Presentation at the “Future of the Legal Profession” Conference 2007 by Serena Lim, Bizibody Technology
“You don’t have to be Big to be Strong…”
We used this tag-line to launch our “Small Practice Solutions” family of outsourced services and technology applications a year ago; and it is still true today. Growing big for the sake of size is no longer fashionable when the focus is on profitability, the quality of service delivery and the durability of the client relationships.
The good news is that being small can be PROFITABLE. The main thrust of my paper at this Conference is to show you how the business environment today favors small practices over large.
In our capacity as technology and business process consultants to law practices over the last four years, we have witnessed, at close proximity, the trends taking shape in the industry in Singapore and abroad. The prevailing global trends which support our claim are –
1. SMALL = FAST & ADAPTABLE
“We have moved away from the old paradigm where the Big ate the Small to one where the Fast eat the Slow” Jason Jennings, author of “Think Big, Act Small: How Best Performing Companies Keep the Startup Spirit Alive”
“Small means the founder makes a far greater percentage of the client interactions. [The founder] is close to the decisions that matter and can make them quickly” Seth Godin, Author of “Survival is not enough: Why Smart Companies Abandon Worry and Embrace Change”
The increasing pace of change wrought by technological advancements makes it increasingly difficult for any business to predict the future. The best strategy for survival in an ever-changing business environment is the ability to stay responsive and agile.
With few exceptions, we are constantly discovering that entrepreneurial drive, innovation and derring-do are much more evident in the Davids of the legal scene and not Goliath. A small practice only needs a dynamic and business-minded head to respond to the challenges of an increasingly competitive market; while business and management decision making in a larger firm are convoluted processes often encumbered with self-interest groups and cronyism.
A striking example of this is found in the impact of the liberalization of conveyancing scale fees in 2003. In a very short time, traditional giants such as Khattar Wong and Lee & Lee gave up their dominance in the retail conveyancing sector to emergent practices such as KK Yap and PKWA Law Corporation. These practices responded to the liberalization with lightning speed by restructuring their lawyer-staff ratio and relocating their offices to the HDB Hub. By investing heavily in document automation systems and in “customer relationship” skills upgrading for their staff, they have worked an amazing transformation. With waiting lounges that rival those of first tier law practices in the CBD, these practices now offer efficient and consumer friendly legal services in conveyancing and personal law to consumers in the heartlands.
Not surprisingly every small practice lawyer we interviewed in the making of our CD “Joys of Being Small” referred to their ability to respond quickly to market forces as one of their strengths over larger practices.
2. Economies of Small vs. Economies of Scale
Let’s look at the business of law from an economic viewpoint. The practice of law is a quintessential “knowledge” business where the theory of Economies of Scale (cost of production decreases as the scale of production increases) does not apply.
Where your sole means of production is your knowledge worker and not factories or machinery, having more fee earners to share your cost does not necessarily translate to a lower cost of production. Why? Firstly, each fee earner can only support a fixed amount of work, and after all there are only 16 waking hours in each day. Secondly, the task of managing, supervising and training more fee earners invariably requires the practice to support a suitably large pool of non fee-earning personnel such as an office manager, IT technicians, accounts staff and a financial manager, a librarian or knowledge manager, a HR manager, amongst others.
Quite clearly, in terms of cost, being large enough to own the means of production (in relation to support and non fee-earning capacity) does not necessarily translate to lower cost of production per knowledge worker.
“It’s no longer about OWNERSHIP, but ACCESS…” by Douglas Brown & Scott Wilson, author of “The Black Book of Outsourcing”
Reducing operational overheads can be achieved by smaller practices through sharing of office premises, office equipment, and clerical staff; while back-office administrative functions such as IT support, courier services and bookkeeping can be outsourced to professionals.
The fundamental wisdom of outsourcing lies in the principle – “Do what you do best and let others do what they do best; most efficiently and at least cost to both parties”. Outsourcing allows the lawyer to focus on core fee-earning activity while leveraging on the expertise and resources of the outsourced services provider to fulfill the other non-core areas; at a cost that a small practice can afford as fees to the outsourced provider are easily tailored according to degree of utilization of services.
While outsourcing of administrative and non-legal support functions by law practices is commonplace, the recent phenomenon of “legal off-shoring” by big companies such as GE and Citicorp who began outsourcing low value legal work, primarily in transcription services, document drafting and management to low cost centers in India proved that even work that requires legal input can be outsourced to legally trained professionals. In Singapore, we are likely to see small practice lawyers cross-hire other lawyers to provide legal research or litigation support whenever they need more legal minds on a project.
3. The Problem with Larger Practices
The drivers of profitability in a law practice (as for any other business) are utilization, expenses and leverage. I have explained, in the earlier paragraphs, why I believe that size has no positive bearing on the first two factors.
As for “leverage”, large practice profitability depends on having the work completed at the right level of delegation and on successful collaboration and teamwork. The truth is that lawyers, lacking training in project management roles, make poor managers. Too often, supervision is done at the output rather than the input level, thus negating hours of work which the junior associate has put in. Lawyers are prone to under-delegate, negating the advantage of leverage.
Law practices are notorious for inherent cultural and organisational inhibitors to knowledge sharing. Maybe it’s a psychological tic carried over from the adversarial nature of our legal training, or maybe it’s because lawyers are paid to know things which others do not. Whatever the cause, in an imperfect knowledge system, the benefits of previous work products, know-how and experience will not be fully realised.
4. Technological Advances Level the Playing Field
“Now the means of production is in your head… dispersed physically but connected by technology, workers are able, on a scale never before imagined, to make their own decisions, using information garnered from many other people and places” Thomas L Friedman, Author of “The World is Flat, A Short History of the 21st Century”
In his book, Thomas Friedman describes how exponential technical advances in telecommunications and the internet has leveled the playing field by allowing people from all over the globe to plug and play, collaborate and compete, share work and knowledge. “Globalization 3.0”, coined by Thomas Friedman, is driven not by major corporations or giant trade organizations, but by individuals – desktop freelancers and dynamic startups from developing countries who can compete and win, not just low wage manufacturing jobs but, increasingly, high-end knowledge services.
By leveling the playing field and granting individual lawyers the same access to resources, information and expertise traditionally held by the large law firms, a small practice is now bestowed the same potential to succeed.
The “leveling” of the playing field makes it even more attractive for lawyers to run their own practices for these reasons:-
A. The falling cost of hardware and software (for word processing, practice management and other work processes) has made technology resources affordable to small practices. In our experience, smaller practices in Singapore are quicker to adopt and benefit from new technology than larger practices as they are not burdened by legacy systems nor deterred by the comparatively larger implementation cost.
B. Small practices now have access to communication and collaboration systems to help them deliver services as effectively (and impressively) as larger practices. In fact small practices that deploy cutting edge, sexy applications (such as deal rooms and video collaboration) do so not only for the useful cost-saving functions such applications offer but also to enhance their image as dynamic, progressive AND big.
