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Microeconomics for Lawyers
Practice Management and Business Skills| What area(s) of law does this episode consider? | Applied microeconomics for lawyers. Dr Beaton’s episode is perhaps one of the most widely applicable topics that will appeal to all lawyers regardless of practice size or type. He discusses microeconomics in the legal services industry, particularly in the context of marketing, business strategy and differentiation. |
| Why is this topic relevant? | Microeconomics is a branch of economics that studies the behaviour of firms and individuals in making decisions about the allocation of resources. There is no doubt that the legal services industry is changing. The way in which legal services are delivered – and billed – has changed dramatically over the past two decades, and even more recently throughout COVID-19. The digitalisation of legal services, dispute resolution platforms and flexible fee structures are only some examples of this. |
| Some examples Dr Beaton discusses
| Advertising by lawyers: Dr Beaton starts by briefly mentioning the US case of Bates v State Bar of Arizona 433 U.S 350 (1977). Bates started to advertise the firm’s services. The question for the Court was whether the Arizona rule, which restricted legal advertising, violated the freedom of speech of Bates and his firm as guaranteed by the First and Fourteenth amendments. The Court held that it did; ultimately finding that allowing attorneys to advertise would not harm the legal profession or the administration of justice. Prior to this case, it was not considered proper (or in fact legal) for lawyers to advertise their services. Substitution: is a key concept when considering the law of supply and demand. A substitute is a product or service that can easily be replaced with another. Substitutes provide additional choices and alternatives for consumers while also creating competition. Dr Beaton considers substitution in legal services, being not only the substitution of other lawyers, but generic substitutes in the form of technology, such as document automation platforms. As more substitutes enter the market supply increases and demand remains constant which results in a decline in the price of legal services. This is proven by Dr Beaton’s example of purchasing a ‘Non-interest bearing loan’ template from an online platform for $35. Commoditisation: of legal services refers to a situation where the client believes that most law firms and most lawyers can perform the same task equally well. Put another way, the client views the work product as a commodity, meaning that clients care less about who they are obtaining services from and more about the price of the service. This results in a downward pressure on price. Pricing models: Essentially there are two types of pricing which are diametrically opposed: input based pricing (i.e. charging based on the number of hours worked) and outcomes based pricing (charging a fixed amount for a specific outcome). The traditional form of pricing is input based pricing based on hourly rates. US law firm consultant, Altman Weil studied the profitability of matters, comparing those that used hourly rates against those that used fixed rates, finding that those that used fixed rates were more profitable. Both low pricing and high pricing are valid business models. Consider the following diagram:
The graph on the left represents a ‘premium’ product, which attracts a few highly valuable clients; the graph on the right represents a ‘high volume’ product, where a large number of clients are charged lower fees. But both blue rectangles have the same area – each strategy is equally valid. Does your practice sell a ‘premium’ product, or a ‘high volume’ product? Incentives: Charging based on hourly rates can create a perverse incentive because time-charging promotes inefficiency, the longer it takes to do the task the more the client is charged. Measurement: ‘If it’s not measured it can’t be managed’ – It’s imperative that information is measured and contextualised. A balanced scorecard will measure money, clients, talent and innovation money and innovation. If charging and analysing fixed fees you need to consider cash flow, debtor days and gross margin; financial measures help you assess profit. Both client and employee satisfaction should be measured and innovation that focuses on improvements should be considered. Unmet legal demand: A study completed by the Solicitors Regulation Authority in England and Wales found that only 15% of legal needs are being met by solicitors, of the remaining 85%, around 50% are recognised as unaddressed and the 25% remainder is being fulfilled by accountants, or family and friends. This highlights that there is a vast latent market for solicitors. |
| What are the practical takeaways? |
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| David Turner:
1:00 | Hello and welcome to Hearsay a podcast about Australian laws and lawyers for the Australian legal profession, my name is David Turner. As always, this podcast is proudly supported by Assured Legal Solutions, a boutique commercial law firm making complex simple. Just a quick note before we begin, the episode of Hearsay you’re about to listen to was recorded in the midst of the Corona virus crisis and as a result of social distancing measures we had to conduct this interview over remote technology such as Zoom or Google Meet, the audio quality might be a little different than what you were expecting. Still we think it’s pretty good in the circumstances and we hope you enjoy the episode. “For the rational study of law, the blackletter man may be the man of the present, but the man of the future is the man of statistics and the master of economics.” Now Oliver Wendell Holmes Jr wrote that in a Harvard Law Review article in 1897, but how accurately it describes the challenges facing a lawyer in private practice today. Increasingly, lawyers practising in commercial fields need a more acute understanding of their client’s businesses and the markets in which their clients operate to give sound advice; but private practice lawyers of every stripe need to understand their own market – the legal services market – to ensure that their own businesses thrive. Joining me today to discuss the microeconomics of the legal services market in Australia is Dr George Beaton. George, thanks for joining us on Hearsay. |
| George Beaton: | My pleasure. Looking forward to this, David. |
| DT:
2:00 | Now George, you’ve advised some of Australia’s largest and most prestigious law firms on their business models and you’ve written two books on this subject, ‘NewLaw, New Rules: A Conversation About the Future of the Legal Services Industry’, that was published in 2013 and ‘Remaking Law Firms: Why and How?’, in 2016, and you also chair the College of Law program board for the new Master of Legal Business qualification. Tell me a bit about how you came to find this niche in consulting to the legal services industry? |
| GB:
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5:00 | I found myself as a young academic in medicine, getting increasingly interested in the commercial world and that harks back to my South African accent, and I decided through an MBA, like yourself David, to venture out and see what the world of commerce was all about and I left my professorship at the age of 33, I started an advertising agency in the one thing I understood – pharmaceutical products. So that’s how I got into the commercial world with a professional background and I was approached by the equivalent of the Law Council in South Africa to come and talk to them about whether attorneys, solicitors should be allowed to advertise. And I looked aghast and said, “Why are you even asking that question, no professional advertises”. And they said, well there had been in 1977 a Supreme Court judgment in the United States, a very famous case of Bates and O’Steen v State Bar of Arizona, where Bates and Van O’Steen, who were personal injury lawyers who had the temerity to place their advertisement in the local newspaper and the bar sought to strike them off and they took it all the way to the Supreme Court, and were successful in terms of the First Amendment – the right to freedom of speech. TIP: A bit more information about the case of Bates v The State Bar of Arizona. Mr Bates was a partner in a law firm which provided low-cost legal services to people of moderate income, who did not qualify for legal aid in Arizona. Mr Bates and his firm would only accept routine legal matters, which did not require litigation, and they depended on a large number of clients, particularly given the low return from each client. The firm decided that to continue operating in this way, they would need to advertise. Now the Court ultimately allowed Mr Bates to advertise on the basis of the First Amendment to US Constitution, which is a constitutional right to free speech that of course, does not have an equivalent in Australia, but importantly for our purposes, the Court also held that allowing attorneys to advertise would not harm the legal profession or the administration of justice, and, in fact, would supply consumers with valuable information about the availability and cost of legal services. And that triggered, worldwide, an interest in the promotion, advertising marketing, selling, of professional services and I just happened to be in the right place at the right time and the equivalent of the law council in South Africa turned around said, why don’t you come do consultancy on this subject for us how do we tackle it, how do we educate attorneys and law firms as to the right way to do this, without being overly regulatory? And that led me to the legal profession and into a fascination with all things marketing, business strategy, of course part of which is microeconomics which we’re discussing today, and I’ve never looked back from that initial phone call that I took. |
