Fault, responsibility and strategy - or none of the above...

Dear oh dear - what a mess.

Ian Austin, the former Managing Partner and Executive Chairman of Halliwells, has been talking to "The Lawyer" (see here for their story) - or rather he has been giving his version of their descent into administration. It turns out that it was the partners' fault, or the external consultants, or the boards' or... someone else's decision or fault. I quote one example from Mr. Austin:

the decision to move into Spinningfields was a decision taken by a board, by external consultants [Sheppard Robson] in conjunction with group heads. This was not a decision of my own making..

What? He was the Managing Partner - his is the responsibility, whether or not it was his fault. He is also quoted as saying that the loss of the insurance team in December last year was the "straw that broke the camel's back". One of the comments on the story points out that his firm was still recruiting & promoting 6 months later.  In a limited company or a PLC surely this would be "trading insolvently"...?

I suppose I should be more shocked at the lack of responsibility that is shown here and at the lack of strategic thinking that allowed the firm to distribute £15million to the equity partners in 2008 (keeping  a whole £5million for investment in the future - well in the firm's future). Mr. Austin's excuse/justification for this seems to be along the lines of "the money was there and we wanted it" or "at the time everything looked rosy". On a much larger scale this is like saying "I didn't need an umbrella - it wasn't raining yesterday. It's not my fault I got soaked". I'm not sure this even qualifies as short term planning.

As I said in a previous blog (see here), one of the most shocking aspects of the Halliwells debacle is that the equity partners walked into new jobs - the very people responsible for the mess are those least affected by it. Mr. Austin himself negotiated his own safe transfer from the sinking ship before the deal on Halliwells' assets was completed - an action he justifies as being "...the right thing for me."

That last phrase sums up the state of management and ethical behaviour in Halliwells - the equity partners removed £15million of cash from the firm 18 months before it went bust because they wanted it; the same people walked into new roles, leaving trainees and junior staff to their fate, because they could and it was the best thing for them. With that level of strategic thinking and personal thinking rather than firm thinking, my only wonder is that it took them so long to go bust. I'm sure Manches are heaving a huge sigh of relief that they didn't merge (or buy) with Halliwells in 2009.

Decisions - good and bad...

This does seem to be the week for decisions - or at least for the announcement of decisions. I wrote yesterday about a brave decision from Outer Temple chambers in trying to get the jump on the ABS structure.

Also in yesterday's press was a story from "The Lawyer" about my old firm - Field Fisher Waterhouse. Friends and colleagues usually expect that I will have nothing good to say about the firms I used to work for - and I will admit to falling into the bad habit of the blogger of tending to talk about bad news more often than about good. I certainly have no ill feelings towards any of the firms I've worked with and in this case it would appear to be good news. The story is about FFW cutting its graduate intake numbers "...by a quarter."

I'm never entirely sure with "The Lawyer" whether they are for or against any particular story and it is perhaps my own problem that I read the headline as a criticism. The word "slash" does not, after all, have good connotations. What the story reveals, however, is what I think is a measured and sensible decision to reduce the number of graduates taken on from 20 to 15 (which, yes, is a 25% cut - but it would have been less sensational simply to have said "five fewer" - but then I'm not trying to sell advertising), to increase engagement with the graduates before they join, to change the programme to four seats of six months (better, I think than the previous six seats of four months), and to incorporate graduate recruitment into the firm's main career development framework.

These all sound like sensible moves. Yes there will be fewer graduates taken on, but I haven't noticed a dearth of solicitors at the moment. It is surely sensible to engage more fully with fewer people and to work to ensure that they receive a better experience.

I know that the firm has been thinking about this change, and planning it carefully, for some time. Tempting as it may be to attack what might be seen by some as a brutal cost-cutting measure, I think they have made a good decision.

Who's next..?

Not Change, but the Consideration of Change

I was at FoxWilliams this morning for the launch of the report written by Jon Robins entitled "The Big Bang Report: Opportunities and threats in the new legal services market". An electronic version is available from Byfield Consultancy here.

The report makes very interesting reading - and I'm reading it very thoroughly at the moment - but there were a few points raised in the discussion which followed the launch which have got me thinking.

One of the speakers was Tony Williams, the Principal from Jomati, who made a point that I have been trying to make for a while - namely that of the "deliberate decision". It is important for firms and chambers to decide what it is that they want to do, the market they want to work with, and to examine the competition they face now and will face in the future. Not rocket science. The point is to make a deliberate decision about the future of their firm or set of chambers before the market makes one for them. The decision may be to do nothing - that their model works and that those running the firm or chambers believe that they are well placed in the market. That is fine - it is a deliberate decision.

Decision time is here for legal services, there is no more time to prevaricate. Crispin Passmore from the Legal Services Board reminded the attendees that the Bar Standards Board was meeting today (November 19th) to consider the possibility of barristers working in partnerships, which (assuming a "yes" vote) would be a major step towards Alternative Business Structures (ABSs). He also said that the LSB expected to see the first ABSs in mid 2011. This is not very far away and so I repeat - now is the time for barristers and solicitors to seriously consider their business and what they would like it to be in the future.

I'm particularly interested in how the changes to the profession will have an impact on the bar. For many sets of chambers, I think that, following thorough analysis, the view might well be that they are more in the B2B (Business to Business) market than the B2C (Business to Consumer), and so their branding and marketing is focussed on professional firms rather than on the "end users" of the justice system. Many sets are specialised or have barristers who work at the very top end of the profession and so are likely to remain in demand after the shake-up. This will not be true, sadly, for every set of criminal chambers. The  new large branded law firms which are widely expected to enter the market are likely, as part of an ABS, to try to scoop up public defence work, while the Criminal Prosecution Service are squeezing the bar from the other side. I can almost see the junior end of the junior criminal bar disappearing - working for the new ABSs before starting in independent practice later in life when they can start to work on more specialised areas of criminal law. This will have a huge impact on the bar, on the Inns of Court, on barristers and solicitors and on clients. Exactly what that impact will be - I don't know.

In times of change, the only real fault is to do nothing - or rather to accidentally do nothing. Deliberately doing nothing to change your business model after careful thought is a positive decision. Firms are already starting to try new ways of working. Look at Turcan Connell a law firm based in Edinburgh with offices in London and Guernsey. They have expanded their Private Client work to include Asset Management - they have analysed their market and are providing their clients with the services they need, whether those are legal services or not. In all but name this is an ABS. Firms in England and Wales will, I'm sure, be examining Turcan Connell's success and analysing their business model. It could simply be one of the first of such practices.

So - my learning from this morning. Your firm or set of chambers must be considering the changes in the industry now. They should be engaging with advisers to examine their market, their place in the market, their strategy, their governance and their operations - and they should be doing this very soon. The bar in particular has been remiss in failing to address the Legal Services Act soon enough. Sets of chambers cannot wait for their regulator before they start to act. By starting the process now, they will be well placed to add what regulatory changes are decided by the BSB to chamber's strategy.

Consider the change now - before the market changes around you and your firm or chambers is no longer relevant in this new market.