Andrew Grech, Group Managing Director, Slater and Gordon Lawyers

What we are trying to do is industrialize, or commoditize, legal processes. This is offensive to some ...but...our approach is the essence of professionalism.

Slater and Gordon Lawyers is a consumer law firm with 70 locations in Australia and 25 locations in the United Kingdom. Slater and Gordon is a publicly held company with shares listed on the Australian Securities Exchange. The Slater and Gordon Group also owns Slater Gordon Solutions in the UK, which provides claims, motor and health services.

Slater and Gordon is a unique law firm. We are an international, publically listed company that prides itself on finding innovative ways to provide world class legal services to people. The emphasis on people is important to understand. Whilst the Slater and Gordon Group does act for institutions and occasionally for government agencies, our core mission is very much focused on serving the legal needs of individuals.

At first glance, the international size and scope of our operations and the consumer focus of our legal practice might appear counterintuitive, but the truth is we are growing globally so that we are better equipped to act locally.

Let me explain.

Frederick Hayek, the instigator of what became neoliberalism, once wrote that competition depended “above all on the existence of an appropriate legal system, a legal system designed both to preserve competition and to make it operate as beneficially as possible.”

It’s difficult to argue that the competition of the legal services marketplace is operating “as beneficially as possible.” The economic upheavals of 2008 have exacerbated social and economic inequity. According to a new report by Oxfam, the wealthiest 1 percent of the world’s population will own more than the other 99 percent by 2016. In the legal services sector this manifests itself in the growing gap between the legal needs of individuals and the affordability of those services. In contrast, the wealthiest 1 percent have almost unlimited access to the legal system.

Prior to 2007, Slater and Gordon fought our battles as we always had — locally and ferociously. We are proud of our reputation and our heritage. Our firm was established in Melbourne in 1935 — at the height of the Great Depression — with a brief to advocate for people who had been injured at work. People who in those days did not have access to the means necessary to provide for their families and cover the loss of income that typically follows a significant injury. Over the decades that followed Slater and Gordon has built up an enviable reputation as a firm that relentlessly pursues the rights of its clients. We gained a reputation as a blue-collar law firm that fought on behalf of grievously-injured employees (in the case of the Wittenoon asbestos mine) or local communities (in the case of the Ok Tedi mine disaster in Papua New Guinea).

When it came to listing, our most recent history, the leadership group at Slater and Gordon shared a vision of building a national law firm — stretching across Australia with an expanded range of legal services whilst at the same time maintaining an intense focus on providing affordable and innovative legal services for clients.

What we learned along this journey, which led to our listing, is that we had to change to ensure legal representation remained affordable and accessible to local communities and people — as well as ensure we had the scale to offer our clients the specialist expertise required to ensure that they could have confidence that their interests were being as well represented as the most successful entrepreneur, largest listed company or government agency. Meeting this challenge as the legal needs and expectations of clients change, remains our challenge.

We wanted to be able to offer first-class service to our clients, but at a price they can afford. We found that it was impossible to do that without growing much bigger. At the same time, we realized that the scale of growth that we wanted to achieve was beyond our means without outside capital. We had to find a way to fund our growth on a permanent basis, and in a way that was not tied to the individuals involved. Ultimately, we came to the conclusion that we were unable to do what we wanted to do — that we were unable to serve the clients we wanted to serve — without growing.

For us, the answer was to make Slater and Gordon a public company in 2007, because it would use the marketplace to give us access to the capital we needed to equip our staff with the resources they needed to provide world class legal services. The decision to go public was not taken lightly. Having formed the view that we could only provide the level and quality of services needed by having dedicated specialized practice groups, able to serve clients locally, it was (at least to us) only logical that substantial scale would be required to deliver that service affordably.

We now represent people wanting to buy a family home, navigating a family or relationship breakdown, or in the midst of a commercial dispute and our lawyers are specialists in their areas of work, instead of working across a range of areas of law.

With listing, we have different cohorts of investors in the Slater and Gordon Group. One cohort is internal shareholders — this includes people like me, senior staff shareholders: some of whom are not lawyers. About 300 staff members working within Slater and Gordon — lawyers in Australia and the United Kingdom — are in that cohort of shareholders. Those staff have either been awarded shares as part of their remuneration, were foundation shareholders at the time we went public, or sold their businesses to us and took part of the purchase price in shares.

More recently we launched a share saver program open to all staff. In its first year about 900 staff (or about 40% of those eligible) participated and are now shareholders, which is a real show of faith and our business that we’re aiming to achieve.

We believe our staff equity programs are important because it gives people a common purpose and creates an ownership culture. A key difference is that, unlike most law firms, we are able to use this as one element of aligning the interests of nonlawyers and lawyers alike because any member of our staff can become a shareholder — as can any of our clients. Equity allows us to reward people for achieving long term results. That last point is important. Today, most of the rewards in law firms are focused on the short-term. Personally, I think that kind of focus is dangerous because it encourages people to focus on short-term rather than long-term results. For me this short termism is a much greater potential threat to the standing of the legal profession and the way it carries out its obligations to protect the public interest in the proper administration of justice than nonlawyer ownership.