| DT:
6:00 | That’s a fascinating path to take to get where you’ve got, and I think it’s fascinating that you came from the medical profession and have ended up specialising I suppose in the business model that the legal profession use. I want to come back to a comparison perhaps between those two professions or commonalities between them, but just to take up this point about the received wisdom I suppose about lawyers advertising. It’s certainly the case that I think although we hear advertisements for certain kinds of legal services quite frequently, there is still a prevailing view in Australia that many legal services aren’t advertised for, perhaps similar to the view you, yourself expressed to the Bar Council in South Africa and that advertising for legal services is still considered a little gauche and that’s obviously not something that applies to, for example personal injury services or worker’s compensation more, but certainly in the commercial fields. Have you seen a change in the Australian legal services market towards advertising some of those, for want of a better term, “business to business legal services”? |
| GB:
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9:00 | Yes, we need to take a sweep of history here David, and we also need to change the word from advertising to communicating because advertising connotes purchasing space in a medium. Bates and O’Steen’s print advertisements you know, in their daily newspaper, is an advertisement. So, if we broaden how we communicate what we do and why we should be preferred and we can call that marketing communications, increasingly that is on social media, so it’s becoming digital marketing communications. There is a sea change occurring and I say occurring in the present participle because there are still many parts of the profession who don’t regard this as proper or regard it as a waste of time and money or think we don’t need it. When you go, which I do in my business, to understand how clients see this world, it’s radically different. Clients recognise the information asymmetry that exists. In other words, you know in medicine, it’s called the ‘white coat syndrome’ – ‘Doctor, you’re wearing the white coat and I’m here with a headache please tell me, do I have brain cancer?’ This huge information asymmetry between what the doctor knows, can discern and what the patient in that example says and whilst that is an extreme example, the information we have in both the business to consumer and business to business markets to which you refer, is that there still a disconcertingly large amounts of information asymmetry. Just to give you an example of this, you would have thought that the general counsel of the ASX 100 companies, the heads of these legal departments, many of whom sit on the executive committees of these large public corporations would not think there is an information asymmetry. Well, they do. They do and when you say some well what do you do when you want a piece of information about who’s best to handle this matter or what your alternatives are, they say, well we’ve got a network of colleagues, so we pick up the phone. Many of them say we just go with our regular law firm and go with what they say. Why do you do that? Because well, I don’t know how to make a choice beyond what I know which is my primary law firm, so even at that sort of sophisticated high end of the market, we know this and it is true all over the world not just in Australia, we should probably more a deregulated and liberal than many parts of the world. So, yes there is a very big consumer need for information about how to make wise choices, how to understand what value is, and the legal profession has in my view a duty and an opportunity to narrow that information gap. |
| DT:
10:00 | I really like the way you characterise that as communicating the value that you provide to your client rather than advertising your services and I think that such a fantastic way to describe it for what we’re discussing today, because we’ll come on to discuss how we differentiate our services from our competitors. Just before we come on to the main topic of today, which is microeconomics, I wanted to talk a bit about your background in medicine. As we were saying earlier, you were a medical practitioner before you came to the commercial world. How has your background in medicine helped you advise other professionals in the legal services industry? |
| GB:
11:00 | My background is more than my personal studies and MBBS degree and PhD in medical science. My maternal grandfather was a medical missionary from the Edinburgh Ladies Bible Society to dark Africa in the late 1800s. He went as a young medical graduate to Livingstonia, the mission station founded by the great explorer David Livingstone, in what is now Malawi and his son went to war and then back from the second world war and stayed in our house when I was a youngster and got what is the Governor General’s grant in those days and studied medicine. So, I sort of grew up in this environment of a family interest and as chance would have it, more than half my father’s public accounting clients were medical practices, so I was surrounded since and persuaded by an obstetrician who actually delivered me, that I should study medicine when the time came. It’s a true story I assure you! |
| DT: | So, he encouraged you down that path? |
| GB:
12:00 | He was like great patron. So, I come from a deep professional background and philosophically, a deep believer in professionalism in an ethical sense, hypocratic sense in the medical profession. Professionals, the practitioners of a profession and professions, there’s now plethora of professions. The original four, if you go back in history, into centuries of history, were to serve the monarch, the military, to serve the deity, the priesthood, and to serve fellow man as to their health – the medical profession, and their rights – the legal profession. So that’s where the origin of the professions comes from, this notion of service and putting you know, nation, the deity, fellow person, ahead of your own self-interest and I’m steeped in that. I’ve come to understand and learn from some great mentors, that there’s not an incompatibility between profit-making in a private practice, and client focus and client centricity and client interest first, these two are compatible, but it does require a deep understanding of client need and a principled view of what’s to be done to serve the client’s interest rather than self-interest. |
| DT: 13:00 | I think we’re gifted in the Australian legal profession with a great many professionals who hold their professional identity, that sense of public service, very close to their hearts and I think your message that that’s not incompatible with commercial success is one that not every professional needs to hear, but that is perhaps one that is encouraging for some of those professionals who take their role very seriously to hear. Now, this episode is called ‘applied microeconomics for lawyers’ and microeconomics is the study of economic activity of individuals, firms and particular markets, as opposed to macroeconomics which is the study of whole economies and economists think about economic activity in different markets using different frameworks don’t they, depending on the features of that market. Now what kind of market is the legal services industry? |
| GB: 14:00
