Training pool: How law firms could pool their training resources

Sylvester Bowen, the former CEO
of Bowen, Fung and Chandri (BFC) has received many accolades for his work in revitalising a once-failing law firm. As a forward-thinking entrepreneurial lawyer who, he admits, was not allowed near any actual legal work, his role at BFC was one
of strategy and implementation. And, while his tenure was widely respected, he was shrewd enough to know when it was time
for him to move on.

"We had a good run and I had taken the firm as far as I could," he said. "The prudent thing was to step aside and allow new blood with different skill sets to step in and steer the ship."

Nonetheless, he still holds shares in BFC and they provide him with a dividend that, he says, "keeps me comfortable".

These days, however, he's excited by a new project that once again may shift the legal landscape; it was this new vision that brought me out to his home for a visit.

I launched into a barrage of questions about that project as he walked me to
the small, smartly-decorated living room.
He smiled and motioned me to sit as his partner offered us drinks.

"One of the key elements of BFC's culture," Bowen said, "was that it was a culture of continuous improvement. 'How
can we do it better' was and still is our mantra. It also formed part of the metrics
for compensation because improvement
should always be rewarded."

He paused as he shifted to get more comfortable on the sofa.

"That includes the career path of our trainees and lawyers. There was no tournament at BFC, no up or out. No carrot being yanked further and further away from the team member. We wanted you for life. We invested heavily in the recruitment process to get it right, then continued to invest in training.

"We seemed to be one of the few law firms that did so, although Slater & Gordon followed our lead and has been quite successful in attracting and retaining good lawyers through a strategy of managed organic growth.

"When I left BFC, I began looking for new challenges. And the incredible cost and waste of the associate-to-partner tournament was something that had been bothering me for some time. We had cured the problem
at BFC, but we were only a tiny drop in
the bucket of firms across the country. Why,
I kept wondering, in an era where associates have little chance of becoming partner, would firms still cling to such an antiquated programme? How could I change that?"

Good luck changing that model,
I thought.

A new model

"The challenge was enormous," Bowen said, seemingly able to read my mind. "But those are exactly the challenges I like to take on.
I believed that there could be a better way to create consistent quality training of young lawyers without being disingenuous about their career path.

"It was when I was watching American baseball that I thought I had found a solution."

"Baseball?" I asked, laughing.

"Don't be so quick to judge, Mitch," he said gently, with a hint of good-natured admonishment. "What do you know
about baseball?"

"A fair amount actually," I replied.
"It's a professional sport played on fields across North America. There are about
30 teams across two leagues."

"And what's the career path of professional baseball players?"

"Players are drafted out of high school
or university and then spend some time in
the minors before moving up to 'The Show' as they call it."

"And the purpose of the minors is?"

"Each professional team has a feeder team in the minors where the stars of tomorrow are trained."

"Exactly."

I stared at him blankly. "Exactly, what?"

"Feeder teams." He paused.

Baseball and hockey have feeder teams. The training is top notch, the work is good
for the players, and there's a market for it. Now, take that concept into the legal services industry.

"We've seen the advent of nomadic lawyers among seasoned lawyers and, more importantly, with clients. Lawyers on Demand has been the leader in this area and I believe we can learn from that model. If the ability to scale up quickly, then scale down after the work is completed, is attractive to clients, why wouldn't it be attractive to law firms?"

"You've lost me," I said.

Bowen moved forward on the sofa to get closer to me. Other firms have followed the lead of Lawyers on Demand: Pinsent Masons with Vario, Allen & Overy has Peerpoint and Freshfields has Continuum; Addleshaw Goddard also recently announced that it was getting in on the game.¹ So, was there something similar that would be attractive
on the front-end of the process - at the trainee and junior lawyer stage?

"Take a large firm that's increasingly under pressure to give up on lower-end work and concentrate on the high-margin files that are mission critical for clients. The reality is that there is only so much of that high-margin work to go around," he said.

"Associates at these firms do not spend all day, every day, on such files. There will be peaks and valleys and, during the valleys, firms will be forced to carry junior lawyers - and perhaps others - at a loss, all the while praying for the next high-margin assignment. But, if you introduce a 'just-in-time' element to junior lawyers and trainees, the fixed costs of operating a law firm can be reduced so that the valleys don't have
to be so costly."

"Ah," I replied, still not completely understanding the concept.

"Law firms spend a great deal of time and money on recruiting and training young lawyers," Bowen continued. "However, in a fit of madness, firms have also become enslaved to the associate-to-partner tournament. Money is spent recruiting and training lawyers, most of whom leave, or are jettisoned from the firm, within five to seven years. Each year, the same process and the same costs are incurred. Wouldn't it therefore be much more profitable if that recruiting and training was outsourced in
a controlled and consistent way?"

"Managed training services. Hmmm."
I rolled that thought around in my head
while Bowen rose.

"Scotch?" He asked as he handed
me a glass.

"Absolutely," I replied. If anything,
the whiskey just might convince me
of this incredibly daft idea.

Managing training services

"We've seen the advent of managed legal services, where law firms manage legal services on behalf of a client. I think it's
now time for managed training services," said Bowen, sitting back down.