Slater and Gordon also has more than 19,000 outside investors. Around 15 percent of those are retail investors, with and the balance being institutions — such as large superannuation funds, endowments and pension funds. No external investor holds more than 10 percent equity in the firm, and no external investors are directly represented on our Board, although our Board, which includes a majority of non-executive directors, are there to represent the interests of all stakeholders — including external shareholders.

For us, the advantages of outside capital have been immense.

We’ve invested in our people too — recruiting new people and developing the competencies of our existing staff. We’ve invested in technology — developing practice and case management (work flow) systems that reduce costs. Our technology investments have also improved the client experience by making legal services more affordable and accessible — a good example of this is our online will service. We’ve dramatically expanded our geographic footprint and broadened the range of services we provide. When Slater and Gordon listed we had about 12 sites in Australia. Now, we have around 70 in Australia, in addition to our presence in the UK. Some of the growth has been organic, but it has also been driven through acquisitions. Whilst we’ve continued to grow organically throughout the post listing period, we’ve also acquired and integrated a number of firms to assist us in accelerating our geographic and practice area diversification programme.

As important as acquisitions have been in enabling us to reach the scale we need to better represent our clients, the most important changes have been in the ways in which we have embraced different ways of working and different ways of engaging with staff and clients.

Traditionally, the law has been a paper chase. Increasingly that paper chase is giving way to a war over the mastery of digital information. So long as client confidentiality is preserved and client needs remain paramount there is no reason why every step of a person’s engagement with the legal system cannot be made more affordable and accessible through the use of technology.

Technology (at least in the sense of “new ways of doing old things”) is the driving force behind many of the disruptors in the legal market — such as LegalZoom or RocketLawyer — because it offers a new way to serve the needs of ordinary people.

In other words, change is here whether the legal profession likes it or not. What matters is not what the impact of change will be on the “legal profession,” but whether those changes will make it easier, in an inequitable world, for people to find access to the legal system.

Generally, we don’t develop our own software, but instead buy proprietary software and work with the providers to customize it to our needs. Most of our intellectual property is in our case management and workflow systems. These systems allow us to provide a seamless service to people, reduce complexity and minimize unnecessary labor work. What matters most to us is how we can use technology to enhance the client experience, in all its dimensions.

That’s why our case management design teams have a mix of technologists and senior lawyers and paralegal staff working together.

At Slater and Gordon, we’ve tried to embrace, rather than fear change. We believe that the mark of true professionals is the desire to meet and exceed client expectations and not to resist change to preserve its place and status. For example, we believe one of the surest ways for a lawyer to meet a client’s needs is to be a specialist in their field. That’s why, when a lawyer joins our firm as a trainee, they rotate through different practice areas. After 12 to 18 months in the firm, they are allocated to one particular practice area. Over the next few years they’ll rotate perhaps another two to three times. After their first five years, our lawyers are expected to decide upon a specialty. In Slater and Gordon, those specialties can be a personal injury litigation discipline, a litigation and dispute resolution discipline (such as commercial and dispute resolution, class actions, family law or employment law) or a transactional discipline (such as wills, estate planning, conveyancing or commercial real estate). Our job is to help our staff match their skills and attributes with the needs of the client base.

If a lawyer chooses a career more orientated towards management and leadership, they receive additional training and work with other managers with expertise in disciplines such as finance, human resources, marketing, business development, change management or IT. For those who choose a career more orientated towards becoming a leader in their field of law through client work the focus of our professional development activity is to give them the opportunity to develop in that area. The reason for this multilayered approach is simple: you need more than good lawyers to run a successful law firm. If you want to grow and succeed you need the skills of a very wide range of people from a wide range of disciplines — and not all of those people can be found within the confines of the legal profession.

The multifaceted approach Slater and Gordon has taken appears to be paying dividends. The firm has undergone immense growth since we listed — last year our turnover was around $68 million (Australian dollars), and total revenue was just over A$438 million.

Not everyone in the legal profession approves of the direction we have taken. That’s disappointing. After all, lawyers are supposed to be logical, evidence-based professionals. In reality, many of the objections presented regarding the liberalization of ownership of law firms have nothing to do with threats to professionalism or potential conflicts of interest. The real reasons for the objections are the entrenched protections that the legal profession enjoys.

Globally, there is a strong trend towards opening up legal markets and liberalizing ownership structures. As powerful as this trend is, it is more like a glacier than a tsunami.

Whenever those changes come, they will be welcome. After all, law firms do not exist in order to serve lawyers — our reason for being is to serve our clients. The question, then, should not be about whether or not liberalized structures should be allowed, but whether or not they may benefit clients. Our experience suggests that nonlawyer ownership (provided it is properly regulated) is more likely to benefit consumers of legal services than not — it is more likely to make justice more accessible and affordable.