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17:00 | Well, it has been, and in large measure depending on the jurisdiction when you look around the world, a regulated monopoly. There’s a grand bargain, if you use an economic history term, between the profession and essentially the regulator, the representative of public interest, as to why a monopoly is a good thing. Provided that you are licenced, hallmark of a profession, occupational licensure and competent and current, which is measured by CPD these days for better or for worse, and the grand bargain says you get a licence to exercise monopolistic power in the way you are allowed to practise, represent a client before the Court, give certain types of advice, but the market operates as well in the way you set your fees. The old scale of fees, which when I first came to Australia, I went up to Ballarat to meet a particular firm who asked to see me, and I was talking to the senior partner and I asked him about how they price. He said, ‘Well, we price how we’re told to price’. I said what do you mean, ‘What do you mean?’, and he said, ‘The lawyer puts out a scale of fees and nobody would dare not adhere to the scale of fees’. TIP: Now there are still scales of fees in NSW, of course, for example the schedules to the Legal Profession Uniform Law Application Regulation, that deal with schedules of fees for debt recovery, mortgage enforcement, worker’s compensation and probate litigation. These scales affect the costs orders a court will make in those matters, but it would be very rare to see a firm charging on a solicitor-client basis according to these scales. I said, ‘Oh, and what happens if a client that you want to look after in some way can’t pay?’ He said, ‘Oh, we have a pro bono practise for that but otherwise we just charge what the scale says’. The profession in a sense has since has come a long way but you know, as the pricing authorities around the world would say, pricing legal services authorities who make a study of this on the observer, on an active researcher, that there is a very long way to go and the changes in the structure of the profession at the entry of the NewLaw business model for example, about 10 years ago, when it just was starting is a major change agent. TIP: NewLaw is a term that in fact Dr Beaton coined together with fellow consultant Eric Chin in around 2013, to describe a new form of legal services provider that you utilises technology and process innovation. This includes providers that focus on document automation, alternate pricing models like fixed fees, solutions that integrate blockchain technology and software as a service product or SAS products that utilise artificial intelligence and machine learning. NewLaw is focused on innovation. NewLaw is often compared with ‘big law’ which refers to those traditional legal practices which are those partnership-based where revenue is typically generated solely from human capital, usually at hourly rates. We’ll talk about NewLaw a bit more later in this episode. And now the clients of the change agents are demanding different ways of paying. |
| DT:
18:00 | I’m glad you mentioned NewLaw because we’ll discuss that a little bit later as one method or perhaps many methods of differentiation I suppose, many methods of differentiation are encompassed by that term NewLaw. The legal services market is not a market for a commodity, we don’t sell something like apples which is easily substitutable from one supplier to another, but in some ways, our services are substitutable for the services of our competitors and so differentiation between ourselves and our neighbour is an important part of winning work isn’t it? |
| GB:
19:00 | It is. A client has to prefer you for some reason given that clients, you know customer is king. Clients have a plethora of choices ranging from do nothing, do it yourself or choose an advisor which might be your brother in law at the Sunday afternoon barbecue or it might be a professional, so we shouldn’t just think of the specific substitutes, which are other lawyers, but there are also generic substitutes and with technology, there is both genetic substitution occurring rampantly, small but rampantly growing and there is commodification going on commoditisation. Now, in the strict sense of a commodity, you know a barrel of oil is a barrel of oil, is a world spot price for oil and you could buy on the spot market, oil as you say apples. We are seeing the commodities slide and that is being accelerated by technology and that is one form of enabling the NewLaw business model. |
| DT:
20:00 | You mentioned that traditional legal services are substitutable for provision of advice other than by professionals and that’s a really interesting dynamic because there are many services that demystify the law by either explaining legal content or simply making that content available to a client who’s searching for it, and in some ways that’s quite similar to the medical profession isn’t it, in that there are many people who, instead of consulting their general practitioner might Google their symptoms and come up with, rightly or wrongly, their own diagnosis, and I think there’s an analogy there to the cost conscious client who perhaps wants to self-diagnose their legal issue as well. |
| GB:
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22:00 | Yes, yes, I mean there is the I think the well justified saying, a little knowledge is a dangerous thing, and certainly in both my medical and now knowledge of legal and other professions, you know I work a lot in the building environment with architects and engineers, and patent attorney profession, a little knowledge is, if you don’t recognise you have little knowledge, as the customer, is a dangerous thing. With the services available Mr Google for example or the dial a doctor services, I mean telehealth is accelerating that you know, exponentially, that danger is being produced and public education by authorities, by professional bodies, is reducing the danger but I do certainly recognise the danger. Just yesterday, in one of my companies, we recognised we had an intercompany loan with different shareholders in the two companies which wasn’t documented. So I have one of the document download platforms, I looked up non-interest bearing loan, I looked at the price and I had to look twice, so a few dollars I thought well yes and over on the side was a button, ‘If you want to consult a solicitor click here’, so if in doubt there’s an online solicitor 24/7 to answer your questions before, and for a fee, before you download and use this document so I read the document, 11 pages on an interest bearing loan, I thought, wow, typical legal document. I managed to get through the whole lot, appended my signature, sent it to my fellow director in the other company to sign and you know, this morning it was registered. So, it took me probably 7 or 8 minutes, it took him probably 30 seconds and it cost us $35. |
| DT: | Wow. |
| GB:
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27:00 | Yeah, yeah. Now, this is to me is as close to a commodity as you’re going to get. It’s a boilerplate, non-interest bearing loan agreement. In an area, and for a risk, that if it would to become contentious it wouldn’t be worth doing anything other than to concede or reach an agreement by a shake of hands, it’s risk adjusted, it is a commodity what I bought yesterday in my view. You know, I still hear, when I tell the version of that story, about a freelance agreement many years ago that I actually bought while sitting in a hotspot in McDonald’s in Sydney and my general manager says back, “Can’t find the freelance agreement”, so I said, fine I’ll look on my laptop and send it to you. I downloaded it from the same platform, and it was in the early days, and I didn’t like the formatting so I put on our letterhead and I sent it to John, my general manager, and said here you go John and he said, gosh where did you find it, and I said I bought it and he said really, I said yeah and I formatted it and I’m still sitting in McDonald’s. He was aghast with awe, and I said just do me a favour, phone up X our solicitor who we really love dearly and respect highly and said George needs a new freelance agreement, could you just tell me how long it will take and how much it would cost? Our solicitor, who knows us very well, and is still my solicitor today said, look I’m a bit busy, so how about three or four weeks and let’s say $500. This is this is a true story! And here I am saying, oh wow 30 minutes and I think in those days that document cost $65. So, we are seeing this and when you look at the well-known platforms now, they’re downloading 40,000 documents a month – 40,000 a month for one of them that I know quite well. Now, that work is either new work coming on the market because the users didn’t realise, they could get a document easily, quickly, cheaply as comparatively speaking or it’s been taken off solicitors. There are only two sources of that download – either new demand or market share and I don’t know what the balance is, and I talked to them about it and they don’t know what the balance is. But their growth of some of their documents is like 10% per week in growing downloads and then you go from that, you know, basic documents and they’ve got a suite of about 4,000 now. TIP: Now I know what some of you are thinking – it’s a little concerning how many legal documents which would traditionally be drawn up by solicitors, perhaps as their bread-and-butter even, are being commoditised. But look at it this way – when we do that high-volume, repetitive work the traditional way, what are we selling? Are we selling our expertise, our experience, our sage advice – or are we selling the time that we spent filling in the blank spaces in our