"So, each law firm would create another entity to train up their lawyers?" I replied. "Sounds even more expensive then what they're doing now."

"Of course not!" Bowne said. "That would be pointless. I'm suggesting a form of joint training centre. In other words, five or more firms - call them the Premier League firms - pool their resources to create a feeder team law firm, call it the FT firm.

"The FT firm would be separate and distinct entity from those firms. The advent of alternative business structures can make this even more interesting, with a mix of corporates who want a training pipeline or just-in-time junior lawyers added to their in-house team, or even just private investors.

"All profits of the FT firm would be distributed to the shareholder Premier League firms and other investors. The drive for profitability would also enhance the experience of the trainees and junior lawyers. Also, this client base allows for more client-facing work than traditional training contracts.

"The Premier League firms would have confidence in the training of FT lawyer, as they had invested in the processes and understood the nature and consistency of that training. Think of it as onshoring meets training with a profit motive."

Bowen sat back, waiting for my reaction.

"The firms would have to be of a similar size to make it interesting and useful," I said. "You couldn't have a magic-circle firm matching up with a high street firm."

"Quite."

"However," I said, "such a venture
still seems to be at least the same cost or even more costly than what they're doing right now."

He took a sip of the amber nectar.

"Bear with me," he said, then paused. "The FT offices would not be in pricey London. They would be located in Manchester, Liverpool, Birmingham or Cardiff. They would be in open space,
with no private offices."

"Sure, that will reduce overheads tremendously."

"Correct. Next, the software, KM and systems used would be an extension of what the Premier League firms already use. No reinventing the wheel here."

I nodded.

"And the lower cost base allows the FT firm to be more competitive on pricing - which it has to be as well, since the
lawyers are not as experienced either."

"And salaries?" I said.

"I suggest that such an outsourced system would give greater control over the inflation of lawyer salaries. The firms in such a venture would no longer be throwing thousands of pounds at unproven young talent. They would create a pool of talent from which they can draw once the talent has actually proven themselves."

"Wouldn't a lower salary and a different city be a turn off to top legal students?"

"If they wanted to work for one of
the Premier League firms of the venture, they would have no choice! Just like the
top talent in baseball and hockey have
no choice."

Bowen took another sip of his Scotch.

Training and selection

"Another key would be to make the outsourced training superior to and more consistent to what they would otherwise
get in a traditional law firm environment.
The young lawyers would then know that even if they aren't 'picked up' by one of
the Premier League firms, their training
was second to none."

"How would they get picked up?"
I asked.

"Again, look at baseball," he replied. "Trainees enter into a training contract that extends to perhaps three or four years PQE. In the final two years of the contract, they would be considered to be 'free agents', available to move to the law firm that best fits them. If no firm picks them up at the end of the contact, they would move on to do something else in their career."

"But on what basis? Which firms
have first priority?"

"Simple market conditions," he said. "They would go out to the highest bidder. The same applies to Premier League firms that wanted to poach a certain lawyer
for a finite period of time during her FT
contract - the highest-paying firm would
win out and be able to move that FT
lawyer to the Premier League firm for
a particular contract."

"Ah, so the Premier League firms have access to the FT lawyers over the term of their contracts to scale up when appropriate. But, what do the FT lawyers
do otherwise?"

Bowen smiled.

"The key to this model is to make the FT firm profitable, so FT lawyers would do work for small and mid-sized businesses. As I said before, it gives FT lawyers greater client time and more hands-on work. They would also be able to hone their business development and marketing skills in this pool of clients."

"I suppose," I reflected, "that the FT would also be seen as a skunk works or legal laboratory of sorts that allows new processes, workflows, procedures and software to be tested before being adopted by the Premier League firms."

"More importantly," Bowen said, again sitting forward, "the legal services industry is a buyer's market. Corporate clients in particular have changed their buying behaviour - they are far more demanding of their firms and, particularly, demanding that trainees and young lawyers be prohibited from working on their files -
at least not on a chargeable basis.

"The traditional associate-to-partner tournament is at the end of its natural lifecycle. It only makes economic sense
if you can consistently pass on the cost of training lawyers to the client. If you can do so, there is no reason to care about the cost of such training. But, when you're forced to fully absorb those costs, the tournament is a horrible way to recruit
and train. Firms will be forced to rethink that process."

"Fair enough," I said. "I agree that we are never going back to a time when clients are going to say 'we no longer care about costs, charge whatever you like and add as many trainees and young lawyers to the file as you like'."

"Exactly. My FT model may not work for everyone," Bowen responded, "but it's a step in the right direction and now is the time that forward-thinking firms can secure first-mover advantage. Reduce your training costs while maintaining quality control, with the benefit of quickly scaling your employee count up and down."

Mitch Kowalski is the author of Avoiding Extinction: Reimagining Legal Services for the 21^st Centuryand the forthcoming The Great Reformation: Notes from the Field(www.kowalski.ca).

Reference

1. See 'Addleshaw Goddard to launch flexible resourcing business', Manju Manglani, Managing Partner, Volume 17 Issue 6, March 2015