Mergers will not cure Scottish law firm woes

Herald Scotland reported this week that “senior lawyers at some of Scotland’s largest firms believe more mergers are on the way in 2013 but are warning quality deals will be harder to find.”

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Traditional law firm business model is failing

The report outlines that some firms are simply not attractive enough for potential merger partners, and that “The New Year may also finally see the introduction of alternative business structures (ABS) in Scotland, which would allow non-regulated professionals to take up to a 49% share in a Licenced Legal Services Providers (LPs).”

So what you have is a traditional law firm business model facing increased competition from Legal Process Outsourcing Companies (LPO’s) and now ABS’.  Indeed, the Herald also reports that Chris Smylie of Maclay Murray & Spens, echoing a sentiment shared in the Scottish legal community said that “Trying to stave off the inevitable decline of an outdated business model is not [a good reason to merge]“.

The solution is never mentioned

What is conspicuously absent from this discussion about mergers – as is the case with essentially all discussion of law firm mergers – is the need for traditional law firms to adopt effective business development practices in order to become more competitive.  The primary reason why traditional law firms are faltering is a direct result of the refusal to adopt effective business development as a mission critical component of the business model.

Scale, cost savings, geographical reach, more specialist reach are all good reasons to merge, stated Chris Smylie in the Herald.  But the elephant in the room, effective business development, once again, is not mentioned.

As Mike O’Horo, President of law firm business development consultancy Rainmaker VT wrote earlier this month: “Getting paying clients is Job One”.  And this is fundamentally why traditional law firms are failing.  By seeking to merge to solve a problem which cannot be solved by merging — and now facing increased competition from ABS’ and LPO’s — traditional law firms must adopt effective business development initiatives in order to survive.

What do traditional law firms need to do to compete?

As I wrote a few days ago in a blogpost entitled: “Will your law firm survive 2013?”:  “Traditional law firms need to embrace effective business development practices as a matter of urgency to fight for their survival in the increasingly competitive legal services market of 2013 and beyond. The core basics of what must be done are:

1. Research and identification of ideal potential clients (aligning firm services with the commercial interests of clients).
2. Contacting those prospects with an aim to securing a meeting/discussion around those opportunities.
3. Driving the process to the close of new business.

Secondary initiatives that follow, not lead 1 through 3 are:

4. Develop a robust social media initiative, with blogging as a centerpiece
5. Develop active, revenue generating referral relationships – where your staff/consultants drive the process to the close of new business.”

The future is bleak without facing reality

If traditional law firms in Scotland do not adopt effective business development initiatives, they face a future – whether they merge or not – where they will either be supplanted by LPO’s, ABS’, traditional law firms who do adopt effective business development, or other competitors yet to enter the market.

John Grimley helps law firms, law firm practice groups, individual lawyers, financial services and governmental relations professionals develop and implement custom business development initiatives. To enquire about his services, contact him at +1.213.814.2855 or at jg@jgrimley.com.

Team sales pros with content-expert lawyers to win new business

Mike O’Horo, Co-Founder of RainmakerVT, a legal business development consultancy, wrote in a recent blogpost that: “Law firms should emulate their corporate clients and hire experienced full-time professional salespersons and team them up with content-expert partners”.  Mike’s blogpost was written in response to my question on the LinkedIn Group International Business Development Blog, a group I manage.  The question I’d asked Mike was: “What is your sense of the future of law firms accepting sales divisions?

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Mike explained that: “the salesperson [would] serve as the decision-process expert, vetting opportunities and keeping things moving toward a decision, and the law partner serves as the content expert for the eventual solution.  This sales model has performed very well in other knowledge-based industries, where domain experts aren’t salespeople.”

Mike concluded that: “The barrier to this model is that nothing would do more to institutionalize clients, which would seriously compromise partners’ ability to take them to another firm.”

In the group discussion, I responded to Mike that I’d performed that role, for an AmLaw 100 law firm – in Europe (and do so now in various measures for my current law firm clients).  I am a lawyer, but my focus is exclusively in new business development.  I work the entire sales cycle, from identifying the prospect, to securing the meetings, to participating in meetings with relevant partners, to writing the proposals, to in some cases helping to locally nurture the client relationship, to in rare instances – collections.  The only thing I don’t do for my clients – is bill hours.

Traditional law firms face new, efficient competitors

Global competition in the legal services sector is increasing every day.  Traditional law firms will in the future face increasing pressure from competitors who will not hesitate to adopt professional sales divisions.  Legal Process Outsourcing (LPO’s) companies, Alternative Business Structures (ABS’) in the UK (whose market impact will also be felt overseas, including America), among others – will continue to eat away at more of the business that traditional law firms have previously assumed were there’s alone.

Jordan Furlong,  Partner at Edge International and Senior Consultant at Stem Legal Web Enterprises recently outlined “the emergence of new competitive and disruptive forces that are mounting increasingly formidable challenges to our traditional assumptions and understandings about legal work.”  Toby Brown, Director of Strategic Pricing and Analytics at Akin Gump recently outlined in detail how LPO’s in particular are coming after law firm market share, [and are moving] up the value chain.”

Indeed, as Katy Dowell recently reported in The Lawyer Magazine in the UK: “In January, [UK ABS law firm] Irwin Mitchell looked outside the profession for an executive chairman to drive its development in the post-Legal Services Act environment, appointing former PricewaterhouseCoopers vice-chairman Glyn Barker.  This appointment is an example of how seriously non-traditional legal services providers are focused on staffing their organizations to wrest more market share from traditional law firms.

Looking forward

The adoption of social media, the creation of internal efficiencies, alternative fee structures and up to date technology are frequently cited as necessary for traditional law firms to adopt to compete effectively in the future legal marketplace.  Traditional law firms will also need to professionalize their business development efforts, including adding sales professionals where possible, in order to effectively compete.

John Grimley helps law firms, law firm practice groups, individual lawyers, financial services and governmental relations professionals develop and implement custom business development initiatives. To enquire about his services, contact him at +1.213.814.2855 or at jg@jgrimley.com.