I.T. and the smaller firm - Are we missing out?

Consultant Tom Paul launches a new series of articles aimed specifically at the smaller law firm. This month, as a prelude to the more detailed features to follow, he offers a general introduction on technology as a business function and an essential area of investment.

Of the 9,000 or so law firms in England & Wales, no less than 95% have ten partners or fewer. While the major firms have turned themselves into huge, highly successful businesses, only some of the smaller firms have done so. When I look into these I still see clear evidence of dated management practices and poor controls and in one particular area, IT, many firms still struggle to grasp the enormous potential available to them.

I suspect that partnership may actually be an essentially unsuitable business structure for good investment decision-making. It comes down to the question of whose money is to be invested. Partners are personally very close to the partnership’s money and assets. If I am a partner it all feels as though it is “my money”. My capital account, although a significant part of the firm’s assets, is still “mine” and depending on the kind of person I am I may not feel comfortable seeing it spent or risked in some way. Even where some members of a partnership are willing to invest, they may be unwilling to push reluctant partners to agree to do so for the same underlying feelings. It simply feels too personal and thus too emotional.

And in my experience partners are seldom willing to press fellow partners for decisions. Whenever a partnership is unable to reach consensus, even when a clear majority view exists, a decision is usually put off.

By contrast, in a limited company directors and shareholders tend to see the business as the separate entity that it is. Their decisions are taken for the good of the company and personal emotions do not get in the way to anything like the same extent. There has been much talk recently of new business structures for law firms and I have come to the conclusion, after many years in industrial companies followed by eight working with solicitors in partnerships, that partnership may simply no longer be a suitable structure for business. It may have worked well in the nineteenth century but in recent years it has become less and less effective as a way to own and run a commercial organisation.

Working with firms as they are now, all we can do is to try to persuade partners of the enormous benefits that good IT can bring, although that can be difficult.

Computers can be a bit frightening. Unless you are naturally technically-minded they can seem to be dreadfully complicated, terribly expensive and worse, possessing the potential to do real damage your practice. After all, imagine what you could be faced with if you suffered a major crash and lost all your data, or invested heavily and found you had bought a “pup”. In the news we read of disastrous IT projects in the NHS and in government and we fear that the same thing could happen to our firm. Fear feeds on fear and partnerships frequently fight shy of investment, scared that they could spend a fortune and end up buying a monster.

After all, we are all well aware that everyone is driven by two key emotions: Fear and greed. In this situation, fear easily dominates.

It is also very hard to know who to trust. Reluctant to spend money, firms often allocate only minimal budgets to their IT and so end up employing unqualified and unskilled IT people. I have come across some extremely unusual characters running the IT for smaller law firms. At one time it seemed that anyone who was finding it hard to make much money in their own business, but who reckoned they knew about computers, would go and look for a part-time job as an IT manager for a law firm. The best example I found was a pig farmer! He may have produced wonderful pork and bacon but his IT skills left something to be desired.

Solicitors would hire such people because they sounded as though they knew what they were talking about and they were cheap but few partners knew the right questions to ask and they went on to suffer the consequences: unstable networks, endless frustration and serious damage to output. Being intelligent people they quickly concluded that the individual they had hired was not to be trusted but their view of IT was clouded by this experience and investment proposals went on to be viewed with deep suspicion.

But, enough of the doom and gloom! Firms may have found IT highly challenging but the potential rewards are enormous and it cannot, in any business today, be anything other than a major resource in it own right. After all, think of whom you do business with every day – your bank, your supermarket, your insurance broker and so on. Not one would function effectively without sophisticated IT systems.

Your firm is no different.

Next time I will offer some guidelines on how to tackle this vital area, and gain the frankly enormous benefits that IT can bring to your efficiency, operating efficiency and costs, risk management and data protection.

Tom Paul is a consultant specialising in the management of small and medium-sized law firms. More about his approach can be found at www.profitablepractice.org.uk

Published on: 30-01-2007