Structure your thoughts to cope with change

Uncertainty seems to be the key theme for the first quarter of 2003. At the time of writing this article (mid February), war with Iraq appears to be more likely than less, and the economy seems to be slowing down and becoming sluggish. The regions are watching the effect of the South East market cooling down with careful interest.  

What is most certain is that the market this year will be tighter. There is likely to be less business activity with people being very cautious about taking any decisions.  

As law firms working in this market, we also will need to be careful - to look at overheads and fixed costs, consider our options and what areas of work are and will remain profitable.  

Sometimes it seems that we are completely controlled by the market, blown hither and thither by winds  of  change. Currently, corporate  work  is  down, commercial  and  residential property is busy, profitability is variable. We need more staff of one type of work and less of another. And everyone seems to have to work quicker and quicker!

The theme of this article is to encourage us to take control of our lives and anchor ourselves to what we want to achieve. To do this, we must develop the discipline to take time to think and plan. Most of the information about market trends we already have. We talk to banks, other professionals and our clients, all of whom are sources of information. We need to take this information, analyse it and assess our options.  

This exercise does not have to be too time-consuming. We could spend an hour jotting down our thoughts, rationalising them, sorting them into some kind of structure and prioritising them. Those trends which are not important to us and we have no control over, we can dismiss. Those which are important, we need to respond to. Those we have control over, we need to tackle.  

Structuring our thoughts

There are a number of useful models to help structure our analysis. For example, I have already advocated the EPISTLE Model in my book, “Achieving Best Practice” (McGraw-Hill 2001 pages 98/99). Major trends tend not to change rapidly, as illustrated by the fact that many of the challenges detailed in that book have not changed in the three years since it was written. Using this Model today we are able to identify a number of important influences on our firms:

• Economic – interest rates will always have a strong impact on the market and people’s attitude to risk, skills shortages continue as does the impact of global influence and increasing dependence on IT.
• Political – regional impact continues, as does the Government’s attitude towards muddling the lines between private and public sectors.
• Intellectual – intellectual issues continue to grow in importance.
• Social – the gap between the have’s and the have not’s widens, consumerism increases and we need to consider the impact of an ageing population.
• Technological – the pace of change continues to increase.
• Legal – there is increasing complexity of legislation and regulations.
• Environmental – continues to become increasingly relevant.  

Once we have looked at these headings in general terms, we need to look at their application to us and our firms in particular.  For example, what will happen as a result in changes in procedures at the Land Registers? What will they mean within the next year or five years? What can we control? What action do we need to take? Do we have the skills? Do we have the resources?  

Another model to look at is the 5 Forces developed by Michael Porter in  “Competitive  Strategy Techniques” (Free Press 1980). I adjusted the Model to 6 Forces (see “Achieving Best Practice” McGraw-Hill 2001 pages 101/104) to better suit professional service firms. Porter’s Model is sometimes criticised for being too inflexible. However, in my opinion, it provides the structure to produce a good overview  of  the  important influences we work under.  

1. The power and influence of our clients continues to increase. We ignore this at our peril!  Clients come to us because they need our help. If we do not respond to this need in a way they think is accessible and good value, other people will “capture” them.  Given the anticipated continued downturn in the levels of business activity, it is vitally important this year to keep our quality clients.  
2. Our supply of quality staff is also under pressure.  There may be more people in the market, but many do not have the skills or technical knowledge we need.  At the time of writing commercial property lawyers are in short supply.  Expert IT and training managers are very difficult to find.  Whilst there may appear to be an oversupply at postgraduate level, many young professionals feel burdened by debt and frustrated by the quality of work they can access early on in their careers.  At this point I would like to make a plea for those in the profession who can afford it to take a long-term view of the market and invest time, especially when work loads are down, to train the supply of quality people for the future success of the profession.  
3. Our vulnerability to IT suppliers is on the increase.
4. The threat of indirect competitors seems to be lessening partly as a result of the Enron situation drawing attention to the risk aspects of MDPs and partly because of the current decline in high volume, high fee work.  
5. The threat of direct competition will more than likely increase as we all scramble for the remaining high quality work.  
6. The threat of substitute services continues with software developments and clients more inclined to seek to do things for themselves.  

The essential response to all of these market trends is to be aware and flexible.  We now need to look at these trends in the particular context of our individual firms.  

Look for shifts in work patterns

It is sometimes easier to look at shifts in our fee income, for example property related work versus financial services, divorce versus alternative dispute resolution, employment advice versus high technology start-ups.  

Once we have identified these, we need to ensure that we can respond to them.  Do we have the right shape to address these shifts? Too often young professionals have become specialised early on in their careers with the result that they do not have transferable skills. The profession continues to shift towards the very large and the very small. Where are we positioned? Are we able to change our department structure quickly?  As a small firm, do we have sufficient resources? For example, we are currently seeing a change in the shape of criminal practices. Current legal aid fees are simply not high enough to service office and staff overheads. As a result, we are seeing many practitioners downsizing and /or seeking admission to the Bar.  

Is there any good news?

Overall the results of this analysis may make people feel that there is little good news! However, I continue to see firms making significant profits in exactly the same market as those who are losing money. The key element is to analyse, adjust and position your firm correctly. I appreciate that some firms are burdened with leases and trading overdrafts. Many, however, have established client bases that would respond favourably to buying other services from their solicitors. For example, accepting that the financial services market is extremely difficult at the moment, clients need proper and independent advice.  

In summary  

Our working lives are very important to our health and well-being. We need therefore to take control back of the demands being placed upon us. Proper analysis of current trends will help us identify priorities and target key areas.  Most importantly it allows us to implement change in a positive and constructive way.  

Fiona Westwood runs her own management  and  training consultancy specialising in working with the professional sector. A solicitor with 20 years experience of private practice, she established Westwood Associates in 1994.