Connected independence: Law firm networks in the new world order

Key takeaway points:

1. Make a match. Networks and members need to have the same values and vision.

2. Measure returns. Ensure the network offers value for money through added-value services and/or measurable cost savings

3. Don’t go for the quick fix. Both sides should see the benefit of building a longer-term strategy.

4. It takes two to tango. Members have to be involved, as value comes through participation, sharing knowledge and maximising utilisation of the services on offer.

5. Focus on innovation. Whatever the network’s model – mutual, franchise or licence – keep asking how it can provide solutions and approaches that could otherwise be out of members’ reach.

 

Networks are an established feature of modern life. Whether keeping up with customers and prospects through LinkedIn, or having an eye on what friends are doing through Facebook, we are all bound together in countless ways throughout our professional and social lives.

But it was quite a different landscape when LawNet was established on a mutual basis over 20 years ago. Social media was unheard of and daily use of the internet was still waiting in the wings. Indeed, many law firms would not have been regular users of computers. So, back in 1989, the original purpose of LawNet was simply to bring buying efficiencies, shared knowledge and training to mid-sized, multidisciplinary independent law firms in the UK.

Since then, the network has developed into a complete infrastructure package, covering quality management, risk management, compliance, training, networking, business development and marketing. We are now facing another leap forward with the introduction of a new mark of excellence in client services.

There have been some hiccups along the way, as with any growing organisation.

Reshaping the network

When I joined the network in 1999, my role was more troubleshooter than chief executive. The network was suffering from growing pains and faced many challenges over its future direction and viability.

Many firms that had originally joined were seeking a quick fix rather than building a longer term strategy. However, there’s no point in joining a network for short-term gain, you have to be in for the long term. This resulted in us having a big rethink about the type of firms we wanted as members.

One matter under discussion at that time was unified branding. This is a big consideration for firms today, but back then firms were passionate about remaining independent, which we have continued to help them do ever since.

I was new to the legal sector, but the job appealed precisely because of the challenges that the profession was facing at the time – the ending of the Solicitors Indemnity Fund, the Woolf reforms, and more besides.

The headlines of the time were that small firms were under pressure, professional indemnity insurance was out of control and consolidation was the only way to go; headlines which sound remarkably familiar today.

The challenges in reshaping the network against this backdrop were immense, but I was drawing on a background in senior management in both banking and insurance, with big similarities in managing risk, people and clients. This came to the fore in binding all member firms together and taking our proposition for professional indemnity insurance to the commercial market following the demise of the Solicitors Indemnity Fund.

We needed more members to reshape and revitalise the network and succeeded in increasing its membership by about 25 per cent by 2002. We have since grown steadily by careful selection and ensuring that firms who join are in it for the right reasons and want to participate in all that the network offers them. There is no point in being in a network, club or association unless you want to participate.

The network is operated on a non-profit basis, with a board made up of members, so any change in member fees is subject to agreement by members. I think the mutuality and the controls on member fees have been a big part of the network’s success story, as partners in member firms know they are getting value for money. As an example of that mutuality, in the past ten years we have handed back some £1m to member firms after balancing the books each year.

It’s helped us to become one of the longest standing networks in the UK. Today we have a stable membership and continue to be based on a non-profit model. Currently we have almost 70 members, ranging from £2m to £15m turnover, with a combined turnover in excess of £250m.

Each firm operates in a discrete geographical area under its own independent branding and with international links through the Eurojuris network, a likeminded network of ?more than 600 firms across Europe ?and Scandinavia.

Membership costs are based on ?size, and members generally recover ?their annual fee through our group purchasing power, discounted services and free CPD training.

But membership of the network is not just about size. It’s based on a strong risk profile, as all firms have to achieve and maintain our ISO 9001:2008 quality standard certification. Through a recently-completed and first-of-its-kind agreement with the Law Society, member firms can also secure and hold the Lexcel practice management standard through a simplified dual-auditing process.

The sector’s growing compliance burden is also a current priority, and ?we are working towards a risk management portal to lead members through implementation of the Solicitors Regulation Authority’s Handbook and outcomes-focused regulation (OFR), backed up with training and risk management consultation.

Growth plans

Many law firms are seeking economies of scale and our recent research has shown that over 60 per cent of member firms believe that, to cope with the future, they need to be at least a third bigger, with a further 24 per cent looking to at least doubling in size.

In response, we recently tied up with another network, 360 Legal, to draw in its specialist knowledge in mergers and acquisitions. The cooperation is intended to share resources of value to each other, rather than with any intention of merging the two disparate member bases.

Our member research has also shown strong demand for a network-wide client service standard, backed by over 80 per cent. Also popular was the development of consumer awareness of what being a member of the network means, while firms retain their individual identity.

As a result, we are now in the final stages of developing the LawNet mark of excellence, which is designed to speak to clients. This will be covered through an expansion of our ISO 9001 standard and is intended to provide a recognisable stamp of approval which shows a firm’s commitment to a given level of excellence in client service and delivery.

Our ambition is for our client service excellence standard to mean the same to consumers of legal services as Intel Inside does for computer buyers. We want a clear measure and standard that gives clients the confidence to deal with member firms.

The continued growth of the network is certain to be a big challenge over the coming years. There are only a few firms across the country that tick the boxes of our membership criteria and the overall number of law firms in the sector is likely to consolidate, based on all predictions. As a network, we are also facing increased competition from other players in the market.

Ours is a completely different model to the franchise or licence arrangements that characterise most of the new entrants into the market, where a substantial percentage of a firm’s turnover is paid to the franchisor to fund the branding activity that lies behind the development of a national consumer brand.

However different we may believe ourselves to be, it’s likely that some firms will be weighing up the relative merits of LawNet versus a branded home.

For me, the focus has to be on demonstrating value for money and giving our existing and potential members the confidence to maintain their independence with our support. It’s about giving them the tools to travel on their journey.

One of our most recent new services is Law League, which is being provided as a free-to-use service for member firms to conduct customer satisfaction surveys and then benchmark themselves with their peers. It takes the place of the traditional post-case ‘happy sheet’. The new online scheme will provide standardisation for comparative purposes and take away the whole costly, time-consuming admin process, as well as giving firms help with meeting OFR requirements.

This knowledge should help firms to see how their clients value them – in the context of service received against payments made. Understanding perceived value is a vital tool, and the firms which get that right will be the winner. But to do this, they need to know their costs, drive them down and find the most creative and efficient way to deliver services to clients. Most law firms are still not doing that.

I think costs are generally still running too high in the sector for small to medium-sized firms. What the recession has forced should really have been done ten years ago – and overheads still need to be trimmed and outsourcing embraced more comprehensively. It’s not just about cutting costs; outsourcing also offers the potential to bring sophisticated solutions that would not otherwise be within a firm’s reach.

We’ve been doing that with firms by buying professional indemnity insurance through a group scheme and providing shared library services. We’re continually looking for new services like these to add to our portfolio.

I want to see the network retain good health, with more firms, expanding services and increasing good value for members. To achieve that, I know we need to continually strive for new thought processes and ideas, wider geography and enhanced organisation.

John Thomas is the chief executive of independent law firm network LawNet (www.lawnet.co.uk)