Random thoughts on leadership

Organisational design

A commonly held belief by senior leadership is that changing the structure of their organisations will lead to significant improved business performance, which is why this is usually one of the key tasks undertaken early in their tenure. However, the experience from many organisations indicates that an organisational restructure, which is no more than rearranging boxes on an organisational chart, does not usually translate to desired improvements in business performance.

Regulatory compliance

Better regulatory compliance primarily focuses on the key drivers of the regulator’s activities, which is usually the protection and promotion of the best interests of consumers. Better regulatory compliance makes the best interests of customers aligned with the rule of the law the focus of its risk and compliance activities and a valuable contributor to its revenues.

In other words, better regulatory compliance is looking through the regulator’s lens to see more clearly the pain points of consumers in order to develop and embed a risk and compliance program that supports the acquisition and retention of profitable new business. Better regulatory compliance is an approach that recognises that being compliant offers no competitive advantage unless its leverages the flexibility that outcomes focused regulation (OFR) offers in order to meet its regulatory obligations in ways that maintain and/or enhance its competitive advantage.

Pricing

Competition based on price cutting is a self-inflicted wound even though it is easy to justify and implement because the competitors are doing likewise. Nevertheless, such a strategy is not sustainable because it also makes it easier for others to imitate the same strategy, which forces further price cutting in order to attempt to maintain their position. A greater focus on value can enable businesses to think harder about creating more value for consumers. Such businesses will devote all necessary resources to enhance their infrastructure and organisational capability to deliver unique value to consumers in order to realise the intended (justified) higher profit margins.

Customer service culture

A culture that supports the delivery of a better customer experience is one where all business decisions are taken in the best interests of the target customers. Embarking on any cultural change initiative requires commitment, vision, perseverance, courage and effective communication. Achieving a desired shift in the culture should not be viewed as a project with a commencement and end date but rather as a journey with ongoing recognition of incremental changes in line with the desired outcomes.

Demonstrating courage in the vision of delivering a better customer experience is necessary particularly in the early days when the return on investment is not reflected in increased revenues. The courage to persevere should normally result in a more sustainable customer focused firm.

Although enhancing a firm’s culture to deliver a better customer experience is a worthwhile goal that will provide benefits to all key stakeholders including employees, customers and shareholders. However, recognising the importance of aligning the culture of a firm with the expectations of customers is the easy part. The difficultly is addressing any existing barriers in a firm in order to embed the desired customer service culture.

Learning and development

A key challenge for firms is to ensure that they have effective systems to optimise the benefits of learning and development. One of such systems is better evaluation of the impact of the investment in learning and development to ensure continued delivery of the right customer experience for the target customers.

Although the traditional approach to measuring ROI on learning and development is to ensure that the financial benefits exceed the costs of delivery. The drawback with this approach is that it may not take into account all costs including opportunity costs and those intangible benefits which are difficult to quantify but may be critical to sustain a firm’s desired culture and competitive advantage. It may therefore be preferable to adopt a more holistic approach to evaluation that combines a financial assessment (ROI) with an assessment of intangible benefits of learning and development activities.

Business model

A business model describes how a business creates, delivers relevant, significant and lasting value to its target customers and captures some of that value (through its pricing) to ensure its sustainability and for the benefit of the other key stakeholders.

A business model describes how a firm does business and the framework of key interdependent activities that a firm undertakes to create sustainable value for its key stakeholders (including target customers, employees, owners, investors and the wider community).

Hiring

Making critical selection decisions based on casual conversations in a social setting may occasionally prove to be effective to select the right person but this approach is unlikely to be reliable in the long term. The probability of hiring the right person is usually correlated with the quality of data obtained about the candidates during the selection process.

This is the reason why using a variety of selection tools provides a richer, multidimensional view of candidates and tends to prevent selection bias (gravitating too quickly to candidates that are most like us), which is a common challenge in recruitment processes.

Involving the right people in the hiring process enhances objectivity and is a critical success factor. This is particularly relevant with regard to the composition of the interview selection panel in order to mitigate the risk of ‘group think’ whereby panellists passively agree with the most dominant panel member in order to avoid conflict.

Business development is a critical competence for many firms but it is very easy to exaggerate this attribute in a potential candidate and overlook their weaknesses with regard to other attributes such as customer service, compliance, team work and allow the halo effect to result in a wrong decision.

Complaints handling

The ability to be truly objective in an internal complaints process requires someone to step out of the firm’s way of doing things (i.e. culture) to establish whether the customer’s complaint has some merit. Senior management of firms can embed and enhance independence and objectivity in their internal complaints handling process by ensuring the following:

  • Investigation of complaints should not be perceived just as a ‘low level’ compliance task but as a brand enhancing activity;
  • The quality of the investigation should not be influenced by the perceived financial value of the clients to the firm;
  • Independent investigation officers should ensure that the nature of the investigation is dependent entirely on the nature of the complaint and all available evidence is evaluated thoroughly and fairly;
  • Periodic reviews of the appropriateness of the decisions on internal complaints by the senior management of the firm.

