Eduardo Reyes's blogs

Is economics any use? That sounds like the start of a rant/ a joke/ or a quip in an after-dinner speech (all the easier to make as many economies, presumably advised by fine economic minds, struggle to recover and grow).

So let me be more specific. Can a law firm’s principle, or even a practice manager, use economics to make a decent business plan? After all, the economy is water we all swim in - its tide and temperature should matter.

At last week’s conference for the Law Society’s Law Management Section investment adviser Justin Urquhart Stewart gave a hugely well-received ‘world economic context’ presentation. There were of course interesting nuggets of information brought together - a reminder of what’s fueling American growth, that the UK has a deficit, not a debt, problem, and some thoughts on the Eurozone and China’s ability to engineer a ‘soft landing’.

All interesting and good - even when the news is dire or difficult, having a narrative to make sense of it is somehow reassuring, and I happen to believe it is important to try to grasp these things when casting a vote in an election.

But macro-economics doesn’t drive the legal market in obvious ways. Instead, it is often professional regulation, statute, sector regulation and financial product development that create or destroy markets for legal services.

Let’s take China and India as examples. Leaving aside questions about China’s ‘soft landing’, economic growth rates and the size of their economies have attracted understandably huge attention from investors and legal advisers.

But with rules on business and land ownership, problems with the repatriation of profits, and restrictions on legal practice in place, returns for businesses and lawyers lag behind commercial confidence that prevails in the potential of both countries.

The liberalisation of the UK legal market is another case in point. If prices fall as a result (I make no judgement as to whether this is ‘good’ for clients), it will be because the old rules maintained a sort of regulatory arbitrage that lasted an age.

The jobs of securitisation lawyers (remember them?) were dependent on the whim of financial regulators as much as of the financial markets, while environmental law practices have experienced a boom based on changes in public policy at a UK and European Union level.

The Rolls Building is busy because clients find Russia and Eastern Europe’s commitment to the rule of law to be, shall we say, uncongenial. And a law firm’s turnover is not going to be much affected if the UK’s national debt cycle went from a 13-year affair to 12 or 14.

I can think of quite a few law firms of all sizes whose turnover is up 20-40% in the last two years, and who are planning for further growth - and it certainly isn’t because the markets their clients are in are doing equally well.

Economics is interesting and it’s an important discipline. But it happens to be next to useless for the purposes of running a law firm.

Eduardo Reyes is Gazette features editor

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Just over two years ago my colleague Rachel Rothwell, now editor of Litigation Funding magazine, wrote a blog with the same title as this one.

Rothwell shopped around a bit, asked questions about referral fees, and eventually settled on a licensed conveyancer above a couple of more expensive solicitors. She had a fairly poor experience as a client, but the deal got done. A fair number of comments were along the lines of ‘well, what do you expect?’.

I had a good experience of my lawyer this time round. We’ve not always been so lucky. Last time a local firm, referred by the estate agent, seemed fairly good, and responded to emails promptly. He did though miss the lack of planning permission for a key part of the property (the owner put in an application for planning permission the day before we exchanged).

It took eight months, even though the property was empty. The seller was disorganised, and used a licensed conveyancer in Billericay.

The time before we used a firm on the recommendation of the editor of one of the leading legal directories. The firm’s paperwork was always well ordered and clear, and my lawyer was nice to deal with. I did, though, think she could have shown a bit more chutzpah in getting the seller’s lawyer to respond to basic yet important queries.

It took 10 months, even though the property was vacant and unlet for the last six months of that time. I have now purchased two freeholds too, managing the process for us and other leaseholders. The first time took six months from the freeholder agreeing to the price. Second time it took about the same, though the lawyer omitted to extend the lease lengths on completion (later corrected at the firm’s expense).

In each case, till this last transaction, the length and complexity of what looked initially like straightforward purchases and sales must have challenged or eliminated the firms’ profit margin on the deal. Sure they finished the job, but seemed to lose pace and drive.

This time it took us just under a year to move. The sale of our property fell through once (licensed conveyancer on the other side), when the buyers suddenly dropped their offer on the eve of sale after months of slow progress on basic things.

