This article first appeared in Managing Partner Magazine Volume 15 Issue 5 in February 2013 and is reproduced with their permission
A combination of recessional pressures and the tide of commoditisation has led to widespread discussion of the ‘new normal’ in which law firms are predicted to continue to decline in profitability and – in the case of weaker firms – face possible extinction. It is asserted that all types of professional service firms have already faced similar commoditisation pressures and that the legal profession, as the last of the professional cottage industries, is merely playing catch-up in a world in which professional services are increasingly dumbed down and packaged – like off-the-shelf suits – into ready-to-wear inter-changeable products.
Just as the clothing industry has a place for bespoke tailors and fashion icons, similarly there can still be a place for knowledge intensive professional service providers within our future world of legal services even if parts become dominated by bulk suppliers of packaged services. To find such a place and to carve out a distinctive nice, lawyers must revert to the fundamental characteristics of ‘pure’ professional service.
I am indebted to Professor Bente Lowendahl for pointing out in her excellent book “The Strategic Management of Professional Service Firms” that professional services have – at their best and purest – five essential characteristics. Whilst none of these characteristics are examples of rocket science, nevertheless managing partners who want to focus their firms on cutting edge expertise should focus on these five attributes of ‘high art’ as development objectives. Conversely, legal service providers seeking to commoditise and package areas of law, should aim to reduce or eliminate as many of these special features as possible.
The five features are:-
1. The problem or issue requires the provision of highly knowledge intensive work delivered by highly educated people. Although it sounds obvious, not all work is highly knowledge intensive. If a reasonably intelligent person with little or no legal training is able easily to access know-how, precedents and templates, or if law firms are able to codify know-how and processes into systems which can be utilised by junior (and relatively low-trained) staff, then the work is not highly knowledge intensive. If, however, the complexity of the problem or engagement is such that the work can only be carried out by highly trained and experienced lawyers, it is then at the expertise-driven end of the commoditisation-bespoke spectrum.
2. A high degree of discretionary effort and personal judgement is required. Highly processed work has at its heart the imperative to reduce both the risk and time involved in making personal calls of judgement. A hierarchical culture is often employed that is dominated by standardised procedures and an emphasis on rule enforcement to maintain efficient, reliable and fast production. Outside the legal profession, organisations like McDonalds can only operate with uniformity of products in all outlets generated by employees with little or no previous experience or training who are required to follow the organisation’s rules and processes with no opportunity to exercise discretion. ‘Pure’ professional service, however, is quite different; requiring the variable and flexible application of insight and experience to problems that are often either under-specified or fast-changing.
3. A high degree of customisation is needed. It is relatively straightforward to commoditise professional services that have become highly replicable, but less easy to codify or package those engagements where the knowledge gap between provider and client is high or where the scoping or definition of the appropriate service and quality level needs a heavy emphasis on customised solutions.
4. Substantial interaction with the client is required. All professional services require some interaction with clients, but a higher professional art is employed when the professionals need to be able to interact with the client in joint problem solving at a high level, or where the complexity of the issues involve a constant and repeated professional-to-client relationship to create tailor-made solutions. Conversely, commoditised services at the cheapest end of the spectrum require client contact to be kept to a minimum.
5. The work is delivered within the constraints of highly professional norms of integrity conduct and quality. Strong client relationships need to be built upon trust, confidence and a perception of professional authority. In addition, the most sensitive, complex and high value client services have unique quality requirements. At the commoditised end of the service spectrum, however, the service merely needs to be reliable, predictable and cost effective, whether or not the legal service provider is governed and monitored by a regulatory body.
Many lawyers to whom I speak continue to believe that they are practising within these principles of high professional service, but many are in fact providing a basic and repetitive service which accords with few of them. The five outlined principles can therefore be used by Managing Partners in three ways. First, the principles can be used to help assess and define the firm’s strategy and business model and its place on the commoditisation–bespoke spectrum. Second, they can be used as a high level checklist either to ‘de-professionalise’ (in the case of commoditised services) or ‘re-professionalise’ (in the case of the more bespoke services) the firm’s various service offerings. Third, at an individual level, the principles can be used to assess the level at which each lawyer is actually operating (whatever he or she may think) and to inform the needed levels of competency and seniority of each lawyer role.