Regulator Shopping: Failure to evaluate may be a missed opportunity

A thread that appears to run through many case studies of successful legal firms is how the business leaders made big bets at critical moments. Underpinning such strategic bets seems to be the capability to ask the right questions. The ability to ask the right questions is a likely reason why legal firms with broadly similar characteristics and facing similar challenges adopt different approaches. For example two firms facing the long term trend of reduction of publicly funded legal services may frame different questions to inform their strategic response.

Firm A’s strategic decision arises from the following question:

‘How can we continue to make sufficient profit from our publicly funded legal services?’

Whilst Firm B may determine their strategic response based on the following question:

‘How can we increase our profit margins by 50% in those legal services that are currently publicly funded?’

Whether the strategic response of Firm A would be more effective than Firm B’s is dependent on a number of variables including the quality of strategic execution but it is likely that both firms would take different actions primarily shaped by the questions framed during the strategic planning process.

So business leaders in legal firms are constantly faced with a laundry list of challenging (sometimes with competing demands) questions to consider in order to ensure the efficient and effective achievement of relevant strategic objectives. This is why it would be surprising if the question ‘Do we need to go regulator shopping?’ floats to the top of their agenda.

Although it appears surprising that ‘regulator shopping’ is a possible consideration for business leaders in the legal services market. Rest assured that this is not an illusion and the reality is that regulator shopping is permissible arising from the Legal Services Act 2007 even though in hindsight it now appears to be an unintended consequence. Despite the fact that the choice of legal services where regulatory shopping is applicable has been fairly limited, the increasing number of approved regulators authorised by the Legal Services Board (LSB) to regulate more legal services is broadening the choice for regulated entities.

Race to the bottom

It is fair to say that the concept of regulator shopping provokes mixed reactions including whether it is appropriate for the legal services market. Such views in part resonate with some of the insights from the analysis (by a range of commentators) of regulatory failures in the USA leading to the global financial crisis in 2008. The cocktail of regulator shopping mixed with an unrestrained appetite for ‘bad profits’ by some regulated entities resulted in a bitter experience for the public at large.

It is therefore understandable why there are valid concerns about a possible ‘race to the bottom’ with regard to regulator shopping. However, fortunately the LSB plays a key role to ensure that such a race does not take place. Furthermore, the LSB ensures that the lowest common denominator with regard to setting and enforcement of standards is set at a level to protect the best interests of consumers in the legal services market.

Key Drivers

Given the opportunity for legal firms to choose their regulator in certain circumstances, it seems appropriate that business leaders particularly in light of their obligation to their key stakeholders should at the very least properly evaluate the suitability of this opportunity for their respective firms even if it results in a conclusion that it is not appropriate. Some of the possible reasons why legal firms may consider choosing a different regulator are as follows:

  • Perception of over regulation by existing regulator;
  • Heavy-handed regulatory approach of existing regulator;
  • High cost of regulation particularly with regard to compliance costs;
  •  Insufficient and unreliable guidance from existing regulator.

Some of the likely objectives that legal firms may seek to achieve by choosing a different regulator are as follows:

  • To benefit from a less stringent regulatory approach by alternative regulators;
  • To receive tailored and timely guidance and support to achieve compliance underpinned by an alternative regulator’s deeper understanding of specific market segments;
  • To benefit from a more flexible regulatory approach by alternative regulators particularly to enable a more conducive environment for experimentation and innovation;
  • To reduce compliance costs;
  • To benefit from a more proportionate regulatory approach by alternative regulators;
  • To exercise greater influence on the regulatory approach of an alternative regulator.

Risks of switching

A decision to switch regulator would normally include an assessment of the strategic risks which would be relative to each firm’s circumstances. However, there are two risks which firms should ideally not overlook.

1.     Reputation Risk
The reputational risk of switching regulator should be carefully assessed particularly where the perceived reputation of the effectiveness of the regulator is a key driver for selection of legal firms by customers in certain market segments in legal services.
Firms that primarily provide services to well-informed buyers of legal services need to ensure that the decision to switch regulator is broadly acceptable to those customers and that they can demonstrate how the decision is in alignment with the continued promotion of their best interests.

2.    Growth Risk
The decision to switch regulator needs to ensure that it does not compromise the future growth ambitions of a firm. If a firm currently operates in niche market segments where the choice of regulator is applicable and intends to continue to do so in the long term, then the probability and impact of this risk is relatively very low. However, if a firm has ambitions to expand into new markets including more diverse and novel practice areas and to serve global customers, then the decision to switch may present a major risk to the firm.

Final Checkpoint

The decision to switch regulator is a massive decision and should not be taken lightly. Undoubtedly in some cases, it would be appropriate to proceed with the decision after all the necessary due diligence and cost/benefit analysis. However, one final consideration which such a firm needs to genuinely and honestly address is as follows:

‘Are we satisfied that the intention to choose a different regulator is because the requirements, approach and expectations of the existing regulator are unreasonable for the size, scope, profile and impact of our firm and that this is unlikely to change in the foreseeable future?’

