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Posts Tagged ‘law firm innovation’

Study of innovation in 35 UK & German law firms – report published

Friday, October 3rd, 2014

 

Front page pictureToday Codexx published the final report on a study of innovation in 35 UK and German law firms, carried out in 2013 with the support of the University of Exeter Business School and the University of Leipzig Graduate School of Management. The objective of the study was to understand the current level of innovation, the methods being applied, the results achieved and the challenges faced by law firms in these two countries. Participating firms have already received a copy of the report, including their scoring in the study, to help in their innovation activities.

Alastair Ross, Codexx Director and author of the report said “Innovation is increasingly important for law firms, particularly those in the UK faced with new ABS entrants from deregulation, new internet-based business models and price-focused clients. It is very encouraging to see progressive firms seizing the opportunities for improved competitiveness through innovation. It is also useful to understand the typical difficulties that firms are facing in their innovation activities. This will help firms in developing their innovation capabilities and assist Codexx in providing best guidance to our legal clients.”

Report highlights:

  • 35 law firms in the UK and Germany were surveyed for their innovation methods and results during 2013.
  • Innovation was defined as anything new to the firm that generates value.
  • Overall UK and German firms,  scored similarly – at a middle to low level compared to best practices.
  • UK firms focused their innovation mainly on process improvement and German firms on services.
  • The study showed that improved innovation practices resulted in better business performance.
  • Firms’ key challenges in improving their innovation were in resourcing, culture and leadership.

 

Overall scatter picture

 

Executive summary:

  • A study of innovation practices and performance in law firms in the UK and Germany was performed during 2013, led by Codexx in partnership with the University of Exeter Business School and the University of Leipzig Graduate School of Management. The study involved a total of 35 firms, 14 in the UK and 21 in Germany. Firms participating from the UK were typically larger than those from Germany with a median yearly revenue of £70m compared to £17m.
  • We defined innovation as anything that was new to a firm and brought value – this broad definition covered incremental as well as ‘step-change’ innovation.
  • This study followed a previous one run by Codexx in 2006 with 16 UK law firms. The objective of the 2013 survey was to perform a more in-depth study of UK firms’ approach to innovation, particularly since the 2008 economic downturn and the legal services deregulation. The opportunity to perform a similar study with German firms and contrast approaches and outcomes brought additional value.
  • The study found an overall similar level of innovation practices and performance in the participating UK and German firms, which was typically at a middle to low level, compared to best practices. Whilst UK firms had their main focus on process innovation, German firms’ focus was on service innovation. The difference, we believe, results from the impact of the legal services deregulation and the post 2008 economic challenges in the UK, with firms giving increased focus to efficiency.
  • The study also found a good level of correlation between innovation practices and performance – showing that if these practices were put in place, it was likely that improved performance in key metrics such as revenue from new services and cost reduction from process innovation, would follow.
  • Analysis of those firms who were leading in innovation performance, showed that UK performance leaders had an average level of practices ahead of the study sample in every practice area, though this was not the case for German leaders (this might indicate some practice inconsistencies in the generally smaller German firms). This finding gives support to the recommended comprehensive approach to innovation, establishing a system to cover the the key practices.
  • Firms identified their key innovation challenges as in resourcing innovation, establishing a supportive culture and process and in leadership. Improving innovation resources and process were cited as common improvement priorities for firms.
  • The report defined five guiding principles for law firms seeking to improve their innovation capabilities, based on Codexx experience in working with law firms in innovation since 2005.

Practice leaders v sampleFor more information on the study or to request a copy of the report, contact Alastair Ross at Codexx.

Law firm re-engineering – 10 lessons from 2005-12

Tuesday, October 16th, 2012

We have worked with a number of major UK law firms since 2005, in innovation and in particular re-engineering of existing services and business processes – including Commercial Property, Insurance, Inquests, Employment, Probate, Matter Management and Innovation.
During that time I have experienced both the satisfaction of clear and measurable benefits achieved by our clients from this work, but also encountered many common challenges along the way. I thought it would be useful to share a ‘Top Ten’ of the key lessons I have learnt, to provide guidance to change leaders in law firms.

1. Benefits from re-engineering are major
Let’s start by answering the ‘Is it worth it?’ question right away.

    Yes, indeed it is.

A re-engineering programme will be a significant exercise that will require a good amount of time from partners and associates – taking them away from fee earning work. So it is not to be taken lightly. But our work with law firms since 2005 has shown major benefits can be realised. Typically our projects have achieved:20-40% reduction in the direct costs of performing a service (with limited capital investment) and improved competitive differentiation by enhancing and innovating services. In addition, the re-engineering programme provides a platform for ongoing change in a number of ways: A culture of improvement has been started among partners and employees; a template for future re-engineering has been proven (we support this with skills transfer) and measurable benefits help encourage other potential change leaders to take action.

2. Board and partner support is crucial
Making major change in a Partnership is much more difficult than in a Corporate, where the CEO can decree ‘It’s my way or the highway’ and force changes quickly through. Change in a Partnership requires the consensus of the senior personnel and therefore it is critical to have board support in place if major firm-wide change is envisaged. Once support is in place, successful execution depends on the active support of the Partners who manage the teams and the clients affected ‘on the ground’. It is not unusual to have vocal support from a Partner until their fee earners are needed to be involved in the programme—then they will resist their fee earner involvement, citing immediate business needs… Partner Champions must be actively engaged in the programme and be able to commit the time and energy required.

