Friday, 25 September 2009

Plumbers' Houses...

When I was about 13, we moved to a new family home in Glasgow. It was a typical Victorian mid terraced house which was wonderful except for one thing. The plumbing was dreadful. There had been a series of botched and hurried jobs done over the years and so a complete overhaul was required. Fortunately we knew a very good plumber - the man who had sold his house to us. It seemed that the myth of "plumbers' houses" wasn't a myth after all. He was embarrassed that his own house had not been given the same level of service he applied to his work for other people - and so it was a matter of pride as much as a commercial piece of work, when he returned in the weeks after the sale, to restore the plumbing in the house to a high standard. He did very good work - he was a very good plumber. It had been too easy for him, however, to focus on the work he did outside his own house and to thing that it was not so important to perform his own work to the same standard.

I though of this story this morning when I read through "Roll on Friday" (required reading, I think). It was carrying a story about Allen & Overy being forced to rehire a German associate following a poor redundancy procedure. There is no doubt at all that A&O know the law with regard to redundancy and there is similarly absolutely no doubt that they are capable of preforming an effective redundancy procedure (goodness knows almost every law firm has, by now, had enough practice at it). This seems to be another case of "plumber's house". Whether one department or one partner did something without checking we will probably never know. The point is that even those organisations at the top of their game can have a blind spot. The important thing for any firm is to know that a blind spot can exist and to look for it.

For many firms (and I'm no longer picking on A&O here) the blind spot can be in the administration, management or marketing of their firm. Lawyers are almost never the right people to be doing this work - and yet most lawyers seem to think that they can do it. For example: "The Lawyer" (I don't only read the tabloid internet) reported on Monday that the Magic Circle firms had slashed their client rates to seek work (see here for the story). I'm sure that, in the short term, this will attract some new clients interested in the "big boys" charging £450. There are, however, some problems with this strategy (was it really a strategic decision I wonder...?) which may have been in the blind spot:
  1. Imagine that you are a large corporate client who has been using A&O for some time. As a good client, you have not been paying the headline rates of , say, £700 but have negotiated rates down to £500. You've probably been feeling pretty good about this. Suddenly you see in the press that the same firm are charging £450 to smaller operations who have no history of loyalty. I'm sure you can imagine the telephone call...
  2. Imagine that you are a smaller mid-market business. Suddenly you have two of the magic circle firms offering their services at the same rates you have been paying. This is great, surely? Well not always. Perhaps I'm too cynical, but I would expect that in two years or so, when the market has recovered, that my magic circle firm will dump me as a client since I'll be too small to bother with. That or hike the price straight back above £700 and let me walk. Either way I would not expect this to be a long term relationship.
  3. Speaking of price hikes - it can be difficult to get a price back up. Look at it from the magic circle firm's point of view. You have been charging a client £650. They read the press, shout and scream and you agree to give them the £450 rate "on a temporary basis". Eight months later, you try to get the price back up to £650. "Don't be ridiculous", says the client, "that's a 44% increase!". The firm will be luck to get anywhere close to 10%. Even at at 10% annual increase, it will take four years to return to just over £650. The firm will have to get and keep an awful lot of new business to make up for that.
  4. There is a danger that it sounds like panic measures. I can understand big clients beating their lawyers up at the moment on price - but I'm amazed that the firms did not include a privacy statement in the agreement. They should at least have tried to keep it quiet!
Every firm will have a blind spot - or more than one. The important thing is to know that they exist somewhere and to be aware of the need for careful thought in making decisions that can have a long term impact on the firm.

The point of my earlier story is that the magic circle firms, in particular, and most firms in general know that they need to be careful with their own employment procedures and they know that they shouldn't make snap decisions. Like plumbers' houses, however, sometimes they can be focusses slightly outside their own walls. Take the time and make sure your own plumbing is up to scratch.

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