This question aims to sense check the proposed decision to ensure a firm is not switching regulators for the wrong reasons.

The evaluation of regulator shopping may not result in a decision to switch regulators but it may lead to a better appreciation of the strengths of the existing regulator and/or a renewed commitment to optimise the relationship with that regulator.

 

Legal Survivor Awards 2030: The winner could be ABS or TLF or RBM?

The licensing of the first Alternative Business Structure (ABS) on 6 October 2011 marked the beginning of the end for traditional law firms (TLF) by some commentators. Although this prediction is regularly bandied about, it seems to me that the survivor from the jungle of relentless and dynamic change in the legal services market is going to be RBM (Right Business Model).

The introduction of ABS enabled legal services businesses to have non lawyer ownership and management with the overriding objective to better meet the needs of consumers in the legal services market. The ability of ABS firms to access external ownership/capital and/or to better attract top senior management talent with the incentive of comparative status and influence of equity partners has the potential to make them more competitive than TLF. In addition, the opportunity for ABS firms to be well funded enables them to experiment (make mistakes and learn from them) and thereby resulting in the delivery of innovative legal services including the creation of new categories of legal services whereby they are quickly positioned as market leaders.

However, it appears that business structures and business models get conflated in the assessment of the emerging and future competitive landscape in the legal services market. Undoubtedly, ABS offers additional flexibility in the business structures that legal services businesses can adopt. Such flexibility offers ABS firms the opportunity to choose the right business model even if that means a departure from the dominant business models in some market segments in the legal services market.

However, an ABS firm that does not use that opportunity appropriately and chooses the wrong business model is not immune from challenging market conditions and may lead to its eventual demise (unless it pivots effectively) irrespective of the access to external capital and top executive talent. So it seems to me that the opportunity to choose the right business model is also available to traditional law firms.

Ownership of law firms by lawyers can in some cases be a barrier to innovation but changing the ownership of law firms alone is no guarantee of improved innovation in the legal services market. Interestingly, one of the emerging expectations from some institutional investors in public companies is for Boards to behave more like owners (i.e. have greater equity stakes and more closely align their financial interests with those of the owners) in order to maintain the primary focus on optimising shareholder value and thereby protect the best interests of the institutional owners (investors).

The debate about the appropriateness of the more interventionist approach of some institutional investors including activists is beyond the scope of this article but it highlights that what matters most is not who owns a business but the mindset of the owners. Owners with a strong mindset to achieve long term value would demonstrate behaviours that support sustained value creation which has rippling effects on key decisions particularly with regard to the right business model and the appropriate combination of people, processes, systems and  technology.

Right Business Model

A business model describes how a business creates, delivers relevant, significant and lasting value to its target customers and captures some of that value (through its pricing) to ensure its sustainability and for the benefit of the other key stakeholders.

A business model describes how a firm does business and the framework of key interdependent activities that a firm undertakes to create sustainable value for its key stakeholders (including target customers, employees, owners, investors and the wider community).

The right business model (RBM) should enable a legal firm to:

  • Create unique value for its target customers that is highly valued by those customers;
  • Be agile, nimble and appropriately and swiftly respond to the diverse and changing needs of the target customers;
  • Deliver better value to customers (subject to ensuring that the value offered is what customers want) relative to the alternatives in the legal services market;
  • Maintain its relevance in the dynamic and rapidly changing legal services market particularly by embedding the appetite and capacity to change in a firm.

The right business model usually arises by connecting the outputs of considerations on the following key questions in novel and diverse ways:

A.    Which target customers does a firm wish to serve?

    • Retail customers
    • Business customers
  • What types of relationships does a firm wish to develop with customers?
    • Personal
    • Digital
    • Omni-channel

B.    What unique or distinctive value (i.e. the job that the customer needs to get done) does a firm offer to the target customers?

  • What do customers want?
    • Pay as you go services
    • Packaged services
    • Integrated services
    • On demand services
    • Unbundled services
  • Is the target customer willing to pay for the value that a firm offers?

C.    How is that value delivered to the target customers?

  • What must a firm do well consistently to deliver the promised value?
    • Creating and delivering value alone
    • Co-creation and delivery of value through collaboration
  • Can a firm use its resources more efficiently to deliver value?
  • Can a firm deliver better value to customers with a lower cost structure?
  • What combination of delivery channels should a firm utilise?

D.    How will a firm capture value for itself?

  • Are the users of a firm’s services also paying customers?
  • Does a firm obtain payment from third parties?
  • Are services prepaid or after delivery?