precedent? This distinction between two kinds of legal product – selling knowledge of the legal processes and documents required for large numbers of similar transactions and cases, on the one hand, and selling our experience and legal analysis of unique cases on the other hand – is a key concept in the development of the ‘NewLaw’ business models. Now at least when I think about that dichotomy, I’m pretty happy to automate the repetitive work – I’d rather spend more of my time on the more interesting kind of work – the bespoke work. So, there’s a document for virtually anything, and you go to the platforms that are happening, and I will name this one because its world leading and its Australian. It’s a 2-sided platform called ‘Immediation’. Mediation with an ‘I M’ in front of it, Immediation. It’s founded by a barrister in chambers in Melbourne and when you talk to Laura Keily, is her name, and say, what are you doing, she said, well we can do mediation online, the parties agree, the parties agree the mediator, the parties agree that terms and the mediator agrees the time, so the fee ranges from – I think if you look at their website, $5,000 to $150,000 depending on the nature of the mediation. Once agreed, a time is set. So, Laura will say to you, look a mediation like this, and she showed me one the other day, would have taken in the traditional form of mediation several months and several hundred thousand dollars. This one took 10 days and cost $90,000. Now, you know if you need to mediate, what are you going to choose? What are you going to choose? You know, with the COVID crisis of course, it’s a gift to her growth, because suddenly everybody’s thinking online, digital solutions and here it is sitting. These are examples, document download and mediation platforms, which are definitely substituting, for a large part of us, solicitors and barristers, taking a large part of their revenue from solicitors and barristers. |
| DT: 28:00
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30:00 | I want to return to that story about the document automation platform because I think it’s a great story and it touches on so many aspects of the way the delivery of legal services is changing and some of the attitudes towards that change because as you said there were really two sources of those downloads, one is new demand and one is existing market share, and there is a response to automation or to “off the shelf” legal services by many solicitors that it is going to cost jobs in the legal services market. That every document downloaded is a hour or two less of legal work that an employed or practising solicitor can perform but I think, and this is just my personal view, that as you said, those documents really are a form of commodity, they’re not a bespoke document to the requirements of that client and I think at least from a career satisfaction or professional satisfaction point of view, preparing boilerplate documents is not what practising solicitors set out to do. I think what we really enjoy doing is being a wise advisor, being a strategist, tailoring to a particular situation rather than churning out the same document from scratch every time and so I tend to be quite an optimist about commoditising some of those bespoke documents. The really interesting thing about that story I think is and I know the platform you’re talking about, is that the document you downloaded was from a law firm. That is a legal services business that’s differentiated by making that product available at a very low cost as a commodity and that is one of many ways a practise can be differentiated from their competitors. There’s certainly a form of price differentiation is obviously also some convenience to that option that you can download it whilst you’re in a McDonald’s and get that service four weeks earlier than you otherwise might have, but what are some other means of differentiation? If your firm doesn’t want to go down that path of making the more commoditised service available more quickly, more cheaply, how else might you differentiate yourself from your competitors? |
| GB:
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35:00 | In responding to that David, I think of differentiation as sustainable or defensible competitive advantage and the notion of sustainability or defensibility raise, how do you create an entry barrier? Now traditionally at law you do that by patenting something or registering trademarks, some intellectual property protection. Famously the one of the descendants of Heineken, Freddy Heineken the brewer said a service like law is something that you can’t drop on your foot like a beer bottle, it’s intangible and it’s ephemeral. You can’t create an inventory of your legal advice. You have precedents of course, and you draw on those precedents for efficiency and learning and continuous improvement purposes but traditional legal advice, particularly of the bespoke advisory nature is one of a kind, it’s made with the client and it’s co-produced and once the advice is given it’s gone and it’s very hard to put a price on advice like that. It’s easier in the accounting profession or in the engineering profession, I’ve come to understand those two professions, than in the legal profession. I’ll just use a medical story to illustrate this. A very good friend and client of mine a couple of years ago had major, major heart surgery with multiple bypasses and very successfully. When I saw him and he’d recovered and come back to work, we were talking about how it had gone he said to me, I was so deeply embarrassed by the total amount that I paid! I said, oh you had a big surcharge of your life insurance, over your medical insurance? He said, no I don’t have health insurance never have, I self-insure. I said, what do you mean? He said, well all up, hospital, theatre, pathology, and anaesthetist, it cost $27,000 and that was the difference between my life or dying; my restoration to health and physical fitness and capacity return to work and enjoy my family and dying. He said how do you put $27,000 on a life? I said, so what are you going to do Charles? He said, well I wrote the hospital foundation a cheque for quarter of a $1m. He said, that is my way of saying, and thanking in a price sense, and of literal price sense by donation obviously, but thanking them for my life and if I think about bespoke legal advice, how do you put a value on that, and this comes to the whole question of value-based pricing and there are exponents. So, the traditional way of pricing legal services has been by the hour you know and senior experienced partners – $400 and junior first year lawyers, $110 or whatever the range is. Now, you could put $3000 if they see a tax lawyer and you could put $200 probably if they’re junior lawyers these days, depending on the size of the firm, the nature of the practise. You just log your timesheet, you make sure you do your seven or five and a half or eight billable hours a day, whatever it says, and you bill it out, a portion is written off before it’s billed out, a portion of the bill may be disputed and not paid but at the end of the day, there is a time-based fee. That’s an input fee, which I think every solicitor understands – time is an input, it’s not an output, let alone an outcome. An output would be the advice, the written advice. The outcome would be the results, you know did you succeed in your tax dispute with the tax revenue office or not. Well these are well-known examples. You don’t roll up at the motor mechanic and say, would you mind having look at my car and by the way what’s your charge out rate per minute? You say, what’ll you do to review my car? Mechanic says, $150, you say fine, certainty. Fixed price. What’s the difference between that, an undiagnosed problem, and a piece of legal advice? The answer is tradition. Lawyers use input pricing; mechanics use outcome pricing or output pricing. There’s a revolution going on led by some very active proponents in Australia of burn your time sheets and convert everything to fixed price. You can feel the litigators bristling in your audience! You can’t fix price litigation. Well, a there is a practitioner in Chicago, Patrick Lamb is his name, who has written two books published by the ABA on this. He broke away from this and made Chicago law firms getting issued 20 years ago and set up his own firm, Valorem, as a pure litigation firm, only fixed price, and he’s never looked back. TIP: According to their website, Valorem started the ‘alternative fee revolution.’ And this is not slip and trip, petty, petty litigations, as in minor litigation, take on anything, and he’s got it down to an art form. |
| DT: | Is his fixed pricing model, I anticipate it might be similar to what sometimes referred to as “menu-based” pricing… |
| GB: | Yes. |
| DT: 36:00 | … where there is an a la carte menu of tasks and those are charged at particular rates? |
| GB:
