Category Archives: In-House as Source of Revenue

In-House as Source of Revenue

Geoff Wild, Director, Kent Legal Services

the public sector is under huge financial constraints — it has to make cuts and savings in every department. Soon, the public sector will not be able to afford private sector legal advice, or even sustain its in-house teams. We want to step into that gap, and fill that legal need at a lower cost.

Kent Legal Services (KLS) is the in-house legal department of Kent County, one of the largest municipal authorities in England.

In 2000, I decided to completely transform how public sector legal services in Kent Council were designed and delivered. I felt that public sector lawyers had it too easy: The fact that they were supplied with both guaranteed work and money without having to search for them bred complacency and poor client service. I wanted to make my in-house lawyers as keen, as hungry, as customer-savvy and as value-aware as their private sector counterparts. That meant turning the whole basis upon which the in-house legal team was funded and structured on its head, by introducing private sector principles and practices whilst still operating from within the heart of the public sector.

I changed this by saying ‘take our budget away, take our funding away, take your guaranteed work away. In the future, we have to earn our income, we have to pay our own expenses (including our own rent) and we have to earn the right to do your work.’ So our clients can go elsewhere if they want to, and they can choose to use us if they want to. If they do choose to use us, then they have to pay for that. And they pay for it at a price that reflects the true cost. In return, the lawyers have to give a first-class service. If they don’t, the work will go elsewhere, and the lawyers will be out of a job.

Today, our lawyers are set income targets, and they have to earn that by whatever means possible. Some pricing is still by the hour, but increasingly we are using fixed, capped and value pricing because that is what our clients are demanding and what our private sector competitors are offering.

We haven’t been able to compete with private law firms as regards around the clock service — we have had to abide by public sector contracts and pay public sector wages, and so most of our lawyers work 9 to 5. But we compensate for that by offering additional value in other areas — for example, by our political and cultural awareness. Also, because our overhead is so much lower than a law firm’s, we are able to offer much lower prices, usually a third of the private sector. Our overhead is so much lower because we don’t have fancy offices, and we don’t have highly-paid partners who take all the profits out each year. Finally, we have automated certain tasks and we push work down to the lowest possible level.

Using this in-house trading model, we now offer services not only to Kent County, but to over 600 other public sector bodies nationwide. We’ve grown from 25 lawyers in 2000 to 125 lawyers today. Against an annual turnover of about £11 million, we have generated a profit of £2.5 million — real income, real profit, not just recycling inside Kent County.

I’m not aware of any other public sector bodies that operate the way we do. This has given us a first-mover advantage: we’ve been able to make a lot of progress without much competition from other public sector legal services. But that is changing as clients evolve, the economy changes and new players enter the legal market.

Today we are looking to go even further. We are going to set up a wholly-owned ABS, in the form of a limited company. The sole shareholder will be Kent County Council.

In creating our ABS, we will invest heavily. The investment will be in the form of a loan from the Council on a commercial basis, which the ABS will be expected to repay over the course of time. The investment will be used primarily in IT, in new premises and in acquiring specialist skills and expertise in business finance and business development. Those are two areas where today we do not have in-house skills or expertise, but that we know will significantly enhance our offering.

Our services will be structured around very sophisticated IT, with the goal of making the client experience very easy. They will have full digital service, so that wherever they are in the world, at any time of the day or night, they can have access to their lawyers, case files and accounts (for bill payment, for example), in a manner comparable to First Direct Bank (which revolutionized the banking world).

Our IT system will also make our lawyers’ experience better. This will mean stripping out from what the lawyers do everything other than legal work, and notably stripping out their administrative work. We will do this via rigorous process mapping with our IT partner, in order to mold the system to the lawyer rather than having the lawyer mold her or himself to the system. Through a combination of having lawyers do only legal work, and having an IT system to support other work, we can reduce our base costs. Lowering our costs obviously will make us more competitive. It also will allow us to make a bigger impact in our market, and to offer our shareholder a bigger return at the end of the day.

The creation of this ABS will require an additional cultural change on the part of our staff. They will have to transition away from working in a public sector to working in a private sector, highly competitive environment.

The new business will provide services primarily for the public sector, which is where our strengths lie (that being said, if any commercial organization seeks our services, we will not turn them away). Today in the UK, the public sector market is valued at about £3.2 billion. This comprises central governments and their ancillary (non-departmental) bodies, local governments and all its tiers (large city councils, metropolitans, counties, districts, parish councils), the blue light services (fire, ambulance, police), the health sector and the education sector (schools, academies, colleges and universities).