Consider the facts. Internationally, the legal profession across the world is fragmented, with the top 100 firms controlling more than a quarter of global revenue from legal services. Most of the revenue today is generated by corporate and governmental clients. As a consequence, legal innovation has tended to stay where the money is — serving corporate and government clients rather than everyday citizens.

One of the great advantages of working at a scale, in a manner that rivals the top corporate law firms is that we have the resources to maximize our expertise and minimize our costs.

Our lawyers work in highly specialized groups, where large amounts of information are available digitally. We focus on providing legal work for fees that are fair, reasonable and proportionate — and, increasingly, to the extent that regulatory systems allows, charge clients a fixed fee. As a result, the focus of our staff is on achieving the client’s objective as efficiently and effectively as possible. This is a radical shift away from the traditional approach, where a lawyer’s value is measured in units of time, and where inefficiency is rewarded. Instead, we are trying hard to get our staff and our clients to understand that the value we add is not best measured by time, but outcomes.

Our lawyers are not evaluated on how many hours they bill. They are evaluated on the outcomes they achieve for their clients and the speed with which they achieve those outcomes, how they train their staff and how they develop new businesses. The bottom line is we want legal problems resolved quickly, without compromising the outcome for the client or allowing legal costs to escalate.

This raises a fundamental difference between a typical law firm partnership and Slater and Gordon. A partnership measures success by the career trajectory of its individual partners. At Slater and Gordon, we measure success by the trajectory of the organization. We have a saying at our firm: “Everyone is important, but no one is that important.”  I believe that this egalitarian approach is one of the reasons why we will continue to manage succession well.

What we are trying to do is industrialize, or commoditize, legal processes. This is offensive to some people because it is seen as being at odds with professionalism. But if you think about it, and especially if you stand in the shoes of the client, our approach is the essence of professionalism.

After all, professionalism is about finding ways to meet or exceed client needs. Often the client needs us to have a deep understanding of and investment in key touch points that are important to them. This means, for example, having local offices that are open extended hours so they can see a lawyer close to their home and conveniently.

Another example of this approach comes out of our Australian asbestos litigation group. Our clients are often families dealing with a loved one who is going to die of an asbestos-related disease in a very short period of time. We have come to understand that while we are there primarily to serve these families’ legal needs, they have a whole host of other needs that they also need help with. So we employ a number of social workers who are available and can advise those families on how to access palliative care and other ancillary services.

Our actions are designed to make the client’s experience as seamless as possible.

I’ve heard the arguments that alternative structures will lead to a consolidated market controlled by large firms, and that those firms will focus on “highly profitable” personal injury work to the neglect of “less profitable” work.

There is no evidence to demonstrate that traditional lawyer-owned or smaller law firms are more willing to provide less profitable legal services compared to nonlawyer owned firms. Nor is there evidence that pricing containment is related to the size of a firm or the fact that a firm is lawyer owned. Concerns about consolidation miss the point. The availability of external investment has enabled us and many others to provide a broader range of services than we once did and to improve the client experience in the course of doing so.

When Slater and Gordon became an ILP it was already a profitable firm with a large client base in personal injury law. Without trade-offs to our personal injury law practice, as a result of a new company structure providing a larger capital base in Australia and the UK, we are now able to offer a wider range of other consumer services including services that critics of nonlawyer ownership claim are the sort of “less profitable services;” that nonlawyer owned firms would stay away from such as: employment law, wills, conveyancing, family law and criminal law. We deliver these services at consistently high standards within affordable pricing structures.

In other words, it was adopting an alternative business structure (ABS) that has enabled us to expand our scale and become high quality providers of other consumer legal services and to do so with affordable pricing arrangements.

As an aside, the claim that personal injury is more profitable does not take into account the cost of capital and cash flow needed to run cases against defendants with deep pockets, on a conditional or No Win-No Fee™ basis. Personal injury law work is cash flow intensive and relies on the availability of working capital, which can be employed to serve the needs of clients who can’t afford to pay to fight insurers and other corporations without that support. A personal injury practice at a 30% profit margin is likely to deliver the same return on employed capital as a conveyancing practice at 15% profit margin because conveyancing work is not as cash flow intensive. Any serious objective analysis in this regard needs to be framed on the concept of comparative returns on employed capital rather than the simplistic and misleading notion of “profitability.”

Whatever the legal profession itself might think, the reality is that for many in the community, the status quo has created a cozy world where the competition that does exist does more to reinforce the current inequalities. The opportunity to open up the legal profession to external capital will provide a catalyst for change. As long as the legal profession (whatever ownership structures are permitted) is regulated, as long as the consumer is protected, as long as the same professional standards apply — as they do in Australia and the UK — then what are the real objections that should be allowed to stand in the way of making the legal system more accessible?

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