37:00 | Yes, so there’ll be a discovery phase and there will be you know boundaries around that, what’s excluded, what’s included. There will be a basis for agreeing what’s out of scope from the initial quotation and therefore that will be added by prior agreement, not when the invoice hits the desk six months later of the client. So yes, absolutely, so there are many names now can you’re right, clearly the unknowns of litigation require a stage by stage and a whole lot of assumptions to be made and that’s what menus do. So yes, there are dozens of ways of pricing but the essential is either input based or output or outcome based and they are diametrically opposed ways of thinking, and the really interesting evidence to remind ourselves of and for your listeners to know about is studies done in the United States by one of the great law firm consultants there, Altman Weil, they have studied the profitability of matters and the profitability of whole firms and which are some of the matters they do and compared those using variable i.e. the hourly rates of those using mainly fixed rates. Guess which is more profitable? |
| DT: | I think I can guess, but you tell me! |
| GB:
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39:00 | Yes! The more profitable are those who have learned to use fixed rates, learned to use it. Now, on day one you’re on training wheels and you will make mistakes and it will cost you money, so you don’t expect just to flick over like that. One of my companies, Firm Checker, did a piece of research amongst the clients of small law firms, small/medium law firms of Australia in 2018. Ben Farrow, my co-founder did this study amongst the clients of small medium law firms as to what they had paid for a matter, a conveyance, settling a family law dispute, sale of business, type of matter, and how they were charged, fixed or variable or hybrid, and separately in the questionnaire, their level of satisfaction with the outcome and the provider – the solicitor or the firm. And no surprises, irrespective of the outcome, fixed fees were much preferred. The net promoter score attracted by those firms charging fixed fees were substantially higher. TIP: Now Dr Beaton has just referred to a ‘net promoter score,’ this is a metric used in customer experience surveys to measure customer loyalty. It was first developed in 2003 by consulting firm, Bain and Company, by asking just one question: on a scale of 1-10 how likely would you be to recommend our firm or product to a friend or family member? According to the customer’s answer the customer is either categorised as a promoter, someone highly likely to recommend your firm, a passive, someone who’s ambivalent about your firm, or a detractor, someone who’s not likely to spread positive information about your firm but might in fact spread information about a negative experience they’ve had with your firm. Now when it comes to a net promoter score, a score of 0 is a neutral score. The more promoters you have, the higher your score will be above 0, and the more detractors you have the lower your score will be below 0. There is no question that as consumers we like certainty and part of certainty, given we understand you can’t have a guaranteed outcome if you speak to the tax office, is the price you’re going to pay and how you will know what you’re getting for that price. |
| DT: 40:00
41:00 | I think there is a misconception amongst some solicitors that fixed pricing carries with it this idea of commoditisation and with it a kind of detachment from the lawyer and client in that the lawyer is no longer a trusted advisor, but more of a high volume service provider but speaking from personal experience, I don’t find that that is the case and I find that fixed pricing can sometimes work very, very well when there is a long standing relationship between the firm and the client. I have a client who enters into a number of transactions that are very similar to one another with some regularity and for transactions of that type, we charge that client a certain fee and sometimes that fee will be greater than it would have been had the transaction been charged on hourly rates and sometimes it will be lower than it would have been had it been charged on hourly rates but over the life of that long relationship with that client, it’s very, very useful for both of us, it provides certainty of revenue for us and it provides certainty of the cost of entering into those transactions for the client and so the fixed fee would probably work quite nicely for us and had that been at one off transaction, it works even better over a dozen or two dozen such transactions. |
| GB:
42:00
43:00 | You’ve referred to trust in a relationship that enables fixed fee. I partly concur with that, but I’ll give you another story that shows another angle on this. This is 15/20 years ago, in Brisbane a substantial firm, particularly in corporate commercial law, developed a way of pricing prospectuses, either for capital raising or for listing and they pioneered this method where they would say to the CFO of a prospective client for a prospectus, it’s $150,000 fixed fee and whatever it takes we’ll do it. What they’ve done is gone back through all the prospectuses and they had a substantial volume going through the firm, they had a whole corridor lined with the covers of these prospectuses, went back through them and said, well on a time costed basis, this is what we know it costs to make, why don’t we just pick a number that’s reasonably on the high side, in other words, it’s risk adjusted in our favour because if there’s an overrun, we wear it, and put that to CFOs. And they were run over in the rush, the word went around town in no time. You can get a prospectus at this firm for $150K, whereas the competitors with charging anything from $100,000 to $300,000, $400,000, and by offering a chief financial officer who often rides shotgun on my prospectus for the corporate client, you offer them certainty, that’s what CFOs want – certainty, and they read this perfectly and were hugely successful and now have extended that notion into other parts of their practise. So it’s not just with repetitive work with a trusting relationship, it’s where there’s repetitive work where you know and you can project manage it, which we haven’t talked about today, but the legal project management this, to produce this at a very high standard very efficiently. |
| DT: | And you’ve kind of developed that it’s not economy of scale but that certainty of profiting in the long run over by the many projects for a number of different clients rather than the same one. |
| GB: | Correct. |
| DT:
44:00 | The idea of a fixed fees being more profitable really touches on another economic concept which is incentives. I think it’s amusing that sometimes we look at historical methods of charging in the legal services industry, like billing by folio which, for our listeners who might not be familiar, is charging based on the number of pages it took to prepare, and we might laugh at some of the traditions that that created and the incredibly verbose documents that we ended up producing that we give, devise, bequeath, etc., to make documents a little bit longer and charge for one more folio and we think, well it’s a method of charging that incentivises inefficiency. |
| GB: | Yes. |
| DT: | How lucky we are to have gone past that to the method of today but really, charging my time does have a perverse incentive doesn’t it, because it doesn’t disincentivise inefficiency. |
| GB:
45:00
46:00
47:00
48:00 | No. There’s a wonderful publication out of the UK by Richard Tromans called ‘Artificial Lawyer’, which he started publishing at the start of the law-tech era and he published a piece, maybe a year ago, called ‘Inefficiency Factories’ and he was on this point, it was an opinion piece by Richard, about law firms are designed to be inefficient because you’re rewarded for inefficiency. And when you think about that, and you talk to people about timesheet padding and they look at you and say we don’t do that, how hard do you work to fill your timesheet every day because you’ve got to submit it every day, Big Brother’s watching as your timesheet arrives in the administration. And they said, well if I’m short and it’s 5:00 o’clock, I add a half an hour there, and I said, well that’s padding, that’s padding. And they ask, isn’t that OK, is the question well why are you padding a timesheet, what value is that to a client? I can understand it makes your billings look good, it adds a margin to the matter, assuming it’s paid. Now, herein lies a really good story, David. So, there is a platform called ‘Neota Logic’, which was conceived by a Melbourne boy, I’ll call him John Law, many years ago and is now running rampant throughout the world including Australia. Neota Logic is essentially an application that allows law firms to build their own decision-making trees and document-production trees and one of the very early examples I saw was by a major Australian law firm who does a lot of foreign investment review board work for offshore clients and he’d say to them, what does a typical complex firm take? They said an experienced senior