When we acquire a practice and the lawyers come to work for us, they suddenly find that they are working an eight hour day instead of a 12 to 15 hour day. This is because they no longer have to worry about marketing, or administration or accounting — all they have to do is be lawyers and take care of the clients.
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.
I’ve been practicing law for nearly 40 years. I started in a small two-man firm that we built up over the course of a decade. I then left that partnership and joined one of the large firms in Sydney. I was with them for about five years, when I went out on my own for about a decade, first as a sole practitioner and then later hiring three lawyers. In 2002, I merged that business with four other small law firms.
In putting together the merger, we embraced the fact that we could use a corporate structure. We set up a company with the shares held through family trusts.
In sum, I’ve been in all sorts of structures, large, medium-sized and small. The opinion I formed over that time is that partnership is a very poor structure in which to operate a business or a profession. The roles of an individual in management, as a fee earner/employee and as an equity participate are blurred and decisions often made whilst wearing the wrong hat — or all at once. It’s difficult to impose the discipline of separating management, fee generation and equity. At its most basic, there is little distinction between reward for work done (salary) and return on investment (profit distributions). This is a topic on its own as the impact on decision making is overwhelming. The management of a partnership is often nothing more than a question of who can speak loudest and dominate the others. At its worst partnership encourages unhealthy competition between egos.
Of course there are exceptions, but my experience is that most law firm partnerships are poorly run. So, when we merged our firms in 2002, we chose the corporate model in order to very clearly distinguish the different hats that people would wear. One hat was that of employee — lawyer or not — who has duties to perform work for the employer, be it billable work or other functions. The second hat was that of a director, who oversees the strategy of the business and to who the management (employees) of the company report, and the third hat was that of an equity owner, who has an interest in the profits of the business, after paying expenses and a fair remuneration to the employees. For me, these distinctions were very important.
In contrast, what I saw in partnerships were internal fights as a result of the blurring of these three roles, where the partners sought to take home the fees they brought in — the more they brought in, the more they took home. The result was that they had little accountability to the whole of the firm, and the firm as a whole suffered because of self-interest.
For me, a corporate model facilitated better decision making and more professional behavior. It also enabled us to be more disciplined in our client service as it became a ‘whole of business’ task, not left to individual lawyers. It helped build a brand recognised by clients so that client relationships were less dependent on individual lawyers and their personal relationship with clients.
An important factor in my decision to join Slater and Gordon was the fact that it has a corporate structure.
In addition to its corporate model, going public has also greatly benefited Slater and Gordon. By going public, Slater and Gordon acquired the large amount of capital that it needed to be able to fund growth. The firm used the capital it raised to fund organic growth and growth through acquisitions. The funds also enabled the firm to take on some very large cases on a no win no fee basis. Taking on these cases requires the firm to assume a large financial burden over a lengthy period of time. It is because the firm has resources it can now assume the risks and the financial burden that comes with the larger cases.
Australia permitted nonlawyer ownership of law firms well before the UK did. One of the reasons we have been so successful in acquiring businesses in the UK is because firms who are in a similar business see that we’ve had a head start — they see that we have learned how to manage a public legal business — they see that we are able to achieve things that they cannot achieve, or that it would take them a very long lead time to achieve. When they see that, a number have decided that it is better to join us than do in on their own.
As a public company, you can go online and see how much our senior staff is paid. You will see there that our top people are paid quite modestly compared to lawyers at a comparable level in a traditional law firm. This is balanced by the fact that our lawyers have the opportunity to take shares in the company. They are making an investment and backing themselves: they accept a reasonable salary and work toward receiving dividends and capital gains from their shares.
This arrangement drives different behaviors. It means that the entire business must function as a unit. Contrast this to a partnership where lawyers are rewarded based upon the performance of their practice area, or even based upon individual performance, rather than the overall practice and success of the organization. We also reward individual performance of employees but again the rewards are modest compared to other organisations.
Also, because in a corporation everyone is an employee, there is little opportunity for egos to dominate. This is especially true for Slater and Gordon, as the Board is dominated by nonlawyers. Management teams, at all levels, operate to achieve agreed business goals, not for the individual benefit of the team members.
Because we largely service the needs of individual consumers and not businesses, the only way for us to be profitable is to service a large number of clients and do it well. Many parts of our business are high-volume, low margin. We have to keep clients coming in the door. This means that we must treat each client as if they are our only client. If we don’t, the clients will stop coming. Our mantra is ‘client at center’ — it has to be, and all management, systems and processes revolve round this message.
