Charles Darwin knew a thing or two about evolution. If I can cast my mind back to my human biology lessons, the term coined by the great naturalist was “Natural Selection”. It took a little while for this radical theory to be accepted by the mainstream scientific community but now it is universally seen as the reason we, as humans, exist in the form we do today. Of course not just humans, we can trace the origins of all living creatures through this process.
If Darwin were alive today he would no doubt be fascinated by our individual and organisational development. He might also see how his theory can as easily be applied to businesses as it can to individuals.
A sector currently experiencing a significant series of evolutionary events, shaping their structure, relationships and existence is the legal profession.
Just last week we heard of yet one more familiar north east name going into administration. The loss of 50 jobs and a history of 250 years, gone. They are not the first in this recent wave of firm closures and they most certainly won’t be the last.
Why are we hearing of so many failures? The answer, as in any scientific evaluation, is not straightforward. The truth is that the myriad of challenges that have conspired to arrive at the door of law firms in the UK are individually manageable with care but when they arrive in rapid succession, they create a chain of events that leave only the very fittest and dynamic of practices standing.
The Law Society reported toward the end of 2013 that over 400 law firms had closed in the preceding 12 month period. Last week the same organisation revealed that more than 4,500 solicitors had simply not arranged to renew their practicing certificates. Without it they are unable to carry their work.
The events that have brought about the closure of so many firms include;
These facts and more point to a series of tremors in the legal world that have built to form a seismic event. The consequence of these factors is when the dust settles the clients, both personal and business will have far less choice. On the upside, of those firms remaining we can be assured that they are resilient and very likely to be focussed on the needs and value they can bring to the client.
The conclusion we can draw using Darwin’s theory is that having survived the natural selection process those still standing will be fitter and more prepared for the future. The advantage existing firms have at this time is their opportunity to still act, adapt and ensure their survival and avoiding a Dodo dilemma.
David Laud – Partner i2i Business Solutions LLP
What lies behind the sudden increase in solicitors firms merging? Is it a need for personal partner security, succession or future proofing, fear of failing or a strategic move to build a successful business?
2013 has revealed a weekly supply of dramatic news impacting the legal profession. Jackson reforms, loss of legal aid, liquidations, economic position and client migration, inability for partners to plan ahead, ABS’s and the increasing impact of the Legal Services Act, succession issues for traditional partnerships, professional indemnity renewal……they have all combined to place the profession in new uncomfortable territory.
One consequence of these issues is the fact that there are now far fewer firms in England & Wales than at any time recorded by the Law Society.
As at September 2013 there were some 10,726 firms to be precise. It still sounds like a big number but as reported in the LSG it’s 400 less than the same month in 2012. This dramatic fall is due to all of the above factors which have resulted in:
The rather worrying state of affairs has created a rather tense atmosphere within many firms as they find themselves glancing around to find security against the pressures, the security of a merger partner.
It’s the merger activity that is of particular interest because if well thought through and executed it can deliver a very positive outcome to counter the weight of negativity surrounding the profession. Unfortunately the press releases with smiling partners shaking hands in front of newly branded and dressed offices are unlikely to convince many onlookers of the true drivers of such arrangements.
When partners start to feel the cold and their accountant or bank has that “little word in the ear” they see the one route to securing their future as that long discussed but never acted upon merger opportunity.
The firm nearby that presents less of a threat to personal control than others with domineering partners. The firm that has the client you’d always courted but failed to land. The firm who’ve just announced an investment in IT which must mean they’re “switched on” and looking to the future. The firm that hasn’t joined a national brand in a vain attempt to protect its future flow of work.
It’s not surprising that the above traits are seen as attractive to the partners of a firm keen to link arms with another. Regardless of whether it’s an arranged marriage or one that all partners consent to willingly, the success of the union will not be founded in any of those considerations but could certainly result in its failure.
As with any successful marriage having things in common helps but is not essential. Yes you need an attraction, a spark and a personality match that uses the “chemistry” to good rather than toxic effect. When joined the “personality” of the newly formed business must be a commonly shared persona. If not the deal can be blown wide open leaving space for detractors, conflicting agendas and negative views of those who were just waiting for the “I told you so” moment.