associate, three months will take – remember there are 27 acts, I think it is, that are involved in a firm application and the fee, anywhere between $150,000 and $250,000 to get it ready to submit. Okay, along comes the Neota Logic to this firm and says, we can help you build a firm document production system, you could tailor it your way, you don’t need to learn to code, this is a no-code system and now they can produce firm documents with an experienced lawyer having the inputs as the app stops and says which clause which way, left right, straight through, loop back as it bitrates through the document, about 2 hours work. So, once you are ready to instruct the app, 2 hours later you’ve got the document, which you then need to read of course, before sending it to client. How do you charge for that? It’s my story of the cardiac surgery on my friend and client Charles, you know what’s his life worth? Well, what’s a firm document worth when takes 2 hours? You know, how do you pay a surgeon that is particularly good at putting stents into very narrowed sick arteries? Same question, same question. What is the intellectual property worth? And there are now, one of the applications of this document, is in sponsored employment in the United States. So, an employer wants to sponsor a migrant for a particular job, and you go to the dime a dozen attorneys doing this and so there’s a market operating for the fees to get sponsorship done. And a typical application could be $50,000, success not guaranteed. Along comes this small law firm, builds their own app on the Neota Logic platform and is selling for $5,000. |
| DT: | Wow. |
| GB: 49:00
50:00
| 10 times less than the average fixed price – $5000. Success rate appears equivalent. What are they doing? Why aren’t they charging $40,000 is the question? Well the answer is simple economics. I can grab 80-90% market share and I will, make my margin out of the volume, not out of the price difference between cost to produce and price recovered. And so, it’s a classic share play, market share play. TIP: George’s comment here reminds me of something I remember hearing from an economics lecture: Revenue is a rectangle. The length of the rectangle is the number of units sold, or matters opened in our case, and the height of the rectangle is the price of each one. Now a very tall thin rectangle has the same area as a very short, long one – both are valid strategies, depending on the dynamics of the individual market. And it’s a small firm somewhere in Arkansas or somewhere, you don’t have to be in a big city, this is all done virtually, all done online, all done just by the final read through and sign off by the machine. We are seeing this everywhere and it’s teaching clients there is an alternative way of doing this and of course, the large sophisticated corporate law departments are bypassing the solicitors now going direct to these vendors. |
| DT:
51:00 | Just before we move away from the idea of differentiation, that last story really highlights that differentiation on a factor is not one thing, that that firm is differentiating on a number of things but when we take their price differentiation, that it’s not a matter of pricing 10 or 20% below their competitors but 90% below and it’s a completely distinct strategy, as you said, and economically viable or even an optimal one but completely distinct from charging slightly below and then having that larger margin, so I think that’s really interesting point for our listeners to note. We’ve talked quite a bit about NewLaw firms, particularly in the context of automating repetitive or non-bespoke legal services work, but ‘NewLaw’ is a term that’s been used to describe multiplex legal services businesses that distinguish in whole number of ways, whether that’s by fee structure, by organisational structure for example, or by the method of delivering their services, such as by automation. Is there one thing that NewLaw firms have in common or is that a term that’s really used to describe something that’s not the norm? |
| GB:
52:00
53:00
54:00
55:00
56:00 | I need to answer that in several parts. The one thing all NewLaw firms have in common is that they are not big law firms, so what they are not. So that then begs the question, what’s a big law firm? A big law firm is not necessary large law firm, it’s a traditional law firm partnership based, leverage based, in other words, the money is made out of the leverage of the human capital, typically but not always charging hourly rates and where the brands of the firm are more the brands of the rainmaking partners in the brand of the firm. That’s a big law business model which has been around in his current form since the 1950s when the reconstruction of the world with American capital began after the war. So, there’s no practising solicitor who’s known anything but the big law business model. Back in 2009/10, talk began about another way of practising and the phrase ‘NewLaw’ was banded around and then based on a series of posts that a colleague and I wrote in 2013, one in particular called ‘The Rise and Rise of NewLaw’, and we expressed it as capital ‘N’, no space, capital ‘L’, so NewLaw neologism basically, to capture this idea and the idea we characterised as a business model that was different and we gave the name BigLaw to the traditional firm, so it was different. A business model is how you make money. It’s not compared to strategies; it’s how do you make money. And so you make money in any business but in the law firm we’re talking about by winning work, doing the work and having an infrastructure and governance that enables the work to be won and done and the stability of the firm to be maintained and we then tease those three big areas, win, do, governance and infrastructure, into 10 different dimensions and said, the traditional law firm looks like this a partnership model. A NewLaw firm in its classic mode looks like this, an incorporated company, only partners or shareholders or equity owners, outside shareholders, variable price, fixed price, brand name of the partners, brand name of the firm, technology enabled for efficiency, word processing, for example or knowledge management or document recovery – BigLaw business model, the technology that is disrupting the examples we’ve been talking about today. On those 10 dimensions you can plot where you are and you can say well we are a big law business model but we want to move as Patrick Lamb at Katten Muchin or Hive Legal has done with value-based pricing or how the Fold has done in Australia with fixed pricing. We want to move out pricing slider across to NewLaw, so it’s not all or none. Because there are all these dimensions and varieties of tech which are enabling or disrupting, there’s no one thing called a NewLaw, business model. It’s a philosophy, it’s way of thinking about a business model and you can construct yours any way you want, and you see every variety now of these models and new names are emerging. They are the law companies, and these are incorporated and sooner or later one of them is going to be listed, started in Australia, added balance, added balance and then merge with lawyers on demand in London. It’s one of the earliest, Elevate Services run by Liam Brown is running rampantly across the world! It’s a law company, it’s got many elements of NewLaw in it, but it’s not pure in the sense of all 10 dimensions are at the extreme of the spectra that I’ve described. So, they come in many forms. Then the rise of legal tech with these pure tech plays, you know you wouldn’t call Immediation, a mediation dispute resolution platform a NewLaw firm. It’s not, it’s a piece of legal tech. You wouldn’t call the service rendered by Neota Logic, it’s an enabler of any kind of legal services provider, including in-house lawyers, to do legal work more efficiently or more precisely with higher degrees of fidelity and lower labour costs in the review. So, no there is no one NewLaw firm, it’s a way of thinking about your business model and differentiating in the markets that you want to play in. |
| DT: | I now want to turn to using micro-economic principles to measure the success of a legal services business whether that’s a NewLaw firm or a big law firm and I know this is an area on which you’ve consulted to law firms quite a bit because it’s critically important to selecting a business model, selecting a differentiation strategy that you understand whether what you’re doing is actually working isn’t it? |
| GB: | Yep. |
| DT: 57:00 | How does a law firm principal, who maybe doesn’t have a formal education in economics or commerce or accounting, how does that principal measure the success of their business? |
| GB:
58:00
59:00