3. Lawyers must be challenged to overcome their innate conservatism
Or as one ex-Managing Partner put it: “Lawyers don’t do radical.” They also don’t naturally think as business people who provide a service, that just happens to have as a core, legal content. Changing the paradigm of lawyer from legal-centric to business-centric and breaking free of existing (often self-imposed) ‘rules’ is key to achieving the potential of re-engineering. This is why leading partners and associates need to be engaged in the re-engineering programme, so that they can change their thinking and share this with their colleagues. This is also why the initial ‘AS-IS’ phase of the programme is key, so that partners and fee earners can remove their rose-tinted glasses and view the business as it truly operates today, riddled with waste and inefficiency – and ripe for major improvement.

4. Clients must be engaged
Client input is key to effective re-engineering, to ensure that services are redesigned with client requirements in mind. However law firms typically do not know their clients’ business at all well. Lawyers can be reluctant to ask clients the open and ‘naïve’ questions needed to better understand their businesses and so enable innovation. This is why our ‘Smarter Working’ approach deliberately engages clients in the re-engineering programme, through meetings and workshops to talk about the business – their business – using structured approaches. This also has the benefit of improving the client relationship and making the firm stand out from others. The Managing Partner of one firm we work with is a strong advocate of the Lean approaches which we are helping him implement in his firm. He communicates Lean enthusiastically in his meetings with clients and incorporated Lean into a recent (and successful) bid. He helps differentiate his firm and also improves empathy with the firm’s industrial clients for whom Lean is a key part of their business improvement activities.

5. Re-engineering needs to be approached in a structured way
Few law firms think about their business processes as an area for examination or improvement. They often consider IT-led improvement activities, as if implementing an extranet, new Blackberry applications or Case Management alone is the answer to their performance challenges. IT implemented in this way has a well defined (and major) cost but undefined (and often little) actual benefit. IT investment should follow process/service improvements, as part of a structured re-engineering approach which is business and client led. In addition, major change requires active ‘Change Management’, which is a skill that few law firms possess. That is why our ‘Smarter Working’ approach uses a structured and phased approach based on 20 years of re-engineering experience.

6. Fee earners must be involved
I was once asked by a Department head in a major UK law firm, “Why do we need to get associates involved [in the re-engineering programme], can’t we just use partners?” It is key that Senior and Junior Lawyers, Paralegals and support staff are involved as they know how work is really done—not just how it is supposed to be done. Getting the best of them released from fee earning work to attend the required re-engineering workshops and work on subsequent change projects is always a challenge – but it must be done to enable practical solutions and help establish a culture of involvement in improvement.

7. Measures and rewards must recognise change agents and new ways of working
In professional service firms, chargeable time is the most valued performance measure for a fee earner – this is as true in a law firm as in an accountancy. Yet if fee earners are to be involved in re-engineering, they must not be penalised for missing utilisation targets, they must be encouraged and rewarded for innovation. And since law firms will be increasing the amount of work performed to fixed or value pricing, rewards based on number of hours performed will be counter to the new behaviours of efficiency and delegation required. New measures and rewards based on profitability, growth, collaboration and innovation will needed instead. Establishing new metrics and rewards needs to be considered as part of the change management element of the re-engineering programme.

8. In-house IT capabilities will be a bottleneck
Information Technology is a critical competency for providing professional services effectively. Indeed its importance will increase with the need for improving collaboration through e-working and the provision of internet-enabled legal services. Yet all too many law firm IT departments operate far behind best practices in other sectors in IT strategy, application development and effective user interfaces. Re-engineering will require IT solutions to support improved services delivery through Case and Document Management and to support new internet-enabled services through internet solutions. In my experience, all too often the IT group will not have sufficient resources or skills to meet the solution design/timescale required by the re-engineering programme. Change leaders need to be prepared to utilise external IT resources for projects where internal IT capacity is inadequate or specialist skills are needed.

9. An integrated strategy for innovation & re-engineering is needed
A key success factor in successful business change is a focused improvement programme. However, too many firms will dilute their efforts with multiple (often conflicting) programmes for IT, innovation & re-engineering. To increase the chance for re-engineering programmes to deliver on time, robust ‘pruning’ of other projects should be performed to postpone some and cancel others to enable resources and management time to be focused on those most critical to the business. Model your change programme on a fast moving stream, where a few projects are run in parallel and complete quickly through focused resources and management – rather than on a wide slow moving river where sediment and detritus cause blockages and delays….

10. Success requires managing a multi-year programme
Re-engineering is more akin to a marathon than a sprint and firms need to have the stamina and resources to stay the course. Whilst analysis and redesign work can be completed in a few months, development, piloting and deployment of new services and new ways of working take many months and indeed years to secure the full benefits. Active programme management is required to monitor progress, manage the required cultural change, and take action where delays occur. In my experience few law firms do this seriously or effectively, resulting in long delays before they can realise the identified benefits in cost reduction and value improvement from their re-engineering projects.

That’s my ten for now (although I can feel another couple coming…). Of course a ‘Top 10’ list is a gross simplification of reality, but hopefully the above points will help guide firms looking to improve their competitiveness through re-engineering activities. For more information in this area a number of articles and ‘New Directions’ newsletters can be found at https://www.codexx.com/knowledge.php

Law Firms can get a complimentary copy of our whitepaper: ‘Smarter working in law firms – re-engineering value and cost’ published in March 2012, which provides further information on this subject – see here: Smarter Working in Law Firms – Re-engineering value and cost – 2012

I’d welcome your views and comments on this topic.

Alastair Ross
Director
Codexx Associates Ltd

Energizing Change

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