The business model can therefore be summarised as follows:

  • Business model = A +B+C+D

Whilst the Right Business Model (RBM) for a firm could possibly be one of the following variants:

  • RBM = A1+B2+C+D1
  • RBM = A+B3+C1+D2
  • RBM = A3+B1+C2+D

Rethinking the business model

Some signs that may indicate that a review of a firm’s business model is overdue are as follows:

  • The revenue streams of a firm are becoming less predictable;
  • The cost of delivering value to customers (including costs to acquire customers) is on an upward trend;
  • No response to the threat of new entrants in the markets where a firm operates that promise to offer customers better value;
  • The appetite for continuous change within the firm is low;
  • Capacity and capability to manage change within the firm is low or underdeveloped;
  • No structured process to consider frequently (have strategic conversations about) the adequacy of the business model, particularly no review has been undertaken in the last two years.

It seems to me that the survival strategy for legal firms can be summarised as developing the capacity and capability for continuous transformation of the business model.

 

Prescription is not always the problem

The announcement by the Solicitors Regulation Authority (SRA) earlier this year to remove the prescribed number of CPD hours for solicitors was welcome news to some, regretted by some and probably met with indifference by others.

The intention by the SRA to rely on the regulated firms to take direct ownership of the ongoing professional competence for their staff is logical and is in alignment with an outcomes focused regulatory approach predicated on the assumption that the majority of regulated firms would use the new given flexibility to promote the best interests of their customers.

However, there remains the concern that the new found freedom may result in the race to the bottom below the former prescribed level as firms may seek to reduce their expenditure budgets. What is puzzling with that view is how a professional services firm can hope to thrive and be sustainable in this digitally connected, mobile enabled and rapidly changing world with increased transparency and smarter customers by only devoting 16 hours of annual learning and development for all their staff including their lawyers.

The risk that appears to be underestimated is the race to top rather than the race to the bottom. Imagine Gen Y lawyers and Gen Z lawyers of the future evaluating the legal services providers where they choose to invest their talents. It seems to me that providers with woolly responses such as ‘we provide whatever development is necessary to meet client needs’ is unlikely to be compelling for such lawyers that may increasingly value more challenging work and passionate about lifelong learning relative to vertically engineered career ladders. The risk is that firms with greater resources may make bolder commitments greater than 16 CPD hours to their lawyers in order to win the war for talent which may make it more challenging for smaller firms to make similar promises with regard to learning and development.

I guess the sad thing about the removal of the requirement of 16 CPD hours is that it perhaps demonstrates that the return on investment (ROI) of the prescribed professional development to improve business performance was unclear or unproven. Whilst the change of this regulatory arrangement is welcome by some firms, the real losers are likely to be the training providers unless they can help legal services providers to establish more easily and persuasively the link between continuous professional development and improved business performance.

Seth Godin, a leading marketing blogger stated in his blog earlier this year (May 2014)

“….Budget appropriately, because the very worst thing you can do with an ad is spend too little–it will get you the same results as spending nothing”.

The idea that insufficient advertising is the same as no advertising is interesting and I wonder whether the same applies to prescribing minimum professional development. Setting a level common to all leads to a lowest common denominator that may be insufficient to result in a noticeable positive impact on business performance.

So a key challenge for legal firms is to ensure that they have effective systems to optimise the benefits of flexibility when the new arrangements become effective in November 2016 (or April 2015 if a firm chooses to adopt the new approach earlier).

One of such systems is better evaluation of the impact of the investment in learning and development to ensure continued delivery of the right customer experience (including a competent legal service) for the target customers. Although the traditional approach to measuring ROI on learning and development is to ensure that the financial benefits exceed the costs of delivery. The drawback with this approach is that it may not take into account all costs including opportunity costs and those intangible benefits which are difficult to quantify but may be critical to sustain a firm’s desired culture and competitive advantage. It may therefore be preferable to adopt a more holistic approach to evaluation that combines a financial assessment (ROI) with an assessment of intangible benefits of learning and development activities.

Some tips to consider to optimise the impact of learning and development on business performance are as follows:

  • Identify the right learning and development needs at the appropriate levels (individual, team and firm level) aligned with the strategic priorities of the firm;
  • Develop clear learning and development objectives and outcomes with particular attention on alignment with business results including the behaviours that a firm wishes its people to demonstrate to achieve strategic priorities;
  • Design the right mix of learning and development activities to achieve the desired outcomes being mindful to build evaluation at this stage including the data required to assess the impact of those activities;
  • Deploy a diverse mix of learning and development methods taking into account the different  needs of staff, their preferred learning styles and their appetite for learning;
  • Collection of the right data to inform the assessment of the impact of learning and development particularly focusing on the following key considerations:
  • How relevant, useful and enjoyable is our portfolio of learning and development methods?
  • How well are our people learning new knowledge and skills through the learning and development methods?
  • How well are our people applying the new knowledge and skills in the workplace?
  • How conducive is our work environment and culture to encourage and enable the swift utilisation of the new knowledge and skills acquired?
  • How well do we follow up with our people to ensure acquired new skills and knowledge are applied in the workplace?
  • How well has the performance of the firm improved arising from the deployed learning and development activities?
  • Assess the impact of learning and development methods alongside the regular review of business/strategic plans, ensuring that measurement activity is integrated into existing systems in the firm where possible recognising the key challenge of appropriately isolating the specific contribution of learning and development on the positive results of the firm.