The range of the public sector is very large. At the same time, it is a sector that is not particularly well-served by the private sector, which tends to concentrate on commercial clients. For that reason, we see our ABS as an opportunity to make a big impact in a sector that suits our specific skills sets.

The services that we will provide will be the full range that a private sector firm would provide, plus. That is, we will provide services in the mainstream areas of property, commercial and contracts, planning, and employment. We’ll also offer services areas that are niche to the public sector, such as adult social welfare, child protection, highways, asylum, mental health, public sector housing, specialist police and fire, etc.

Our biggest competitors will be the in-house lawyers that our targeted public sector clients currently employ. Many of the public sector bodies I’ve mentioned have in-house lawyers. But they provide services to their employers today at varying levels of quality and cost efficiency. Our competitors will also include the handful of private sector law firms in the UK that specialize in public sector work, as well as the wider range of private sector law firms that offer mainstream services.

In creating our ABS, we will look to preserve the best of what we have developed over the past 15 years, namely a high-quality skill set, established market reputation, a public sector ethos and a low cost base. What we believe will sell is high quality at a low cost. In our opinion, in the public sector there is a large amount of unmet legal need (as yet unquantified). At the same time, the public sector is under huge financial constraints — it has to make cuts and savings in every department. Soon, the public sector will not be able to afford private sector legal advice, or even sustain its in-house teams. We want to step into that gap, and fill that legal need at a lower cost. At the same time, we want to be able to assure our clients that the quality of our services as well as its speed and reliability will not only be high, but in all likelihood better than what they are used to from private sector law firms.

As regards the IT that we plan to develop: there exists today many systems – case management, legal finance,… These systems provide a certain level of automation and standardization, but they don’t go far enough. As result, you still get lawyers doing work that could instead be done by a paralegal or indeed not by a human at all. The system that we will develop will avoid human intervention wherever possible. In addition, it will push back down to the client a lot of responsibility for the process that would otherwise be done by the lawyer.

Indeed, if you look at other sectors, such as online shopping, accounting and banking, we the customer are responsible for filling out all the forms (names, contact details, payment information, etc.). Generally speaking, we have developed a comfort with this way of working, and even a preference for it. Yet, in the legal world, we have not yet woken up to this way of working. We can develop a system that enables the client to do a lot of work themselves, such as using their own devices to input data through a client portal. This system can then do a number of things automatically, such as collate the data the client has input, acknowledge communications from the client, generate responses, forms, letters, reminders, process payments, etc.

Our process mapping exercise will look in detail at what each one of us on our legal team does every day. We’ll work out how much time is spent on each activity, and how much could be saved if that activity was no longer done by a lawyer or by a human or at all. In this way, we will strip out the waste in our processes. The end result is that lawyers will be involved only when they need to be involved.

This does sound somewhat mechanical and robotic and we will need to preserve the human relationship that is so crucial to a lawyer’s work. So, we will maintain personal contact. For example, named people will always be on hand to answer the phone and emails and to be available for face-to-face communication, whether by skype or in-person. We’ll have the right blend of human interaction with speed and efficiency of automation.

This is a tall order, we know. Today no such system, in the totality that I have described, exists. So, we will work with an IT provider to develop this system. Without such a system, I don’t see how our ABS can succeed as we’ll be lost in a sea of otherwise similar organizations.

The reason that we need to acquire an ABS license is that it will be the only way that we will be able to serve the wider market that we need to target in order to generate the income and the profits that will make this company successful. The current SRA rules are becoming more and more restrictive on the ability of in-house lawyers to be able to serve clients other than their direct employer, and these restrictions are applied in a particularly stringent manner to local government in-house lawyers. Further, a number of public sector bodies are outsourcing a significant amount of non-legal services which were previously undertaken in-house. Once that outsourcing occurs, that body’s in-house lawyers can no longer provide legal support to those services, for the reason that they are no longer performed internally. This means that for in-house legal teams, their range of clients and available work is narrowing. In order to reach a wider market, an ABS license is necessary.

We are constantly challenged, and we constantly challenge ourselves, on why we are doing all this. Why can’t we remain a traditional in-house team doing the Council’s in-house legal work? This is the model for most public sector in-house legal departments — why are we looking to be different?

The principal response to this question is cost. Lawyers are expensive. If all we were was an in-house legal team, we would be a cost burden. We would cost the Council something in the region of £5 million per year. At the moment, as mentioned earlier, we are not a cost burden, we are an income generator — a profit center — not only covering our costs but generating a healthy surplus each year.