1:00:00 | Yeah, very important to repeat the old saying, ‘if it’s not measured it can’t be managed’ and we then get into the realm of speculation, opinion and guessing, so measurement is critical. The easiest thing to measure is in numbers, so anything that comes out of the practice management system, reporting, chargeable hours this month, fees received, debtor days, those are the numbers which we can all understand a number. The problem is it’s easy to misinterpret a number. Why did debtor days in family law differ so much from debtor days in the commercial department? Well, it’s the nature of the work, the nature of the clients, nature of the Court processes. So, numbers have to be contextualised, but numbers can be very misleading because and the summary answer to your question is, take a balanced approach to this. You know, in the jargon, saying a balanced scorecard approach to this. TIP: By now you’ve probably heard of the balanced scorecard. It’s a concept that comes from strategic management scholarship. It’s a performance management tool, but instead of measuring one key performance indicator, it measures a range of financial and non-financial metrics, all of which are aligned to the objectives of the organisation – so the balanced scorecard puts the performance of the individual in the context of the strategic direction of the organisation as a whole. The parts of the scorecard we would say are, sure, there are numbers and if you’re charging fixed fees then you look at cash flow, you look at debtor days, you look at gross margin, you don’t have time sheets so you can’t tell at the matter level because you don’t know how many hours have gone into the matter at what labour costs, but you can surely do that at departmental level or at firm level. So, you have a bunch of financial measures which tell you what the financial health is, where your profit is tracking and how your cash is doing to keep busier. Then you have a bunch of client measures and how satisfied are the clients? Today there are very easy quick ways of tapping client’s satisfaction and it’s not taking them out to lunch and ask them how you’re doing, it’s again a measurement system which can be readily installed to tap your client satisfaction. You could look at debtor days and use that as an indication and then the third quadrant is around your staff and your partners as to their levels of job satisfaction and their morale and what it’s like to be employed or a partner in this firm and again there are very simple ways of measuring that and tracking that. You’ve got your talent, you’ve got your clients, you’ve got your money and the 4th part of the quadrant is your, particularly, innovation – what are you doing to continuously improve in this? Innovation is not some humongous new piece of technology, it’s what are the improvements that you’re making to better serve clients or be more efficient in yourselves. You can simply have a list of innovation projects and say, at what rate are we progressing these? How many on the ‘stored’ list you know, pending, pending, pending, versus which are progressing? Are the more strategically important ones progressing and the less strategically important ones that are languishing on the To Do List? So, it’s not hard it’s got to be set up, it’s got to be socialised, but balanced scorecards are quite simple to set up in a law firm. |
| DT: 1:01:00
1:02:00
1:03:00 | Two things – First, I love this idea of taking a more rigorous and data driven or even quantitatively driven approach to client satisfaction. I think that’s really interesting because I imagine there will be many lawyers, perhaps some of our listeners, who do think, well the best way to measure client satisfaction is to take them out to lunch, or to coffee and ask. But it’s no surprise that just before the main course during a lunch with a client that they would tell you that everything is perfectly fine. And the second thing is, I like this idea of measuring continuous improvement and I wonder whether, and there’s a concept the name of which escapes me, but with the magic of editing will be able to add it in later. TIP: Now the word that escaped me here was “Kaizen” – which is a word meaning ‘change for the better.’ It’s a way of continuously improving business activities by involving all employees from the CEO to the line worker in identifying, suggesting and implementing improvements. Toyota is one of the largest organisations to embrace ‘Kaizen’ – it’s part of the so-called Toyota Way, the philosophy of how the Toyota corporation runs. Toyota has an inclusive approach to Kaizen where all line personnel in their factories are expected to stop production if they see an abnormality and go up to their supervisor and immediately suggest an improvement to resolve it. The basic concept is to identify and quickly remove waste or obstacles rather than merely persisting in the face of them. Coming out of manufacturing businesses in Japan of measuring continuous improvement in efficiency and I wonder if for so many firms that are, as you said earlier, moving the slider from the big law side of the slider to the NewLaw side and undertaking that journey, whether continuous improvement in efficiency is something that can be numerically measured for those firms over time? |
| GB:
1:04:00 | Yes, is the answer. There’s no doubt that you know it doesn’t come with two decimal points on the end like dollars and cents. You can’t measure to decimal points, but you can have a simple tracking process. I was in a large law firm the other day and we were talking about their projects in the innovation space which includes continuous improvement and the manager in charge looked at her iPad and said, well close your eyes and I’ll show you, and she pulled out a chart and they had like 30 or 40 projects and each of the projects had a colour code – three colours – very important, modestly important and less important or something and how far towards the delivery deadline they had progressed, and she updated this daily by asking for input, because it was distributed throughout the firm, it wasn’t being done centrally. So, they had it out there with the practitioners with the shared services people doing these projects and she literally got a daily roundup and updated the chart and then published it on the intranet so everybody could see it and there’s a beautiful measurement system. |
| DT: | And I suppose that that touches on the continuous improvement in terms of innovation projects, for example, perhaps developing a document automation system or developing a means of delivering a service to a client differently, like the firm approval product that you described earlier but I suppose equally, you could measure the continuous improvement of the efficiency of doing the traditional professional services work, you could measure from matter to matter, the margin on a fixed fee for a given item. |
| GB: 1:05:00
1:06:00 | Indeed, indeed. If you have reasonably repetitive work, conveyancing work for example, or securities work for a large lender, these are reasonably standardised processes and you know, you say, this is taking us 11 hours, how do we re-engineer it? How do we take what takes typically 11 hours on average, down to five hours? How do we halve it? What steps can we take out? What steps can we automate? What steps can we delegate to a paralegal from a solicitor, in other words reduce the cost and crush the time so that the cycle time is reduced? And that again requires very simple measurement to set up and somebody has to run it and you know who the best people are? The young people of the firm. The young people of the firm are the place to go. You know we never cease to rejoice in the fact when a client has just asked, look I’m going to ask Susan Jones to do this, she’s a third-year solicitor and she’s really, really keen on this, do you mind working with Susan? We say alright, you know, you’ve got a receptive, talented, no blinkers person coming to this, you know with energy and creativity that comes with youth and freshness and the best firms in this innovation space are those empowering their young people over and over and over again. |
| DT:
| I’m so glad you said that for a number of reasons. First, I do like to think of myself as one of the young people in the firm, but some of our listeners may know that I was formerly the president of New South Wales Young Lawyers that represents all lawyers under 36 in this State and I’m really pleased to hear you describe the value, not to doing the professional services work but to improving and growing the business that young lawyers can bring. I think that’s so important for young lawyers to understand and for the people who manage them to understand that they have something to give to the improvement of the business. |
| GB: 1:07:00
1:08:00
1:09:00