So the shift from how much to how well CPD is deployed in legal firms offers promise of a better customer experience for consumers of legal services.

Is your firm ready to deliver that promise?

My USP is no USP

During a conversation with a business leader of a legal firm he admitted with much frustration that they had struggled to date to articulate their firm’s Unique Selling Proposition (USP). As a general high street legal firm, they had found it extremely difficult to differentiate themselves from other legal firms without resorting to exaggerating minute and inconsequential differences.

This challenge is faced by many service providers and may be indicative of firms adopting too narrow a view on their offerings. It is recognised that many legal firms offer broadly similar products and services with regard to their functional expertise. However, how such products and services are delivered provides significant scope for differentiation.   Furthermore, the diversity of customers that would benefit from the services and products that are similar in nature also provides scope for firms to differentiate themselves.

It seems to me that a USP is the meaningful and valued difference that a firm offers to its target customers relative to their alternatives. Defining a USP is possible but can be challenging as it necessitates a firm making clear strategic choices. Key assumptions to underpin a process of defining or redefining a USP are as follows:

  • Recognition that a clear and meaningful USP is relevant for a firm to achieve sustainable profitability;
  • Acceptance that a firm cannot serve all customers and the identification of target customer segments is critical for long term success.

Key considerations

The key question that a USP should seek to address for a firm is:

Why should my target customers choose our firm instead of the competition?

Some questions to explore and to inform the definition of USP include the following:

  • What types of customers are we best placed to serve?
  • What unique benefits does our firm offer to its target customers?
  • In what ways are we meaningfully different to our competitors?
  • In what ways are we similar to our competitors?
  • What unique problems do we solve for our customers?
  • What particular needs of our target customers do we address best?
  • What unique features of our firm are most relevant to our target customers?
  • What is the unique story about our firm that would resonate with the target customers?
  • Is our USP clearly and precisely aligned to the right customer and market segments?
  • What is meaningfully different about who we are a firm that is relevant to our target customers?
  • What is meaningfully different about what we do as a firm that is relevant to our target customers?
  • How is the way we operate meaningfully different and relevant to our target customers?
  • In what ways is why we do what we do valued and relevant to our target customers?
  • How is the way we deliver our services meaningfully different and relevant to our target customers?
  • How is the way we behave as a firm meaningfully different and relevant to our target customers?
  • In what ways are our deep core values meaningfully different and relevant to our target customers?
  • Which combination of our dimensions of difference (outlined below) can we offer well to our target customers?

Domains of Difference
Legal firms can broadly define their USP in three mains domains:

  1. Better:  A firm seeks to define its USP as offering a qualitatively better experience to its target customers.
  2. Faster: A firm seeks to define its USP as offering a quicker and faster experience to its target customers.
  3. Cheaper: A firm seeks to define its USP as offering a cheaper price to its target customers.

Although it is not impossible to seek to define a USP across the three domains, it is usually very challenging to define a USP across the three domains which is why it is common for legal firms to have a family of brands in order that they can more clearly tailor their value propositions to diverse target customers through a primary domain.

Dimensions of Difference

A firm’s USP could be a single meaningful unique factor that it offers to its target customers or it could be its ability to achieve synergy across a combination of common factors offered by competitors to deliver a total customer experience that is meaningfully different to its target customers (the total experience being greater than the sum of the individual common factors).

Some of the dimensions of difference that should be considered to inform the definition of a USP are as follows:

  • Customer segment
  • Customer characteristics/demographics
  • Customer behaviour
  • Geographic focus
  • Ways of working
  • Service delivery approach
  • Customer problems/Pain points
  • Complexity of customers’ problems
  • Range of services

Are USP’s forever?

A USP today is no guarantee that it would remain a USP tomorrow and the history of business highlights that the competitive advantage of a USP can be eroded in time due to imitation by competitors especially if the USP is not protected legally. However, if the USP of a firm is closely aligned to its culture, then it is more likely that the USP would be enduring and more resistant to imitation from competitors.

In any event an enduring USP should not encourage a legal firm to be complacent but rather provide the firm with sufficient runway to invest in regular reviews of its USP either in response to its proposed change of target customers or due to changes in the behaviours and needs of its target customers.

Unpacking CHANGE to deliver positive transformation

To maintain competitiveness in dynamic operating environments, it is imperative that legal firms become more flexible and agile with the ability to execute strategy rapidly and more effectively. However, the scope, pace, scale and complexity of change that legal firms of all sizes are continuously facing makes it very difficult for some firms to successfully manage change programmes.

The difficulty of driving change in legal firms is sometimes exacerbated by the complexity arising from trying to adopt the myriad of change tools and frameworks. With the unrelenting pace of change it is not surprising that some legal firms get overwhelmed or overtaken by the long list of critical success factors that are recommended by a range of commentators to underpin successful organisational transformation.