Given the regulatory and other changes that I have just described, if we do not continue to evolve, we may very well cease to be an income generator, and go back to being a cost burden. On the other hand, by evolving, we can become an income maximizer. That is, we can multiply the income that we are currently generating, and in that way evolve from not only being an income generator but also becoming an appreciating capital asset. That is (and assuming we are successful), by establishing our ABS, not only will we continue to generate an income, but also at the end of — say, ten years — we will have a capital value. Depending upon our performance, we estimate that this will be between £40-£60 million. This is an asset that the Council will have and will be able to do with as it pleases — it can sell it in part or in whole, it can raise money against it. It is something of value that the Council would have never had if we had remained an in-house legal team operating as a cost burden.

There are a few other local council in-house departments in England that have also set up ABSs. Their structures differ from the one that we envisage in certain fundamental ways, and in particular they assume much less risk. Notably, they have bolted their ABSs onto their in-house legal teams, to serve merely as delivery vehicles. The ABS is not an entirely free-standing operation in its own right, and notably it does not have its own assets or employees. Instead, all the employees remain employees of the local council. The existence of the ABS structure on the side simply allows the in-house department to use its employees as and when required in order to take on work for others outside that council. It is a way for these in-house departments to preserve their current positions in the face of a changing regulatory environment. Unlike us, they are not looking to survive as a trading entity in the wider market. As a result, the range and capacity of their work is more limited than ours will be, as is the non-legal expertise (such as IT, finance and business development) that they are able to bring on board.

As I mentioned earlier, until now, we have required our lawyers to turn their hands at marketing, at sales, at business development, as an add-on to their day job. They have not been trained in those areas, although some have done remarkably well regardless. While this has been successful for us until now, it is no basis for entering a competitive, cut throat market. We can’t ask our lawyers to craft the ideal pitch, to draft the ideal tender submission, to scour the market on a daily basis for opportunities, to go out and cultivate connections and contacts, to prepare the business for growth. We need people who are trained professionals in these areas in order to assure those endeavors are successful. At the same time, in employing trained professionals for those purposes, our lawyers will be freed up to focus on the work they have been trained to do.

The culture shift involved in transferring our lawyers from an in-house public sector environment to a private sector environment will be one of our greatest challenges. We’ll need to help them to develop the skills they need to survive and flourish. Even for me — I’ve worked in the public sector all my working life — this will be new and different. We can’t expect to take our old skill sets and apply them in the new world. We’ll need to address some of our habits and ways of working that have developed over the years and that are well-suited to an in-house environment, but will no longer be practical or relevant in our new world. It will be a huge challenge, and we have to get that part right.

I’ve spoken with my counterparts with local government authorities all around the world who face the same dilemma as us: how to afford to provide quality legal services to their public sector bodies. They are all struggling with the same issues — how to do more with less and how to demonstrate added value. For example, in the US and Canada, the in-house legal departments in the public sector are generally quite small, with a lot work being done by external private sector firms. Those firms do that work to greater and lesser degrees of efficiency, effectiveness and quality. In those two countries, my counterparts are still waking up to the idea that it is possible to provide high quality legal services to the public sector without paying top dollar for it. The ABS structure that is available to us in England is not a panacea. It is not going to solve all of our problems. But we can make it work to solve some of our problems and — importantly — it allows us to be in control of our own destiny.

The delivery of legal services in the public sector is a universal concept. I am not talking about the application of laws specific to a given jurisdiction — I can only speak about the laws of England. What I am talking about is the principles of how we can deliver legal services to the public sector in the most efficient and effective manner. The concepts are the same regardless of the jurisdiction.

Looking beyond the public sector to the practice of law more generally:  how we serve our clients is universal, and there are more commonalities than there are differences. Many things are happening in England in both the public and private sectors that could easily transfer to the US and Canada. There are universal principles at play in both sectors that transcend jurisdictions and regimes. So many people are put off of seeking legal services because they see them as inaccessible and incomprehensible to the average person. As a result, many people (and this includes many in the public sector) would rather solve their own legal problems by using Google in a haphazard and dangerous way. Why as lawyers do we allow that to happen? Why aren’t we putting ourselves in a position to be able to deliver legal services in the way that these people need them to be delivered?

This is a very exciting time. While I don’t yet know what the outcome will be, I see the potential of what can be. You have to open your mind to the art of the possible. Sometimes the only restrictions are in your head.

