The traditional law firm model is being disrupted, but firms do little to encourage employee innovation
Large commercial law firms are in period of challenge and threat to their business model, from – just to list a few:
- Client resistance on fees: Increasingly sophisticated clients suspect (or know) that much of what their law firms provide is a commoditised product; they are less likely to accept hourly rate billing or to pay hundreds of pounds an hour to subsidise the training of junior lawyers.
- Pressure to reduce costs means unaccustomed changes to how firms work: These client pressures mean that more efficient ways of working, such as outsourcing, that are commonplace in other industries are now being pursued by law firms - presenting structural, personnel and risk issues of which management has little experience.
- An overlawyered, intensely competitive environment: For many commercial law firms in the UK, it is difficult to differentiate their offering from that of dozens of other firms; without a unique or particular service, some firms are likely to succumb to the law of supply and demand, whether by dissolution or merger.
- Regulatory change: From 1 October 2011 the alternative business structures regime will see new models of ownership and capital provision enter the UK legal industry – an industry that has no experience of previous “big bang” style change.
- Insufficient capital: Most of these pressures – and others – will require firms to invest capital; but most law firms are constructed on an economic model of partnership that is, by its nature, inadequately capitalised.
Should law firms look more to their internal talent in thinking how to address these challenges?
An industry of experts, consultants and conferences has built up around discussing and planning how law firms can adapt and change their business model. However, little attention has been paid to the role of innovative thinking from within a law firm itself in addressing how the future might be shaped.
Given that the one thing a law firm should have is a plethora of intelligent, highly-educated and (hopefully) commercially-minded people, it is odd that little effort is made to discover whether employees can offer new ideas or suggest improved ways of working – in short, to what internal entrepreneurship (“intrapreneurship”) may offer.
How can this intrapreneurship be encouraged?
“1. Set up a formal structure for intrapreneurship. Give people enough time away from their “day jobs” to work on creative ideas, but set up formal processes to make sure those ideas develop and take root.
2. Ask for ideas from your employees. They have their fingers on the pulse of the marketplace. Encourage everyone from all ranks and functions to contribute to the innovation dialogue.
3. Assemble and unleash a diverse workforce. Statistical research has established that diverse viewpoints result in better ideas and better products.
4. Design a career path for your intrapreneurs. They tend to be nonconformists who dislike conventional jobs, so look for non-traditional ways to advance their careers.
5. Explore government incentives for innovation. Ask how these can support your intrapreneurial ventures. Governments all over the world are offering new tax and other incentives for research and development (R&D) — and corporations in turn are urging governments to support innovation.
6. Prepare for the pitfalls of intrapreneurship. Backing bold ideas can backfire. Be prepared to deal with failed ventures, internal conflicts and financial risks.”
These strategies were identified in the corporate context, not out of research into the legal industry. But as law firms consider how to come to terms with a changing marketplace and an industry in flux, they could perhaps do worse than to adopt some of these strategies and benefit from the thinking of their own employees and partners.
Friendly Corporate PSL
To subscribe for our free weekly update e-mail, click here.