It seemed to me that keeping the critical steps to leading successful change both memorable and manageable may make it easier for legal firms to drive change particularly maximising the engagement, enthusiasm and participation of their people during the change programme. Consequently, I decided to develop our CHANGE framework to support legal firms to arrive at their desired futures.

Unpacking our CHANGE framework is as follows:

Communicate consistently a clear, compelling and coherent vision (shared by the senior leadership team) of a better future that resonates with staff and the underlying rationale for the proposed change (why the change matters for everyone).

Hire intentionally the right network of leaders (formal and informal) across the firm to champion, the benefits of the proposed change, inspire adoption of new behaviours (particularly as role models) and to shape and agree the change implementation plan informed by input from staff at all levels.

Align the desired behavioural change with the reward and recognition arrangements in order to avoid sending conflicting messages about the vital behaviours.

Normalise the desired vital behaviours through daily routines including revised and/or new procedures, systems, processes, relevant performance indicators and ongoing engagement with staff underpinned by timely, forthright and tailored messages to diverse audiences.

Grow new competencies and capabilities (particularly enhancing political and contextual awareness to understand and respond appropriately to the concerns of stakeholders and to recognise early symptoms of change fatigue) through relevant learning and development in order to achieve positive lasting change underpinned by a renewed organisational mindset and an enhanced capacity to lead change.

Evaluate the ongoing relevance of the key drivers for change and the embedding of the desired behavioural change in the firm at appropriate intervals through relevant and outcome focused measures (leading and lagging indicators) and make timely and relevant adjustments as well as celebrating positive outcomes to date.

So how can legal firms use the CHANGE framework to support the embedding of change in their firms?

The approach that firms may choose to adopt should be informed by their current change experience as the framework does not always have to be used in a linear way. Some suggestions of how firms may use the framework in certain scenarios are outlined as follows:

1. No ongoing change

If a firm has no ongoing change project, the key consideration is the adequacy and appropriateness of their vision in view of the rapidly changing operating environment.  If the future is likely to be very different from the present, then carrying out an objective review of the vision should highlight whether maintaining the status quo is sustainable.

2. Imminent launch of change project

If a firm is about to embark on a change project such as an office move or the implementation of a new IT system in order to facilitate the adoption of new behaviours in the firm, then using the framework in a linear way would be appropriate to ensure that their approach to leading change is comprehensive before the launch of the change project.

3.   Ongoing change project

If a firm is currently going through a change project such as implementing a legal project management approach to service delivery or introducing fixed fees on some services. Then a key consideration is using the framework to carry out a quick evaluation to ensure the current approach is on the right track paying close attention to the behaviour of the senior leaders in addressing the emotional needs of staff affected by the change.

4.   Ongoing concurrent change projects

If a firm is currently dealing with concurrent change projects such as implementing a new approach to business development alongside a revised approach to knowledge management plus introducing a customer measurement system such as Net Promoter Score (NPS) and undertaking a review of the governance arrangements.  Then a key consideration is whether there are any signs of change fatigue in the firm. Another key consideration is the extent to which the firm has grown the necessary capabilities to juggle concurrent change projects particularly if the level of disruption to ‘business as usual’ is significant.

In this scenario, it is advisable to use the framework to assess whether the ongoing portfolio of change projects are aligned to the same overarching strategic vision.

Driving change in legal firms can be rewarding but challenging and difficult and I hope this framework makes a small contribution to make it easier.

 

 

Building an agile conveyancing team



This article was first published in the June 2014 edition of Property in Practice, the magazine of the Law Society’s Property Section.



A rising market presents conveyancing firms with many opportunities, but at least one challenge: finding the right conveyancers to meet increasing customer demand. The ‘right’ conveyancers for any firm will be those with the appropriate technical and interpersonal skills to keep their promises to clients.

However, firms are not all the same, and neither are their customers, or the promises that they make to them; the ‘right’ conveyancer is relative to a firm’s strategic objectives, culture and customer profile.So how can firms find the right people, in the right place, at the right time, and at the right cost, to meet the demands of their specific customers?

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Should lower costs lead to lower prices?

The Solicitors Regulation Authority (SRA) recently concluded the following consultations and the outcome will be eagerly awaited by a range of stakeholders in the legal services market:

  • Compensation Arrangements Review: the introduction of an eligibility criteria
  • Proportionate regulation: changes to minimum compulsory professional indemnity cover

The two consultations were underpinned by a number of key assumptions and the assumptions that were of particular interest to me (likely to have rippling implications if the proposals are implemented as proposed) are as follows:

1.     Individual consumers and larger/corporate organisations do not require the same regulatory protections
2.     Reduction in costs for legal services providers should lead to lower prices for consumers

Different Needs, Different Protections, Different Interests

The question that arises from the first assumption is the extent, to which the interests of individual consumers and corporate organisations can be aligned on the same transaction if the regulatory protections afforded them are different.