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In-House as Source of Revenue

Yuliya Andresyuk, Founding Partner, Oracle Family Office

The ABS structure has been a great thing for us. It has allowed us to think about how we work in a different way, to provide better service to our clients, and simply to serve more clients.

UK-based Oracle Family Office is a boutique legal practice that serves CIS clients in the areas of corporate law, immigration, private debt financing and IP protection. Oracle Family Office originated as the in-house legal practice of Oracle Capital Group, but spun out as an ABS in order to serve additional clients.

I first joined Oracle Capital Group as in-house counsel. As in-house counsel, I encountered repeated requests from clients to help them with a variety of their legal matters. Of course, as in-house counsel, I was not allowed to do that — I could only provide legal services to Oracle Capital Group.

We are a firm of three lawyers. In additional to Oracle Capital Group, our clientele consists of companies and individuals whose origins are in Eastern Europe / CIS countries and who are coming to the UK to live or do business.

About 60% of the work we do is for Oracle Capital Group and about 40% is for other clients.

We became an ABS in 2014. We spent a lot of time and resources to prepare our application to the SRA. I suspect that is the reason why, once we filed our application, the process with the SRA went smoothly and quickly.

Our status as an ABS enables us to have a nonlawyer shareholder, and we recently finalized Oracle Capital Group’s investment in our firm.

Before I decided to move out of Oracle Capital Group in order to create Oracle Family Office, I shared the view that having nonlawyer ownership of a law firm would create ethical issues. But now that I’ve been working so closely with Oracle Capital Group, I don’t see that happening. Oracle Capital does not get involved in the legal work we do for our clients. They’ve not questioned my opinions on how matters should be handled.

The fact that we have a capital investor provides me with financial security. I don’t carry the entire financial risk of the firm on my shoulders alone. I find that this makes me a better lawyer — it makes me less worried about generating as much work as possible in the form of billable hours, and more focused on getting the work done efficiently and effectively. We have been able to move from hourly billing to fixed pricing, which our clients appreciate.

I am aware that other countries, such as the United States, do not allow nonlawyer ownership of law firms. Having experienced it here in the UK, I think that they should see how other countries, like the UK, work because nonlawyer ownership has worked for my firm.

The ABS structure has been a great thing for us. It has allowed us to think about how we work in a different way, to provide better service to our clients, and simply to serve more clients.

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In-House as Source of Revenue

Viv Du-Feu, Director of Legal Services, BMA Law

Our motivation for creating an ABS was to expand the types of work that we could offer to our members …and, if the ABS makes any money… it will all come back into the coffers of the BMA, for the benefit of the organization generally.

The British Medical Association is a trade association representing doctors and student doctors in the UK. ABS BMA Law offers support and advice to members of the BMA and their families in the areas of corporate and commercial, contracts (such as partnership agreements and doctor network and federation agreements), competition, regulatory, estate planning and probate, conveyancing, mediation, personal injury and immigration.

The BMA was created in 1832, becoming known as the BMA in 1855. In 1974 it was recognized as a trade union. That was when it began to vigorously campaign for doctors’ pay and improved working conditions, becoming at that time the recognized body responsible for the terms and conditions of doctors working in the UK. To be a member, you have to be a doctor or a student doctor — that is the only requirement. For the past couple of years membership has been relatively static at about 155,000, but very recently our membership has gone up to about 160,000 + due to an industrial dispute involving junior doctors in England.

In addition to being the Director of Legal Services for BMA Legal, I am also a partner in a commercial law firm (Capital Law based in Cardiff). I arrived at BMA Law in January 2014, initially as an interim. When I arrived, there were just three other lawyers working in what was then called BMA Law .This was a very limited service to members and operated  under a dispensation granted by the SRA which permitted them to work for members on the condition that they did not engage in any of the six reserved activities. The work they did was on a small scale, without any specific plan or strategy.

Very quickly upon my arrival, I had a discussion with the CEO of the BMA, and asked him why he wasn’t using the legal department more effectively. I told him that if the organization acquired an ABS license, it would result in a massive benefit for the membership as well as for the organization. The CEO was immediately interested, and, after some discussions about just how it would work, I received approval to proceed with an application to the SRA for an ABS license.

Our application procedure went very quickly — just seven months from the time of our initial conversations with the SRA to the receipt of our license.

The textbook motivation for creating an ABS is to be able to bring in external investment. That was not our motivation. BMA Law Ltd. is wholly owned by the BMA. Our motivation for creating an ABS was to expand the types of work that we could offer to our members — to go from a small list of unreserved activities to the full range of legal services that our members need. We saw that we had a captive audience: 155,000 members — if each has one family member, that’s 310,000 people. That is a lot of people and a lot of requirement for legal services. Why wouldn’t they want to come to their own professional body’s law firm, where they can get good quality advice at discounted rates? And, if the ABS makes any money (which it will), it will all come back into the coffers of the BMA, for the benefit of the organization generally.

