Virtual law firm or chambers practice?

Tim Summers of Temple Bright LLP explains the difference…

As the legal services market is shaken up by deregulation, advances in technology and changing client expectations, barriers to entry have been lowered and there is something of a gold rush. A disruptive crowd has entered this sector once dominated by tradition and hierarchies – the venerable profession that was not really seen as a market at all.

Some of these new entrants are not lawyers. Various business people are seizing the moment. There are now online providers of template commercial agreements, websites where law firms can bid and franchises offering new branding to existing firms. Meanwhile some practitioners are exploring new business models which enable them to offer their services in a different way.

In the latter category is the “virtual law firm”. With the advent of greater bandwidth and good practice management software, this is a relatively simple model to operate. There is a central entity which provides a regulated body and insurance. Self-employed consultant solicitors contract with this entity and run their own practice, generally working from home and using the internet to access the firm’s resources. The contractual aspect of the model is sometimes referred to as a “hub and spoke” structure.

The model has proved popular with some. These lawyers may appreciate the release from big firm expectations, greater autonomy and the flexibility which the virtual law firm affords. Moreover virtual law firms usually operate an “eat what you kill” remuneration basis whereby lawyers take home the majority of their fee income, after deduction of a share by the entity. This financial contribution towards the firm’s management means that the lawyers also avoid the bureaucratic burdens of a sole practitioner, for these aspects are handled by the entity in return for the contribution.

However, lawyers should ask some penetrating questions before signing up. In particular, to what extent is the organisation actually a firm, and not just an administrative hub and rented infrastructure for (de facto) sole practitioners working in silos? For any legal services provider to be called a firm, some elements should be considered indispensable: a client-facing brand and message that make the business more than the sum of its parts; clients who choose the business and not just individuals within it; a characteristic culture; the ability, and encouragement, for lawyers to work (and win work) in teams.

To put it another way, how much does the virtual law firm contribute to the quality and quantity of its lawyers’ instructions? If the firm is little more than a provider of technical and professional resources, candidates should consider whether their financial contribution gives them good value for money – particularly once established processes and economies of scale make it easy for the firm to “plug in” new lawyers. This question is all the more pertinent where such firms specify that the lawyers joining them should bring a client following. What value is the firm adding for its lawyers, in return for a substantial share of the fees they are being asked to bring?

In fact, for virtual law firms intent on growing quickly, there is a potential conflict of interest between the firm’s owners and its lawyers. The owners may wish to add, as quickly as possible, new lawyers across a broad range of practice areas who promise a following. This should lead to more income going into the centre. However, individual lawyers will presumably wish to build a sustainable business of their own – an aim which, by contrast, is usually best served by the firm growing in a controlled way, with a clear-sighted and careful development of its offering to clients and practice area focus.

If a firm’s management is not selective in recruitment and embraces widely disparate practice areas without considering the coherence of its message to clients, its lawyers may be less able both to win new clients and to retain them. Similarly, if a firm’s main message appears to be aimed at lawyers, focusing heavily on matters such as lifestyle and earnings, this may not convey the right message to clients and prospects. Lawyers operating on a self-employment model are likely to be best served by a firm whose main message is not aimed at lawyers, but at clients.

And so, finally: what is the firm’s real target market – clients, or lawyers? This is a fair question when the lawyers effectively pay the firm. Is the primary aim of the firm to get more lawyers, whether or not it helps those lawyers already there? Does the firm ask new joiners to bring a client following because the firm has little cohesion or collective work-winning capacity of its own? If so, there will be a ceiling on its ability to compete for big ticket work against traditional firms.

An alternative law firm model which involves the hub and spoke contracting structure, but deployed in a manner which circumvents such concerns, is the chambers practice. A chambers practice will likewise offer its lawyers greater autonomy, and freedom from bureaucracy, but it will combine these attributes with some of the best features of the traditional firm. It will use the flexibility of its structure not primarily for marketing itself to lawyers, but to enhance the service it provides to clients. Its focus will be uncompromisingly on quality, on winning new work and doing it well. Thus it will add value beyond the convenience of an infrastructure – it will add to the quality and quantity of its lawyers’ instructions.

What features of the traditional firm does the chambers practice preserve to achieve all this?

First, the firm will have offices where every lawyer has a desk (which they can use to the extent they wish). Personal meetings are the best way for relationships and business to develop, and offices provide a base for the firm’s activity. Secondly, the firm will have an offering designed to meet clients’ needs. It may have developed, and may advertise, a distinctive style of working. There will be no incongruous practice areas. Thirdly, there will be a characteristic firm culture, not of silos but of collaboration. Having been selected carefully, the lawyers will be encouraged to work in teams. All aspects of the model promote this aim, which will be a priority if the firm wishes to be a serious competitor to traditional firms.

Why the name? Like most barristers in chambers, the firm’s solicitors are self-employed and are specialists operating within a broader-based group. However, such a firm has the character of a single practice, in that its lawyers habitually work in teams, and may work in a particular style associated with the firm. The term “virtual” is not used, as it downplays the importance of offices and implies a lack of cohesion. In the chambers model, cohesion is everything.

As technology advances, a serious focus on client priorities will be vital in preserving a role for lawyers. The chambers model will make sense to those of us who want to maintain this focus and who seek greater autonomy and efficiency, enabled by technology, in order to do so. This innovative law firm model enables us to provide our expertise to clients in a way that works for them, alongside likeminded colleagues within a cohesive team.

Tim Summers is a founder member of chambers practice Temple Bright LLP.