For example on a conveyancing transaction, would it still be appropriate for a conveyancer to act for the lender and purchaser on the same transaction if the impact of mortgage fraud has differential implications for both clients with regard to recovery of losses. It could be argued that changes to the regulatory arrangements as proposed may present a stronger case for a review of separate representation in conveyancing transactions.

Reduction of Costs, Lowering of Prices

Imagine a legal firm (regulated) with a turnover of £800,000 paying approximately £48,000 annually for the minimum required level of professional indemnity insurance (PII). Assuming that the SRA’s recent PII proposals results in a 30% reduction in its PII costs, it appears unlikely that such a firm would consider lowering its prices in order to pass the savings of about £14,400 to its customers. In the unlikely event that such savings in PII are achieved, it is more likely that such a firm would explore either retaining such savings in the business or consider making investments in improvement projects.

Nevertheless, the question of determining when it is appropriate to share any costs savings with customers through lower prices is a legitimate one to consider for legal services providers.

Some of the issues that legal services providers may consider are as follows:

  • The extent to which proposed lower prices arising from costs savings would be meaningful and discernible to customers;
  • The extent to which proposed lower prices arising from costs savings would not adversely affect profit margins;
  • The extent to which proposed lower prices arising from costs savings would not adversely affect the perceived the brand value of the firm and its services;
  • The extent to which a firm’s prices are currently misaligned in view of the strong downward/competitive pressure on prices in the relevant markets and the proposed lower prices arising from the costs savings appears to be an appropriate response to market conditions;
  • The extent to which the relevant drivers of costs are within the control of the firm and where the reduction of costs is unlikely to be recurring, lowering prices on that basis may not be prudent;
  • The extent to which the proposed lower prices arising from costs savings is underpinned by a clear strategic rationale particularly with regard to increasing market share in order to optimise the life time value of its customers;
  • The extent to which the link between costs and prices are transparent and easily understood by customers in order to make it acceptable to raise prices again if cost savings are not sustainable due to fluctuating key external costs drivers;
  • The extent to which the proposed lower prices arising from cost savings is designed to reward loyal customers particularly if the relationship with customers is based primarily on repeat purchases;
  • The extent to which a firm considers that it would be unfair in view of its corporate purpose not to share costs savings with customers through lower prices.

What customers want

It was a wonderful honour to speak at the LSN Practice Management Conference 2014. During my session (see my presentation here), we explored developing a better customer experience for tomorrow’s clients through enhancing customer understanding. I indicated that one of the great benefits of the existing regulatory architecture in legal services is the increased emphasis on evidence based regulation particularly with regard to consumer research. However, this resource appears to be underutilised by legal services providers, particularly small firms to inform and shape the development and implementation of their customer experience strategies.

Although commissioning bespoke consumer research can be beneficial for legal services providers, regrettably the cost of doing so can be prohibitive for many firms.  However, the good news is that just as Santa Claus delivers periodic gifts; the Legal Services Board (LSB) has recently published new consumer research reports which present wonderful insights to help firms enhance their understanding of customer needs. I recognise that some may consider the sample of customers surveyed in both reports not to be wholly representative of their customers and conclude that the information is not relevant. But the data in these reports can be the foundation for firms to develop their own supplementary research or inform the development of prototype products or services.

The key takeaways from the reports are summarised as follows:

Legal Services Board: How People Resolve ‘Legal’ Problems (May 2014)

Key Takeaways

  • The predominant business models of law firms are based on resolution of legal problems that consumers have identified and categorised as legal problems. However, this approach potentially limits the market opportunities in legal services as legal services providers tend to be reactive rather proactive in their engagement with customers.
  • Quadrant B in Figure 1 below is the predominant domain where consumers engage with legal services providers to address their legal problems.

winzest

Key Implications

  • There are potential opportunities for legal services providers to develop new service categories to frame legal problems in ways that matter to more consumers.
  • A likely emerging sub market in legal services is the provision of cost effective packages of services including information products to help consumers to identify legal problems appropriately and in a timely manner in order to address the unmet need for legal services.
  • Revenue opportunities should be explored particularly in Quadrants C & D in Figure 1 by helping consumers through the use of technology including interactive digital tools to self diagnose any likely legal dimension to their problems. Helping consumers to self diagnose less complex legal problems would also raise their self awareness and likely to enable them to better recognise when the services of a legal expert is necessary.