Leadership is critical and it doesn’t necessarily need to be a single person more often a team who share a vision driven by clearly stated and understood objectives.
The original cupid arrow that created the merged business is typically founded in solid logic and should have all the ingredients for a successful outcome. Unfortunately the complexity and challenge of putting organisations together can dilute and lose the benefit of economies of scale and combined resources.
Critical to the success is a clearly articulated strategy delivered consistently by an effective leadership team. The focus at all times MUST be on the customers, lose sight of that key fact and matters can start to unravel fast.
Rather than being daunted by the scale of the challenge it’s helpful to view the merger plan as a series of projects that each need to be worked on to achieve the overall desired outcome.
Not many employees relish change and mergers present plenty of new challenges and potential threats to personal job security. Keeping the talent engaged is important as is the need to motivate the business to achieve the new goals.
There are many positives to be borne from mergers but before being charmed by a suitable partner it’s worth looking at theirs and other track records. We can and should certainly learn from the mistakes of others and the legal market is peppered with them.
On the upside mergers can and do deliver, but best look at an equation that gives 1+1 = 3+ not 0. This is a marriage that needs to deliver offspring that can grow and evolve and take the newly formed business forward.
Here below are a list of projects, an example of the areas a typical merger would need to cover to deliver a positive and co-ordinated outcome. The list below is but a guide and is not comprehensive. The projects would of course be determined by the specific features of the merger.
Merger Projects Example
If any of the above issues resonate with you and your business and you would wish to explore your options please feel free to drop me a line in confidence – email@example.com
i2i Business Solutions, Management Consultancy
firstname.lastname@example.org twitter @davidlaud
In his day Charles Darwin would have been aware of the existence of solicitors but probably not considered that his theory on evolution and natural selection could be applied to that most staid of professions.
Darwins’ theory explained evolution as a process that took millions of years. The difference for your typicalUKlawyer is that right now they have a life changing event akin to the impact experienced by the dinosaurs to contend with.
One would hope that the introduction of the Legal Services Act would not so much wipe out solicitors as we know it but accelerate a long overdue evolution and metamorphosis. Not to say there won’t be casualties, for some the impact has already been felt. A number of practices across the country have struggled; failing to manage succession, obtain professional indemnity cover or simply folded because running costs were too high and they didn’t attract enough clients.
Add to the mix the prospect of high profile competition from nationally recognised brands such as the Co-op and BT, the governments drive to strip costs from publically funded areas and eliminate referrals for personal injury and life for your average managing partner just became more than a little interesting.
Those with an eye for an opportunity have quickly seized the initiative with the creation of apparent “safe harbours” for law firms to lay anchor and leave the tricky task of trying to compete to someone else. Examples include Quality Solicitors. The recent impressive TV ad launch from Quality Solicitors will have created a significant stir and feeling of warmth amongst its early adopting panel. Will they feel quite so content in 12 – 18 months when they’re joined by even larger already established brands? Claims Directs £16m TV budget didn’t deliver for them 10 years ago but it did create a noise.
“The survival of the fittest” a term first used by polymath Herbert Spencer following his study ofDarwin’s theory is an appropriate phrase to describe the pressure on our legal sector.
Being fit means of course being in shape, physically with the talent within the business including leadership and essentially the strategic direction including the message communicated to customers.
If you’re running a law firm right now you need to decide if you’re prepared for the future and indeed have the energy and ambition to succeed in an increasingly competitive market.
The future of many firms lies with the next generation of lawyers and managers who need to see that the business has a clear sense of its position and confidence in its approach.
The time is not to make like the dodo or dinosaur but to see the increase in activity by larger brands as an opportunity. Millions spent on TV advertising is not such a threat as many may think, it’s putting the subject of a range of legal services into the mainstream media.
Of course some may be attracted by the glossy, polished national ad campaigns but in my experience it only serves to increase overall awareness. Well placed, local firms will benefit as long as they’ve evolved and adapted to capitalise in this brave new world. Be brave, don’t fear the new world, be bright and stand out.
Partner i2i Business Solutions LLP