We were fortunate to have both a CEO and a CFO who are commercially savvy and who have been hugely supportive.

Our model is that we have a core in-house team of three lawyers, plus a panel of external law firms. Our in-house team does the work that I consider to be core, notably competition and regulatory matters and partnership agreements. Our panel of external lawyers provides everything else: conveyancing, wills, probate, personal injury, litigation and mediation,…

A reason why we were able to launch so quickly is because prior to 2007, I was a partner at the international law firm Eversheds, and in that role I had developed a massive role of contacts. What I essentially did was call up my friends and former colleagues from around the country and say “I’m setting up an ABS, I need lawyers for X, Y and Z: do you want to play?” I got a great response as well as great support from them, and notably I got everyone to agree to uniform rates and menu prices (but I won’t say that part was easy).

The reason why we set up our dual in-house and external lawyer model is this:

On the one hand, we wanted to be sure that our “core” activities are done in-house and that our “core” expertise is located in-house. This is because the work they do is on the matters that keep our members awake at night. By having the lawyers that do that work in-house, I can keep my finger on the political pulse — I can feed into the association’s committees and management the types of things that the members are worried about. It’s a conduit for information and a virtuous circle.

On the other hand, it would require huge resources for us to bring in-house all the lawyers we would need to offer the full range of services to our members. It would be too expensive and not make commercial sense.

To look at it from the perspective of our external lawyers: everyone would like to have the BMA on their client roster — it’s a well-known and powerful brand and a top-class professional association. Further, law firms constantly have to spend time and money on marketing and business development. What we offer is to pipe work to them, with no marketing or business development costs. That is how, in exchange, we can obtain discounted rates — in fact, we can obtain quite large discounts. So, why wouldn’t we use the resources of these external firms, and reserve our in-house lawyers for the core work? The key to it working, however, is that you must have people that you know and trust — like-minded people that you know you can work with.

It can take enormous time and effort to vet the lawyers you want to work with. Our approach was very clear: “Here are our terms and conditions, we are not negotiating them. This is want we want from you, we are not negotiating it. This is how we work, and we’re not negotiating it.” We have a rigid model that everyone must sign up to. But, because I know these lawyers and have had past relationships with them, I gave them comfort by telling them that if at any time they have a problem, they must table it and we will all discuss how to resolve it to everyone’s mutual benefit, and we’ll amend our terms and conditions accordingly. So far, it’s working well.

The way our pricing works is this: we have a menu of fixed fees for various services, such as a partnership agreement, company formation, lease, deed of retirement,… Each has a fixed price. What usually happens is that the member needs a particular service, but with a few bells and whistles in addition. That additional work is priced at discounted hourly rates — normally 20 to 25% less than the firm’s standard rate.

I think that our members choose us over other law firms in part because we offer effective, quality work at a very fair rate. We are not always the cheapest, but our lawyers have a highly specialized knowledge of and experience with the specific legal needs of doctors — it is difficult if not impossible for other lawyers to match that knowledge and experience.

When I was a partner in a big commercial law firm and I first learned about the changes to the laws in England and Wales to permit ABSs, I was not in all together in favor of them. My initial reaction was that it could not work — that allowing non lawyers to own or manage law firms would create many problems, not the least of which were ethical ones. Over time, however, I recalibrated my thinking. It realized it was old-fashioned and that I was deluding myself. The profession, together with technology, has moved on. There are younger generations involved in the delivery of legal services. Today lawyers need to work in a way that is different, more accessible and savvy.

We got a lot of criticism when we created BMA Law — people wrote to the Law Society Gazette complaining, for example, that we were cannibalizing the profession and dumbing it down. My reaction to that was that I have a raft of members, and my responsibility is to look after them. I will do that by providing them with legal services. And if I do my job right, it should produce more work for the other lawyers out there because there is always someone on the other side.

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In-House as Source of Revenue

Anne Copley, Head of Legal, BPIF Legal

Our members come to us because of our expertise in the industry. They do not have to explain to us how the industry works, they do not have to explain the terminology, the production methods, the processes. We know what our members are and we can ask questions that other lawyers might not know to ask.