Legal Services Board: Helping Legal Services Consumers Make Better Decisions: Methods to Identify and Respond to Legal Problems (May 2014)

Key Takeaways

    • Provision of factual information to address knowledge gaps of consumers is necessary but not always sufficient to enable them to make appropriate/informed decisions.
    • Helping customers to make appropriate decisions during the customer journey requires a good understanding of the likely difficulties that they may face in different types of legal problems.
    • As summarised in Figure 2 below, other factors should be taken into account to support customers to make the right decisions including choosing the right legal services provider. Some of the other factors are as follows:
  • Values of customers – what really matters most to them
  • Risk appetite of customers
  • Bespoke dissemination of information
  • Reducing bias in information provision
    Timely provision of relevant information (objective & subjective)
  • Degree of self confidence of customers
  • Degree of inherent friction in the customer journey

 

Figure 2: Overview of Better Customer Decision Making

MAKING_DECISIONS

Key Implications

  • Mapping the key decisions that customers are required to make prior and during a legal transaction and assessing through the customers’ lens whether the existing processes support customers to make appropriate/informed decisions.
  • Using insights in this report to enhance marketing material of legal services providers in order to optimise the acquisition, engagement and retention of customers

Key Observations

  • An interesting aspect of the report was the impact of ‘nudging’ as an approach in some contexts to enable customers to make decisions (nudging is an approach where the customer’s decision is presumed with the option that if they are otherwise minded in a defined period, that can actively reverse the decision).
  • This perhaps explains why the use of nudging in conveyancing seems to result in customers sticking with the conveyancing firm recommended by their estate agent or mortgage broker despite the option afterwards to choose another provider. The question that requires further exploration is whether in such decisions where the customer’s level of emotional investment in the decision is relatively low; there is a correlation with positive satisfaction after the transaction. In other words if a customer is actively and emotional engaged in the selection of their legal services provider, are they more likely to have higher expectations of service delivery and relatively less satisfied even if service delivery is the same with customers nudged into the process.

In summary, it appears that customers want the legal services ecosystem to make it easier for them to timely recognise and cost effectively meet their legal needs. The great opportunity for tomorrow’s legal businesses is profitably giving customers what they want.

Is Your Compliance Leader Effective?

The first Monday of each month is designated for the senior management meeting at a 15 partner law firm with 180 staff (Firm A). The meetings held in the conference room located in the centre of an open plan office with floor to ceiling glass walls are characterised by a mix of laughter, informal discussions and a generous lunch provision which overflowed to staff in close vicinity of the conference room. 

However, on this particular Monday there was a distinctly different feel about this senior management meeting because all the partners were also going to be in attendance. The reason for the combined partners and senior management meeting was a letter received from the firm’s most important client. The client had experienced rapid growth through recent acquisitions and mergers and it was reviewing its legal services panel as it anticipated that its legal spend was likely to increase by 200% over the next few years and it was exploring how best to do more for less.

Is Your Compliance Leader Effective
photo credit: bernat… via photopin cc
 

The client in the recent letter to the firm acknowledged receipt of the firm’s tender proposal including the information provided in response to the question ‘Are your compliance arrangements suitable?’ However, the client required further information prior to the firm presenting its proposal at the tender interview. The client required the firm to demonstrate how it ensured that the compliance leader is effective.

This request for supplementary information caught the firm off guard because they had not previously considered an assessment of the effectiveness of the compliance leader. The reason why this issue had not been addressed is because there was a distinct lack of enthusiasm to assume leadership of the compliance function and the chosen compliance leader was in effect a reluctant leader and tacitly exempt from close scrutiny with regard to effectiveness.

So this special meeting of the senior management and all partners was to begin the process of identifying the pertinent issues with regard to assessing the effectiveness of the compliance leader.  The managing partner indicated that a checklist with a long list of relevant questions to consider on this issue had been tabled and the purpose of this meeting was to agree a shortlist of appropriate key questions.

After lengthy and tense discussions facilitated by many cups of coffee, the group identified the following key questions as the most relevant to determine the effectiveness of their compliance leader:

  1. Does the compliance leader primarily promote compliance to legal and regulatory obligations?
  2. Is the compliance leader easily approachable to discuss minor and major compliance issues and/or potential issues of concern with everyone in the firm?
  3. Does the compliance leader facilitate the delivery of timely, relevant and comprehensive training for all staff in the firm to ensure effective compliance?
  4. Does the compliance leader adopt appropriate tools and processes to monitor and track compliance issues in the firm?
  5. Does the compliance leader maintain positive, proactive and constructive relationships with influential people across the firm?
  6. Is the compliance leader well respected by employees particularly leaders in the firm?

Satisfied with the outcome of their internal brainstorming session, the firm’s delegates (excluding the compliance leader) attended the tender interview with confidence that their client would be reassured that their approach to managing risk and compliance was robust and effective.

A few days after the tender interviews with the shortlisted firms, the client invited the firm (Firm A) back for a meeting to provide feedback on the outcome of the tender process. The client indicated that they have decided to move their business to another law firm (Firm B) because they demonstrated that their approach to risk and compliance was embedded in their ways of working and facilitated a more consistent and better client experience. Furthermore Firm B’s compliance leader provided valuable information during the tender interview which reassured the client that the role was clearly influential in the firm with proactive input in the formulation of strategic priorities and has the freedom to meaningfully challenge any proposals that present risks to client outcomes.

Following the massive disappointment of losing this client account, Firm A called another emergency meeting of the senior management and all partners on the next day which was surprisingly on a Thursday to discuss the implications. Unsurprisingly, the main item on the agenda was ‘Reviewing our approach to risk and compliance to keep and win clients’.

Is such a strategic review due at your firm?