But our lawyer was great this time. With another buyer on board, he kept things moving, kept costs down by assiduously reusing as much of the first lot of paperwork he could. I also felt that on both sales he ‘carried’ the shortcomings of the other side.

How did I find him? I did an internet search for a conveyancing solicitor in a bit of south London that was more salubrious than our area, and when I called the person who answered the phone talked with total confidence about the job the solicitor would do, the terms, and asked sensible questions. A clear, friendly, straightforward email followed.

The website was basic, but noted that one of the partners had been on the Law Society’s mental health panel, before changing direction. Mental health, and the capacity issues that go with it, I find interesting.

The firm cost about £300-£400 more than the last sale and purchase we had done - but they just felt right. Two partners, I’m guessing both in their 50s. (Our seller used a similar firm, two streets away from our lawyer).

In telephone calls, ‘opening your file’ involved him going to the nearest shelf. His correspondence was clear, and he was easy to get hold of. We almost needed some probate advice from his colleague, when, eve of exchange, it looked like the person at the top of the chain might die between exchange and completion.

On the face of it then, a ringing endorsement of a very traditional model.

I have a few observations though. I’ve dealt with lawyers in my day job for 15 years now, and this was the fourth firm I’d instructed. If it takes me that long to find the ideal firm, I’d have thought there is even more ‘luck’ involved for the average client.

As I noted, it felt our solicitor was ‘carrying’ less engaged professionals who were acting for other parties - including proposing wording for contract amendments that they should have done. I minded that we were subsidising other professionals’ lack of focus and care - and there seemed no sanction for slower, more stretched professionals. I’m not sure what could or should be done about that.

I think our solicitor, if looking to grow his business, should be finding slightly better ways to convey the trust I’m sure his other clients also feel in him. And while marketing doesn’t need to be too slick, remember my interest in mental health and capacity is a minority one among conveyancing clients.

In common with some who read Rothwell’s blog, I’m also struck by the fact that other ‘profesionals’ in the chain probably worked less hard than our solicitor did for equivalent or greater return. I wonder how they do that - certainly there is no shortage of competition among estate agents in our area. One removal company quoted us half the cost of what had been almost a year’s worth of legal advice. It certainly felt something was awry there.

And finally I’m worried about my ideal solicitor’s succession planning. What if he and his colleague retire? The idea of looking for a new firm from scratch makes me feel distinctly down.

Eduardo Reyes is Gazette features editor

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Going by comments made on the Gazette website, and letters to the editor, there are plenty of practitioners who see some of the changes in the legal landscape that we are told are in prospect as pointless, and who see no reason why a ‘brave new world’ is inevitable.

I have some instinctive sympathy with that view. I write with a fountain pen, think that some of the law firm franchise labels people have come up with sound silly, have a watch that needs winding, like small independent shops on my high street, and prefer a well-informed butcher you can have a conversation with to a supermarket fridge.

I also happen to think there are hidden costs to the supply-chain revolution that’s transformed retail, and that outsourcing and offshoring too often deliver outcomes that I dislike, and would pay extra to avoid. I may be on Twitter, Facebook and LinkedIn, but I have to admit some of my instincts remain, if not ‘fogey-ish’, then at least old-fashioned. And that’s the way I like it.

Relevant to the current context, I am also using a two-partner law firm for conveyancing because I like the road they are on, and they sounded nice on their informative, but unflashy, website. So far they’ve proved a good choice, but I’m not ready to write about them till we’ve completed.

Instead it’s the book trade I’ve been thinking about, where the history of the last two decades has some parallels with the challenges now facing the legal sector.

After a long period of decline in their number, I’ve noticed more independent bookshops thriving in my highly mixed corner of south-east London (five within two miles of my home), and more in several of the places I regularly visit – all of them nice, run with integrity, with a loyal client-base whose demands they know how to meet and pre-empt.

But how are these shops making a living? They are doing battle with the likes of Waterstones, with supermarkets and WHSmith, extreme discounting techniques, Amazon, and new platforms such as Kindle and tablet computers. They can’t buy in bulk, and in many there’s the additional cost of feeding the dog that sleeps underneath the counter.