The British Printing Industries Federation (BPIF) is a trade association representing members of the UK’s print, printed packaging and graphic communications industry. The BPIF offers support and advice to its members in the areas of human resources, health, safety and environment, quality, marketing, sales and finance, and legal. BPIF’s in-house legal team is able to draw upon its experience in the industry sector to provide advice and support to the association’s members principally in employment and contract and commercial law. In liaising with the association’s other support services, BPIF Legal is able to provide this support in a holistic manner.

The BPIF is the principal trade association for the printing industry in England, Wales and Northern Ireland.

When I started working for the association in 2001, the association did not have a legal advice function. The association’s specific purpose in employing me was to be able to offer a more attractive membership package by including legal support in the services offered to its members. The people who made the decision to employ me thought that they could charge for my services, and were disappointed to find that it was not that simple.

At that time, the regulations in place permitted trade associations to provide legal services to its members — not to anyone else — and on the condition that they were provided free of charge. So, as a legal function, I was a cost base rather than an income producing one.

But there was already discussion at that time to change the regulations in the UK to allow for alternative structures, which would allow us to charge for our legal services. The next 13 years of my time at BPIF included time spent preparing for those regulatory changes.

With the 2007 Legal Services Act, it finally became clear to us that in time we could form an alternative structure, and in that way the restrictions on charging a fee for our services would be lifted.

That was the only reason why we were interested in becoming an ABS — because we wanted to be able to charge our members fees for providing certain legal services to them.

The reason we wanted to be able to charge them fees was to be able to have the resources to expand the legal services that we could offer. We had about 1500 members, but only 2.5 lawyers. We can’t serve that number of companies with just that number of people, but in order to increase our resources we need to have an income.

It took us a long time to obtain our ABS license, but we finally got it: we first filed our application in February 2012, but we did not receive our license until August 2014. There are several reasons why it took so long — a principal reason was because of our structure. We are an “unincorporated body.” It was difficult for the SRA to understand our structure, and especially difficult for them to understand where the influence and control resides. For an incorporated body, that is easy — there is a Board of Directors and executive managers and shareholders. But for us, as a trade association you could argue that every single one of the 1500 members has influence and control. After a very long process with the SRA, we finally agreed with them that influence and control resided with our National Council, because it has the power to veto anything that the Executive Board decides. On that basis, I had to spend a lot of time trying to get the Managing Directors of the companies that were on the National Council to fill out long, tedious forms and have background checks. You can imagine how much time that took and how many emails I had to send begging for responses. And that work is never ending because every time a member of the National Council changes, I have to go through the whole process again with the new member.

The members of the BPIF are all small and medium size companies (SMEs). Most have from 20 to 40 employees; very few have more than 150 employees. We were very interested in a recent survey done by the UK’s Legal Services Board that showed that SMEs in particular have a huge unmet legal need. It estimated that one event of an SME not using a lawyer when it needed to costs the SME an average of £14,000. This is what we are trying to address in our own small way, with our members — this huge unmet need.

We are currently surveying our members to understand their current arrangements with lawyers. I suspect the responses will be the ones that are typically given for avoiding lawyers: they are too expensive, we don’t know what they will charge, they never come off the fence, we ask a simple question and we get a long memo back.

My message to our members is: you need to use lawyers, the lawyers of BPIF Legal are not just approachable, industry-specific lawyers, we are your own law firm, so use us.

We offer our members services in the areas most relevant to their day-to-day operations, and namely in commercial and employment law. Employment is especially important for SMEs since few of them have their own in-house HR functions. Our legal services are one of the core services that we offer to our members, together with services in HR, quality, health and safety, finance, and business development.

Our members come to us because of our expertise in the industry. They do not have to explain to us how the industry works, they do not have to explain the terminology, the production methods, the processes. We know what our members are and we can ask questions that other lawyers might not know to ask because we know frontwards and backwards what goes on in a printing company. In addition, the relationship we have with our members is different than the one a traditional law firm would have with them. For lack of a better word, the relationship is more intimate. Since they are members, they consider that they have some ownership of us, rather than coming to us cap in hand. And since we liaise with the other services in our organization, we have a much more rounded view of their businesses.

Our members get some legal assistance us for free, as part of their membership package, and other legal assistance from us for additional fees. The services they receive without additional cost depends upon their level of membership. The paid services are provided either on a retainer basis (X amount per month) or on a fixed fee basis. We don’t record our time.

Today we have 2.5 lawyers — one full time and one part-time employment law specialists and one full-time commercial law specialist. We all work from home, so technology is very important for us, and notably our case management system, which permits us to understand what is happening with each file and to cover for each other in case of absences. (In fact, all of our specialists — in HR, health and safety, and business development work, etc. from home as a cost-saving measure).

