnerships. Scots firms should take the lead in setting up specialist services, such as a complete house-buying package which includes estate agency services and mortgage advice.
Alliances should be formed to encourage cross-border solutions rather than seeking to highlight the differences between the two legal systems.
Firms need to look at how they operate to ensure effective delivery of profitable work and to allow an increase in financial and skills resources for future development.
Investment in IT is important but not in itself sufficient. Work practices must be refined to ensure work is carried out as cost effectively as possible. Solicitors must look at how they can best spend their most valuable asset their time.
Partnerships must develop a management structure which allows the firm to be run “professionally”, not merely by professionals.
The key to successfully managing professionals is maintaining their professional values and autonomy. Innovation and skill development must be part of every working week.
Firms should concentrate on developing partnership structures which encourage responsiveness and flexibility and mitigate the need to obtain consensus. Clients want a cohesive and comprehensive service to support their needs. Key client partners can provide this as well as collecting and responding to client feedback.
So is there a future for Scottish firms? As a member of the Law Society of Scotland and a Scottish solicitor, I have to believe that there will be.
Scotland has a good educational system, producing graduates who are keen to become solicitors and contribute to society and their profession.
We have a legal system based on principles which allow us to offer a broad and flexible response. We have a strong network of connections throughout the world.
Properly managed partnerships also allow a flexible and responsive approach. Through good management and the development of long-term strategies, we can make our legal firms successful and satisfy both clients and other professionals.