We use many junior lawyers and nonlawyer clerks, as well as IT, systems, and processes to get work through quickly and efficiently. The junior lawyers and non-lawyer clerks work under the supervision of senior lawyers, but even so they get significant client contact, and they take a lot of pride in that. At the same time, seniors lawyers are freed up to spend more time on issues requiring their expertise and on building the relationship with the client, without being tied down by work than can be undertaken by others.
We have many ‘shared services’, divisions within the firm that support our legal teams. These include: learning and development, HR, finance, accountants, media for external communication, marketing and a team for internal communication. The internal communication team is key — they make a big difference — having all the troops being aware of what is happening across the firm on a daily basis is one of our greatest challenges, especially with all of the changes we are undergoing.
The duties and responsibilities of management at team, practice group, local, State and National levels are well defined and the reporting lines are very clear.
All of these things can flourish within a corporate model, and all of these elements, taken together, enable us to offer a high-volume, professional service to our clients.
Technology is essential, but it is only an enabler. There are elements of legal services that can be commoditized, that can be done by a computer and processes, that can facilitate very efficient and inexpensive work flows. But technology does not, not yet anyway, replace interaction with a lawyer. We find that most people still want to know the person behind the work. I think that technology is going to change the role of the professional — there will be less processing paperwork, and more of client relationship building and supervision of teams by lawyers.
At the time I came on board in 2008, Slater and Gordon more or less had only two practice areas, which were personal injury and specialized class action law suits. However, as Slater and Gordon began acquiring other PI firms, they acquired with them the smaller practice areas of those firms. For example, Slater and Gordon would acquire a firm that did mostly personal injury work, but that also had one person who did wills and conveyancing and some commercial work. After making many of these acquisitions, we accumulated on our staff many lawyers whose practices areas were outside Slater and Gordon’s main practice area of PI.
As a result, we found ourselves with multiple practices areas — family law, conveyancing, probate — that had multiple processes, multiple precedents, and multiple ways of doing things, each in its own silo. We had to create from those silos unified processes and procedures and national teams, for each of those practices. And they couldn’t be just any processes and procedures; they had to be ones that enabled high volume, profitable work. It was a challenge.
Part of the challenge was that many of the lawyers that we brought in were senior lawyers who were not open to changing how they worked. When we encountered those lawyers, we had hard discussions with them, and if they continued to resist change, we parted ways. On the other hand, if they could see that the interests of the client came first, they would come on board. Most learnt to love change and adopt new ways of doing things.
Now that we have finished this work, I’ve gone back to my original function that I was hired for, which is to grow the estate planning business — we believe this area of law has great potential for us.
Most of the lawyers and law firms in Australia are sole practitioners. They have very little opportunity for succession — they do not have equity that they can sell. No capital for retirement. During their career they have done no more than create a job for themselves, and as soon as they stop peddling, their bikes fall over. Slater and Gordon has created a market for legal practices — a market that did not exist before. A lot of the practices we have acquired are ones that would have closed if we had not come along to buy them. With our processes and systems, we can turn these barely profitable businesses into profitable ones.
Away from the glamour of large firms and city based commercial firms, many small practitioners work very long hours for very small return. Once they’ve paid their expenses, they barely have enough to live on. They represent the greatest number of lawyers in Australia. When we acquire a practice and the lawyers come to work for us, they suddenly find that they are working an eight hour day instead of a 12 to 15 hour day. This is because they no longer have to worry about marketing, or administration or accounting — all they have to do is be lawyers and take care of the clients. Some lawyers, who had planned to retire, and we are expecting to do so, don’t because for the first time in a long time they are enjoying practicing law — they are doing what they were trained to do instead of being an untrained practice manager.
At Slater and Gordon we insist that everyone become a specialist. Some people question the wisdom of this, but we find it is liberating because our lawyers don’t have to accept everything that comes in the door — they only do the work they are best at and most enjoy doing.
Before I joined Slater and Gordon at the age of 54, I was looking forward to giving up the practice of law because I was bored to tears and had to take on work I preferred not to. I had to worry about the overdraft and managing people. Now that I am at Slater and Gordon, I enjoy being a lawyer so much, they will have trouble getting rid of me.
I wonder what law will look like in 10 to 20 years’ time. I don’t know, but I am sure it will be different from what it is today. Many of the things that lawyers have done as their bread and butter legal work is now becoming the domain of non-lawyers and technology. And this evolution is just beginning.
There will always be a role for firms, large and small boutique, that look after large corporate clients. As for firms servicing consumers, small law firms will be a thing of the past. Their work will be done by large corporate structures that are able to provide affordable high quality services to consumers.
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