BPIF Legal is a limited company that is 100% owned by the association. The management board has just two members — myself and the CEO of the association.

I qualified as a lawyer at the age of 40, and I’ve seen life outside the law. I’ve heard of the concerns that ABSs will erode professionalism and ethics. In my opinion, those concerns are a reaction to a new way of doing things. That is the problem with lawyers — they are risk averse. Any change means risk, so they don’t like it. Of course you need robust regulation. But if you have that, what is the real threat to professionalism? In addition, companies are very keen to maintain the value of their brand — it is typically their biggest selling point and they will do everything they can to make sure their brand is not sullied by unethical behavior.

As regards conflicts of interest and other ethical matters, I think it is disingenuous of lawyers to argue that they don’t already have these same pressures on them. If they can handle them, then why can’t an alternative structure?

We are just a little minnow in all this. We have a very narrow focus — we just want to be able to charge our members for the legal services that we provide to them and in doing so be able to expand the services that we are able to provide. Our members are SMEs. There is very little difference between them and your average consumer. BPIF Legal offers a way for these SMEs to have their legal needs addressed in way that was not available to them before. With us, they can get a lawyer involved much earlier than they otherwise would, and this is very beneficial for them.

We are glad that we have obtained an ABS license. The licensing process was long and difficult, but now, within the bounds of the regulatory framework we are free to work in the manner we choose, with the clients we choose.

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In-House as Source of Revenue

Archana Makol, Director, BT Law Ltd

The shift that BT Law took is not a big shift. We went from offering certain services to our internal client to offering the same services to other, external clients.

BT Law Ltd. is a wholly owned BT group company. Acquiring ABS status in March, 2013, BT Law draws upon the expertise and resources of its in-house legal department to provide legal and claims handling services to external corporate clients, in the areas of motor claims, public liability, employers’ liability and employment law. Archana Makol is both Director of BT Law and Chief Counsel at BT.

BT has a large in-house legal department — about 450 people worldwide — a number that includes lawyers and nonlawyers. BT is unusual in how it has chosen to manage its casualty property and employment law risks. Most companies outsource some or all of these — BT does not.

Just under 20 years ago BT began collecting all its volume claims handling work into one location. There was no need for that location to be in a high-cost hub like London, so Sheffield, a town in northern England was chosen. Initially the focus was on handling BT’s own property damage claim work: how can we develop a process and technology for it? How can we be sure that we claim the monies owed to us rather than let it leak through poor processes? Over a period of 10 years, we enlarged the scope of that work to include third party claims to the business, employee injury claims, and eventually motor vehicle claims. BT was not completely happy with the service it was receiving from external service providers, and so it brought all of that work in-house. At the same time, our employment law team was developing its practice based in the Midlands and London.

When an in-house department builds this kind of service, it does not do it with profit in mind. It builds it on the basis that everyone wants more for less, so you must be efficient, you must have well-managed work flows and you must understand the data and trends.

The brand of our business is critical. Regardless of whether a claim is big or small, the people handling the claim are the face of the business, and they need to take care. This does not mean an open checkbook — to the contrary. It means handling each claim with the bigger picture in mind. It means being firm, but also decent and polite, it means taking a customer service approach, it means keeping a lookout for fraudulent claims. Those are not things that our external service providers — including some external lawyers — necessarily did, or did well.

By about 2010 we had it all pretty much in place. Our internal clients were extremely happy with our service having decided to bring some outsourced elements back in.

Even though the Legal Services Act was not adopted until 2007, we had known for some time that changes were afoot. Indeed, we, as an in-house team, had been approached a few times and asked to act for other companies. At the end of a case, some opponents had come to us and asked, “Would you do that for us next time?” I believe they saw that we handled claims in a clean and fair manner, and that we did what we said we would do, when we said we would do it.

It was flattering to be asked but of course we couldn’t represent them. As in-house counsel, we could only act on behalf of our employer.

But it got us thinking. We started to improve our processes even further, with the possibility of one day offering it to external clients. There are ways you can work in-house that need to be refined for external clients. For example, we reviewed how we managed money, our business continuity plans, and our IT. It was quite a wait from 2007 when the Legal Services Act was passed until 2012 when the first ABSs were authorized. That gave us time to get our act together.

