Reviewed by: Tom Mackay
Author: Fiona Czerniawska and Peter Smith
Publisher: The Economist
ISBN: 978 1 84668 325 1
Price: £20
Buying Professional Services educates and provides a framework for organisations in employing and controlling consultants (including legal firms). My guess is the book will be widely read by purchasing departments and also in-house legal departments for ideas on outsourcing. Therefore anyone in private practice pitching for business from larger clients ought to be aware of the ideas presented.
In many ways I found Buying Professional Services depressing, as you cannot escape the thought that lawyers will have to get accustomed to the modern trend of having the people who buy paper clips interfere with the lawyers’ client relationships. However this is not a criticism of the authors - but my reaction to reading this book.
Of particular interest are chapters on scoring bids and tenders, negotiations and on payment and commercial terms. I suggest that those of you who regularly involved in tenders and negotiating fee terms ought to read this publication to understand what procurement departments are being taught.
The book reminds readers that lawyers are brought in by senior level, but that aspiring middle managers want to bring in their own advisers. ‘Hiring a "magic circle" law firm or a strategic consultancy,’ the authors note, ‘is still like a badge of, if not quite honor, then certainly achievement’.
If I reflect on my own experience of purchasing legal services from private practice in the days when I was head of a legal department - either 3i PLC or the London Stock Exchange - is that it was all about the relationship.
There are many competent lawyers in the UK but if you have been using one and they have become familiar with your systems then a relationship has developed. It was comfortable using the lawyers you knew and trusted, and a right pain training-up a new firm.
The authors, however, point out that relationships:They remind us that procurement departments often revert to checklists and you cannot evaluate a relationship with a checklist. There is a genuine attempt to teach people in procurement departments how to assess other attributes of a law firm. The inherent tension between a purchasing department, who are focused on value for money, and the users, who are focused on the business objectives is tackled. If the budget holder is not the user, then the law firm or other service provider may be torn between delivering a good service and trying to satisfy the procurement departments desire to keep costs down.
- push up prices, because buyers are reluctant to negotiate with people they like;
- obscure business decisions, as it is harder to get rid of people who are already working with you;
- reduce competition, because you buy from the same supplier again and again; and
- make it harder to be objective.
This book contains useful reminders about the selection criteria used by purchasers. There are generic qualities such as: technical knowledge, logical thinking, listening skills (the best advisers will always listen carefully to a client rather than leap to a conclusion), discipline and organisational skills. The book notes that there is little point in working with advisers whose only real skill is throwing in new ideas or challenging existing assumptions as things need to get done.
I particularly enjoyed the discussion on blended rates - where the firm has been asked to provide a single average rate. This makes professional fees less not more transparent. It creates an incentive for the firm to use as cheap a mix of people as possible to claw back the margin of the combined rate. It also makes it harder for smaller firms because they typically employ a great portion of senior people (and in effect blended rates reduce competition).
On the other hand if payment is based on time and disbursements then there is no incentive on the firm to perform efficiently and it is hard for clients to control the budget. The firm is motivated to keep the meter running constantly and look for opportunities to bring in more people or stay for longer. However payment based on time and disbursements is also a sign of trust between the client and the firm and it is easier to see it working over a long-term relationship rather than in a short-term one-off large project.
The book finishes with implications, such as:
- should the firm focus on small, high margin projects or high-volume low margin matters;
- will the increased use of preferred supplier lists lead to a greater consolidation among the mid-tier players; and
- will smaller firms have to become even more specialised and will clients struggle to find them and find it hard to judge their quality?
In conclusion, this book is a must for those in purchasing departments who are going to have some control over the choice of contractual arrangements with professional firms; a useful read for managing and senior partners of larger firms; and a somewhat depressing read for those of us who enjoy practising law for clients with whom we enjoy a good relationship.
Tom Mackay is a partner at Mackay Carter Shaw LLP, Solicitors, Kent.
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