The lesson is that such ‘old-fashioned’ bookshops are kept exactly how I like them through a huge amount of innovation. This was forced on them – their starting point was, of course, an open, unregulated market.

There was and is a challenge from WHSmith and the supermarkets, who do not stock many titles, but concentrate on the big-selling (or low-cost) titles that traditionally allowed independent booksellers to take a punt on stocking more unusual titles.

The likes of Waterstones, Borders, and Books etc. also played this game while stocking a wide choice, leveraging their economies of scale. You could certainly say that they did well for years at the cost of the independents. But, of course, that’s not the end of the story – enter Amazon and other e-commerce businesses.

Now it’s Borders and Books etc. that have gone from the high street, and Waterstones is in trouble. (Though for a while, Waterstones set the market with innovative arrangements such as charging publishers extra for product position and ‘recommendation’.)

Waterstones’ new owner has now called on the expertise of the head of small, well-run chain Daunt Books to turn it around – a return to booksellers’ core values.

And what are the innovations that have kept smaller independents standing?

Product knowledge of course, but they now wear this expertise very much on their sleeve – the hand-written staff recommendations that are aped, but not authentically matched, by some chains.

Many diversify into other linked products – nice, fairly individual ones that catch your eye; tasteful cards picturing local things. The sorts of items that a huge centralised operation lacks the flexibility to source, or the nuanced local knowledge to find. One large-ish prize-winning bookshop in a village in the Scottish Borders also sells a few antiques.

There are also different business and charging models at work. One second-hand bookshop in Northumberland, which has expanded from an old station cafe to fill most of what was the railway station, runs a barter system – you get a credit note for old books you bring in, that can only be redeemed at the same shop, a charming quirk that ties the customer to the place.

The economics of concentration works in Hay-on-Wye, where the proximity of competing book businesses has made the town into a destination for literate, monied visitors. Other towns are now using books in an attempt to replicate its success.

The parallels are not limitless between the book trade and legal services, and apologies if you got this far hoping for a firm action plan to save your business.

But I do think it is worth noting that in a story that involves the arrival of big brands, commercial attrition and several paradigm shifts, some of those left standing have quite an old-fashioned look, an old-fashioned feel and traditional values.

They would have seemed unlikely victors a decade ago.

What we shouldn’t underestimate, though, is how much business nous, innovation and change it takes on the part of many independent booksellers to survive, and even thrive, in an unprotected commercial environment while keeping their familiar feel.

Where they have outlived Books etc., and co-exist with Amazon, these businesses are not just lucky – they have taken change and innovation very seriously indeed.

As someone who wants them to stay the same in key respects, I’m very pleased that they did.

Many managers in private practice and in in-house legal departments struggle with issues around staff morale.

Morale’s a complex area.

Staff can be intelligent and productive people, team players who are trusted by their colleagues and managers, working in a sector that interests them, and still report low morale in staff surveys and annual reviews.

Faced with such a scenario, some heads of department and general counsel have come to what might at first seem an odd conclusion – that they should stop canceling one-to-one meetings with staff, and that this should be a rule that is strictly adhered to.

Of course this rule does not fix all the sources of poor morale. But those who have implemented the ‘never cancel’ rule say that the effects are surprisingly wide ranging.

First, while client service is the understandable priority for lawyers in any setting, an office where it always trumps internal matters that need attention creates an unhealthy working environment.

Protecting some space for team considerations is an important correction to this outward-facing bias.

Secondly, it is a common complaint that, put in a management position, lawyers spend insufficient time on staff management issues. If some of that time is ring-fenced in this way, managers will come closer to the targets they aspire to in this area.

Thirdly, keeping to one-on-one meetings should mean that managers are made aware of issues within the team, or the fact that individuals are experiencing professional frustrations, before it is too late to deal with such problems.

Of course, issues raised may include points about the manager’s own conduct, or that of clients, which again are better off dealt with sooner rather than later.

As a workplace rule, this is a surprisingly hard one to stick to.

But certainly those who have tried hard to adhere to it are positively evangelical about this rule’s ability to solve problems in these three key areas, and in the process raising morale.