1:10:00 | Very much. And if I may add, present company excluded, I hate to say, that those firms that aren’t empowering young people are losing them. There are so many ways of setting up your own law firm. On our ratings and review platform, Firm Checker, some of our most ardent users are principals of firms founded in the last two years and they’re all under the age of 30 and you know, we have law firms in Parramatta or Cremorne in Melbourne or Gold Coast City and I say to Ben, who are they? He said, they’re my age! Ben turned 29 last week, you know, and the energy, the creativity, the drive, the business success of these firms it just needs to be seen to be believed and where they all come, I won’t name them, but the big name firms, of the cities and the country where they’re saying, look I can’t wait to be given an opportunity to grow, I don’t want to be stuck in a room doing discovery for two years on a major matter. I just do not. And they get out and some of them say to us, I say to them, but weren’t you at XYZ firm, and she said to me the other day, yes, I was but I don’t want it on my CV because I would be tainted. That’s the reactionary view of this. And I said, wow. She said, it’s true you know, it’s true. My cohort, and I think she’s probably at the leading edge of this, my cohort want to be seen to be our own people and whilst you get great training and some people think it’s great to have these big names on your CV, I personally don’t think that. She may be an exception but it is indicative of the mood that’s out there and you know, if I may just take a moment, this talent challenge where the training took place in the firms and people joined the firm and 15/20 years later became a partner, used to be 5/7, now it’s 15 or more years, if they’re not staying, then where are the partners of the future? So firms are being hollowed out in a talent sense in the middle and from a supply perspective to the community, whether it’s B2C or B2B, you’ve got a group of ageing owners of firms with nobody to succeed them and if you leave the cities of the country and go into regional Australia, it’s an acute problem that’s got the Law Societies worried, it’s true in the accounting profession and my answer to them is well, you know the young people who want to come back and live here because they like the place or the parents are farming in the neighbourhood or you know their spouse is farming in the neighbourhood and they want to practise law, how are they going to practise law from here? And they are going to be technology enabled. And they’re not going to be bounded by geography. They will practise where the work is for the client that want to do business with them this way. So, you raised the point earlier of technology redundancy. If you go back in history to the industrial revolution there were grave fears in North of England that Watt and his steam engine or the cotton mills would deprive the labour of their jobs and it’s been amply demonstrated that it creates more new jobs than it deprives from the smokestack jobs, takes away from the smokestack jobs. |
| DT: | And even before that I suppose, the printing press was…. |
| GB:
1:11:00
1:12:00
| Exactly, exactly. So, economic history tells us fear not, rejoice. Technology is here and you don’t have to be 25 to jump into this stuff. We know enough people of my generation who are founding companies on their own. Not I, I have a 29-year-old business partner who’s the co-founder, but it is very, very much a market of opportunity. Maybe the last point for me on this David, is the unmet demand. A big study on this by the SRA, Solicitors Regulation Authority in England and Wales showed that only 15% of legal needs are being met by solicitors. Of the remaining 85%, about 50 go recognised but do nothing about it. In an insurance sense, individuals of the small businesses are running bare, no legal advice. The remainder, the 25% are being filled by accountants or by family and friends so there is a vast latent market for solicitors, vast, and the whole, tech-enabled access to justice movement will start to fill that gap and the entrepreneurs are going to be the winners here. They could be law firms, they could be law students who started while they are students, they could be kids in their bedrooms who see the opportunity and can code. You know, mum or dad is solicitor and I watch, and I can do better than them. So we are seeing a liberalisation, we’re seeing a democratisation of the legal services market and I say from a professional perspective, this is good, because it provides more access to more people of higher quality professional services in a greater variety of ways and therefore provides equity and access to that market. |
| DT: 1:13:00 | The discussion of that position of some of the younger listeners is an important and a beautiful segue to the last topic I want to ask you about George. It’s not only principals of firms that can or should keep track of the performance of their firm. If you’re a newly admitted lawyer or a lawyer that’s been practising for some time at perhaps what is traditionally called the senior associate level, it’s still just as important to understand the economic success or the economic performance of your practise isn’t it? How can some of our younger listeners use what we’ve been talking about today in their career growth and in measuring their economic and financial success? |
| GB:
1:14:00
1:15:00
1:16:00 | Very, very nicely put question. Most of our younger listeners will be working in firms that are secretive about the financials, its ‘partners’ business’ and therefore asking to see the monthly management report is going to be met with, what? Why? How dare you, in some cases. So, what are the alternatives? And I think these alternatives are in fact better, than looking in the rear-view mirror of the year-to-date management report of PNL, let alone the balance sheet. I would say keep a little record of the files that you have worked on, keep a record of whether you were solely running the file, sharing the file, keep a record of the outcome of the file, you know, the matter settled, the matter went to Court, whatever. In a sense of a running diary, learn from what you are doing and stop every month and take a tally and say to yourself, well what have I learnt from this? How many of these did I bring to the firm? None. Okay, well I need to learn how to introduce matters to the firm, to my practise. How do I go about that? So, if you have this kind of diary, on which you can reflect, which is what good traditional diary writing was about, being able to reflect on the day, or the week and your learnings, your spiritual journey, your intellectual development journey, the highs and the lows and how you’ve dealt with those in an emotional intelligence way. Do it for your practise, your practise is the matters on which you work. What did I learn from working for partner A, contrast with partner B? What did I learn about style? What did I learn about myself and being self-starting? Being able to judge when to ask a question and when to make a call and do it my way and put it in the draft advice rather than saying, which way shall I go with this? My advice would be keep it simple, keep a diary, think about the things you want to record in that diary and record them in a way on a spreadsheet or in an app that enables you to periodically reflect and draw lessons so that you build your knowledge of yourself and your practise and your skills. Careers are yours. |
| DT: | It’s an old adage you mentioned earlier in the episode that it applies so nicely to the importance of keeping that record. ‘What isn’t measured can’t be managed’. |
| GB: | And that includes self-management, David. If you don’t measure yourself how can you manage yourself to know if you’re progressing, static, going backwards, avoiding the difficult or the challenging or the uncomfortable, making…exactly right. |
| DT: | And that’s a great point to finish with today. Dr George Beaton, thanks so much for joining us on Hearsay. |
| GB: | My pleasure, thank you for having me. |
| DT:
1:17:00
1:18:00 | You’ve been listening to Hearsay The Legal Podcast. I’d like to thank our guest Dr Beaton for coming on the show. If you liked this episode about economics for lawyers, try my interview with Craig Osborne from RNB Lawyers about succession planning for lawyers. Or for something different, listen to my interview with Reece Corbett-Wilkins from Clyde and Co about data breaches and cyber risk. If you’re an Australian legal practitioner, you can claim one continuing professional development point for listening to this episode. Now whether an activity entitles you to claim a CPD point is self-assessed, but we suggest this episode constitutes an activity in the practice management and business skills field. Now if you’ve claimed five or more CPD points from audio content already this CPD year, you may need to access our multimedia content to claim further points from listening to Hearsay. Visit htlp.com.au for more information on claiming and tracking your points on our platform. The Hearsay team is Tim Edmeades who produced this episode, Kirti Kumar our researcher, Araceli Robledo who manages all of our marketing and me, David Turner, your interviewer. Hearsay The Legal Podcast is a project headed by Nicola Cosgrove and Chris Cruikshank co-founders of Assured Legal Solutions. You can find all of our episodes as well as summary papers, transcripts, quizzes and more at htlp.com.au. That’s HTLP for Hearsay The Legal Podcast.com.au. Thanks for listening. |
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