What has been key for us has been the ability to offer a genuine cradle to grave service to all of our clients, in-house and external. We aim to have the same person handle a claim from the time the incident occurs right up to the Court of Appeal if necessary. This is more efficient than having a claim change hands at several points as it progresses, and it gives our team the ability to track trends. In order to be able to offer this to others as a legal service including litigation, we needed an ABS license.

BT Law is operated under a secondment model. BT Law does not have any of its own employees — all its work is carried out by BT Legal (BT plc) employees and using the resources of BT Legal. It is a complex model, but it provides us with a lot of flexibility. It allows us to take a more credible and cautious approach.

We want to work for businesses who share our values. Notably, we want to work for businesses who understand the importance of brand and the wider ramifications of their claims handling practice, and who also need to bring their costs down. When a client comes to us, they get the benefits of an in-house team without having to build an in-house team. We have a real understanding of brand and of business process. Because of that understanding, we handle cases differently than many other practices would.

BT Law has a number of clients, especially with respect to motor claims and employment. Most of our clients are large companies that generate many claims. Our clients include companies like Network Rail and EDF Energy. We are open to working with smaller companies, and our employment law team does. Typically they do not generate enough volume to need a specialized, full service like ours, but they can benefit from our existing scale.

Our technology and our work flow system enable us to address claims quickly. We collect information from a variety of different sources. Speed is of the essence, and our process helps us to collect and filter information quickly, which enables us to analyze and react to cases quickly. We are able to allocate and act within hours if not minutes of an incident occurring. This can save the business a lot of money, and also protect its reputation.

The quickest we’ve been able to react and offer help to someone who was the victim of an accident is 23 minutes. This can be done only with a good work flow system. Our system is IT based. Imagine a series of flow charts: If A happens, do B, if C happens, do D. In this way, our IT flags what needs to be done, and diarizes it.

We enable our case holders, who are typically not lawyers, to handle as much as they can. In our volume case handling team of 60 people, only eight of us are qualified lawyers. For issues that come up frequently, you do not need to have lawyers; you just need to have the right processes and good lawyer supervision.

We ring fence the work we do for non-BT clients, to ensure we comply with our regulation and keep their information confidential. Client money is handled separately in accordance with the rules. At times a lawyer wears the hat of a BT Legal lawyer and at other times the hat of a BT Law lawyer. At first I thought it would be a nightmare to organize, but in fact it has been quite easy and seamless. We think it has worked so well because BT has always been highly regulated, so adding an additional level of regulation was not a big leap.

We have a conflict of interest process in place, and of course our IT system helps us to identify conflicts. It’s not any different for BT Law than it is for any other business.

Potential clients often ask us how we handle workflows when demands are high: Do we prioritize the work of BT or the work of our clients? We prioritize as needed, in the same way as any professional service provider would, and our business understands that we need to do that.

A problematic conflict for us is when our vehicle has an accident with a client’s vehicle. For occurrences like those we have a system in place where we refer claims elsewhere — we would never for two sides in a conflict and that may mean referring a BT Claim. We have the support of the business on this — they understand.

We are still quite small in the big picture of BT. Our key sponsor is BT’s General Counsel. He is highly supportive of BT Law — he is proud of what we do and how we have done it. Other key supporters within BT are the head of insurance and risk and the head of health and safety.

It is still early days for us. We are no longer seen as just a cost center for BT. At the moment, we seek to offer cost neutrality, and we are moving towards becoming a profit center.

The shift that BT Law took is not a big shift. We went from offering certain services to our internal client to offering the same services to other, external clients. It is not the same thing as a brand new structure offering a brand new service.

Predictions of doom to the legal profession because of the adoption of alternative structures are too simplistic. What is the real fear? What is the real concern? Other business propositions in the market, not just traditional law firms, are no bad thing. We are still part of the legal profession and proud to be so.

The law is a great profession, but it is not great at all things. I work for a company that is very good at diversity and corporate responsibility. In my experience these are not the kind of things that traditional law firms always do well. The idea that these alternative businesses will come in and ruin the world is not looking at the bigger picture. And it makes a lot of assumptions that traditional legal practices are the best kind of businesses for all legal services. Actually, if you have a structure where a large number of people need to agree on everything, it can be a very slow business to evolve.

In many legal practices, there are many elements of the work that can be done differently, and do not need to be done by lawyers. Because legal businesses have been owned only by lawyers for so long, innovation has not always been what it could be. Lawyers are great at being lawyers, but are we great at managing businesses and at customer service? Are there other skills that could be brought in that can improve the service we provide to our clients? This does not detract from the professionalism of law. There is room to grow and change. There isn’t any end to where it can go, but you need to have vision.

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