For UK lawyers, if not others, the world is turning upside down. As a result of technology and the liberalisation of the legal services market, the way in which the legal profession does business is rapidly changing. Supermarkets and accountants can now run law firms, if they choose. Proliferation is the order of the day amongst freelance lawyers and virtual law firms. And this week, Karl Chapman, the revolutionary CEO at Riverlaw, told the Law Society Gazette that by 2020 his law firm will be no longer be hiring qualified lawyers.
For in-house lawyers, the stuff that is terrorising elements of the private practice seems a world apart. So long as our organisation needs in-house lawyers, we can keep our heads down and keep our jobs. After all, our organisation has to have a legal team doesn’t it? Right?
Wrong! No pre-ordained reason or regulatory requirement exists for organisations to employ in-house lawyers. Indeed the growth in numbers of the in-house profession- now around 20% of solicitors – is as a reflection of the dreadful economic state of the legal services supply chain. Research consistently shows that large teams are being built because of the escalating costs of legal work. Financial institutions, global companies and conglomerates now employ teams as large as 1600 lawyers worldwide. The average size of teams recently surveyed for the Solicitors Regulation Authority is 40-50.
As the size of legal teams and the legal fees budget grow, they become more noticeable to the likes of the CEO, the CFO, the Head of Procurement and the HR Director. Coupled that with new legal services providers using the regulatory regime, technology and trusted business practices to offer competitively priced alternatives and you have a heady cocktail. As these new providers are now featured in the business and financial pages read by the CFO et al, it will just add to the pressure to do “more with less.”
So what are in-house teams going to do? There are a few who are well ahead of the curve such as Dan Fitz at BT. BT has its own Alternative Business Structure: BT Law. It uses LPO; Axiom and an alternative legal services advisor: Halebury. The legal teams are focussed on delivering services across the business with customer facing teams interacting with the Group central teams.
Other organisations will adopt Ostrich tactics; run fast and then, when that fails, stick their head in the sand. Others will become statuesque in the hope that the whirlwind will pass them with little or no damage.
Around the place, many GCs see cost control and operational efficiency as the path to organisational safety. But centring on cost cuts delivered by efficiency savings is not a strategy. It is well established that, long term, a dependency on cost cutting leads to rising costs, reduction of quality and loss of competitive advantage.
The paradox is that in the brave new world of which the legal fraternity are a part, there is a pathway to safety that is rarely, if ever mentioned. Value Creation. In the post industrial economy we now have in Europe and North America, value is driven by intangible assets as much as by tangible ones. Innovation and creativity are vital for our companies to keep competitive advantage. Unlocking hidden value as well as identifying and seizing new advantages is a valuable commodity. This is an area in which in-house lawyers can thrive. By showing the company it can create competitive advantage and innovative ways of doing business (e.g. reducing legal obstacles to trading), the lawyers can show themselves at the hub of value creation. Now that is a powerful antidote to the cost cutters poison.
In the coming weeks, I will be looking at value creation by in-house legal teams, considering the “Value Creation Conundrum” and thinking about how you demonstrate that you have created value.
Watch this space.