Today sees some of the UK legal industry’s most senior operational and strategic decision makers converge for The Lawyer Management Conference and Awards 2014.
This one-day conference focuses on the critical issues facing modern law firms. It is followed by an awards evening, which celebrates the vital contribution that operational departments make to the successful running of a law firm.
One topic featuring frequently on the agenda is the disaggregation of legal services. Christina Blacklaws from Cripps will be talking about how to sell disaggregated legal services and both the morning and afternoon panel discussions to cover it, finishing on a debate around the opportunities and challenges in building a model for disaggregated services.
But what does disaggregating services involve? And since not everyone has adopted this method of delivery and pricing yet (just 5.8% have been offered these services according to research by The Lawyer) – what are the issues?
What are disaggregated legal services?
Disaggregated legal services are an alternative to the traditional legal services delivery model where each case is managed from start to finish by one lawyer. Other industries have for many years been using a different operational model, which involved disaggregating or breaking processes down into component parts to be delivered by different (specialist) teams. Employing specialist teams or outsourced contractors to carry out specific parts of that process can enable both specialisation and cost savings.
In an increasingly competitive market place, legal firms are now under pressure to reduce costs, improve efficiencies and deliver an improved client service. So many have now turned to the disaggregated legal services model to find cost savings for their clients. In this model, the more straightforward or administrative work on a case can be done by a less senior lawyer, freeing up the most senior lawyers to focus on complex work, and bring cost savings for the client.
Who is disaggregating?
In smaller practices, work will still be done by the same team. But larger practices and those dealing with complicated cases, particularly in corporate law, are now working out who is the best person for each component of the case. For London-based firms with regional offices, work can be passed to the regions where fixed operational costs (such as building leases) are often much cheaper; again, bring down the total cost for the client. Alternatively, such work can be outsourced completely to another provider.
Why are they disaggregating?
The traditional legal services billing model is based on billable hours. Although many clients prefer having a senior lawyer’s name on their case file, it simply isn’t cost effective for the highest fee earners to be carrying out every task on a case, including the administrative or straightforward work.
James Tsolakis (head of corporate legal services at RBS) describes how “the use of contract staff and paralegals is accelerating” in the corporate legal sector, and that “a major and highly desirable consequence of this is the shift of the traditional law firm cost model from a heavy fixed-cost to a much more variable-cost mode.”
Are there any issues with the disaggregation of legal services?
The very fact that this topic is covered so heavily at today’s conference and is the main panel debate topic suggests that there is still a lot to debate on the subject.
In his post last year, Eric Griffin, a director at Counsel On Call, describes the notion that “only firm personnel – billing at inexorably higher hourly rates – must be down in the weeds and working in areas in which its associates aren’t expertly trained (workflows, business process management, metrics, technology protocols etc), makes little sense in today’s marketplace.” He sees this new model as inevitable and long overdue: “Legal is catching up to the rest of the world with this structure, and there are several verticals that are leading the charge.” In-house counsel, he says, “must focus on business issues, outside counsel on strategy, and the LBPM – the legal business process manager – is the gatekeeper on costs, process, technology, appropriate staffing, and continual improvement.”
But in an article published this summer, The Lawyer reported that “in-house lawyers are not buying the much-trumpeted disaggregated legal services firms are offering them.” According to research carried out by The Lawyer, awareness of new legal services delivery models “remains low, with the vast majority of in-house lawyers having never, rarely or only occasionally been offered some form of disaggregated legal service.” Just 5.8% said they had been offered such services.
Surprisingly, even among those clients that had used services such as regional low-cost centres or disaggregated legal work, only 12.4 per cent reported a significant overall reduction in costs while 10.3 per cent reported an increase in costs.
So is the issue simply one of awareness? Are firms just not charging enough within the new model to make a profit? Or is there a general reluctance to move to the disaggregation model? Are clients putting pressure on legal firms to allocate named senior lawyers on their case, and are happy to pay for the top fee earners’ time? Or are there any inherent issues in this delivery model that need to be overcome before take-up can increase?
If the issue is a lack of adequate management information systems to calculate appropriate fixed pricing structures, what systems and process improvements would be required to facilitate this?
What are your views on disaggregated legal services? Are you using this approach in your practice? How effective has it been at reducing costs? How do you monitor and track case loads, and allocate work in your practice?
I’d be really interested to hear your thoughts!
You can contact me on LinkedIn and Twitter: @EXENLS
This blog post was written by Graham Moore, Managing Director of Exen.
Law Firm Practice Management System and Business Intelligence expert. Managing Director of Katchr.
If you’d like to discuss how large or small law firm software and legal financial reporting systems could help you run your practice more profitably, please give me a call on 03333 010 766.