Legal practice reinvented

The impact of the recession across the solicitors’ profession has been well publicised. So too the many difficult decisions that have been made: cutbacks, closures, redundancies. The Society’s own survey of firms concluded that a significant majority expected either to experience a downturn in profitability or to make a loss, with the gloomy forecast extending beyond the property sector to almost all areas of work.

But ongoing monitoring of the economic situation has also led to some unexpected discoveries. The fact that 28 firms have closed since November 2008, however grim, is likely to come as little surprise. Less predictable is the finding that 32 new firms have opened in their place.

Not sitting doing nothing

The Society’s newly appointed Director of Representation and Professional Support, Neil Stevenson, provides an explanation. “Most of the attention recently has, not surprisingly, focused on victims of the recession. But solicitors have also shown trademark flexibility and resilience. The finding that more firms have opened than closed is maybe an example of that.

“No doubt many of those setting up on their own are working from home with a laptop. But that is no barrier to providing a high quality service, perhaps at a lower cost than established firms. Others, such as architects, have been doing something similar for years. With practices looking to reduce

overheads, it could well prove an innovative response to the current challenges of the marketplace.”

Given that there is no way of predicting the end of the recession, innovation will remain essential for law firms hoping to survive intact, and still more to prosper, in the months and years ahead. The expected arrival of alternative business structures within the next nine months reinforces the need for innovation and forward thinking.

Stevenson continues: “The two biggest impacts on the delivery of legal services in the immediate future will be the economic recession and the introduction of alternative business structures. However, innovation is something firms should be doing now rather than waiting for change to happen. There is increased competition in the legal services market, so all our firms need to be thinking about the shape and structure of their businesses.”

Alternative models

And there are a number of examples of innovation already in the marketplace, both in Scotland and south of the border, where legal disciplinary practices (LDP) – which can include up to 25% non-lawyer ownership – have been permitted since March. The LDP model got off to a relatively slow start in England & Wales, but has picked up more recently, with the Solicitors Regulation Authority approving 84 applications to date.

But there are other signs of innovation, not least with the concept of “virtual” law firms gathering momentum. Also referred to as “dispersed” firms, they reduce overheads by employing solicitors who work from home or small satellite offices rather than an expensive head office. Only around 20 are estimated to exist, but the concept is attracting increasing interest.

“There are exciting things happening within the law in Scotland, in other jurisdictions and in other professional markets,” says Stevenson. “Lots of firms are looking at whether they can deliver a service more efficiently or tap into new markets. That might involve re-examining a business model which involves a high street presence. Younger clients, in particular, are used to buying services online and don’t always feel the need to meet a local solicitor in person at the high street office. Commoditisation also allows legal services to be delivered in a way that suits clients.

“Some firms have invested heavily in technology, for instance in client relationship management. But others still don’t have an electronic record of their clients. The kind of businesses that law firms will be competing with see client data as one of their most valuable assets, and they are excellent at client management as a result, even if they lack the personal touch.”

The ABS factor

Boosted by developments in technology, the pace of change is likely to increase when ABSs are permitted. For instance, a franchise model could operate in a similar way to virtual firms, with a central facility providing back office functions, while solicitors and paralegals operate remotely. Likewise, a co-operative model might involve a number of different local firms sharing back office costs while maintaining separate businesses.

A variation of those structures could see different professionals –

for instance, a solicitor, accountant, surveyor and financial adviser – working together and sharing a client base in a one-stop shop, or business hub. Alternatively, a network of solicitors’ firms could continue to provide a basic service but also share a common pool of specialists or solicitor advocates, rather than retaining them all in each practice. A further change might involve not-for-profit organisations or charities developing the law centre model to deliver legal services themselves.

“All of these business models can be consistent with high standards and the ethics associated with the Scottish solicitors’ profession”, Stevenson comments. “In other words, it does not automatically involve dumbing down or trivialising the law – it is about responding to the needs of consumers and the marketplace. But we are also conscious that access to justice is a key issue.”

In his new role at the Society (see p32), Stevenson has responsibility for supporting and representing members. “In the coming months,

we will look to stimulate discussion about these issues, backed up by further articles in the Journal as well as a series of events and discussions with other interested parties. There may be more of a role for the Society too – we want to hear from members about what role they see for us as they face current and future challenges.”

Bill outstanding

In the meantime, much of the Society’s attention will also be focused on the legislative process, with the Legal Services Bill expected to be introduced in late September. The Society is already preparing to give written and oral evidence during stage 1 and then put forward any necessary amendments. The final stage of the parliamentary process is likely to take place early next year, with royal assent possible as early as the spring.

The Society’s Director of Law Reform, Michael Clancy, says: “We’ve already had a series of meetings with civil servants to make sure the views of the Society – on behalf of the profession and the public – are made known. We will continue to make representations at each and every stage of the bill’s passage through the Parliament, always keeping the profession informed of developments.”