The Community Rule

Part of the lpc series The New Economic Rules

The Community Rule? It was difficult to coin a better expression and if any readers want to suggest an alternative, lpc would be keen to hear from them.

So what is being discussed here? In the broadest terms it is that legal practices (particularly smaller ones) recognise that having formal relationships with other legal firms will be to their mutual benefit.

Consider the following:-

• The pool of work available to legal firms in many disciplines is being reduced as the economy declines and as certain types of work become "commoditised" moving to a reduced number of firms


• In some disciplines where there is an available pool of work, there is not a resultant pool of fees available that makes the work profitably viable for many or even most firms - civil legal aid work is an example


• The lack of work in traditional disciplines - particularly property related work - may mean that a practice is prompted to do work which is out with its comfort zone or area of expertise; this inevitably means reduced margins (more work for a given return because there is a learning curve and lack of ready skills) and may mean creating a greater degree of risk


• It is in the interests of legal practices both in the general and individual sense to (a) operate in accordance with the high standards of the regulator (b) execute work in as efficient and low risk manner as possible and (c) accord with all aspects of competition law.


• That there are areas of economic activity that could be open to legal businesses through existing clients which they do not currently seek or encourage but which would increase the available economic pot - tax work, basic accounting and the like.


• Elsewhere in this website there is discussion of the strides in software that allows groups of individuals or individual businesses to work individually but collectively. Most of this software is either free or as near to free that it does not matter. Google in particular have produced extraordinarily competent and simple to use tools that allow individuals or businesses to co-operate. Another company that has produced notable online software is Zoho.

The essence of this rule is that legal firms should be much more ready to refer work to those who are better at doing it and to take a commission on the generated fees. They are likely to make more profit than doing the work themselves especially when they factor in the risk cost and the potential damage to their client relationships.

Such a network of relationships is rather like a legal equivalent of Facebook. Let's call it Legal 2.0. At this point there is probably a collective "shaking of heads" by readers- what about the client's views, what if the person to whom the work is referred filches the client?

These issues would be covered by a set of rules by those agreeing to take part within the network. Such arrangements are not unknown and indeed many solicitors informally operate referrals as it stands. But the point of Legal 2.0 is to formalise the arrangements so there are clear and unambiguous rules ensuring that clients are properly handled. It is a "win win" situation because any firm within the network is not bound to refer any piece of work. It is a choice that can be exercised as needs be.

Such a network values different skills and minimises potential failings. For instance, if a particular practice are good at marketing and attracting business but does not necessarily have wide skills, then their expertise is maximised if the work they attract can be done effectively and properly within the network. Equally it means that someone with good skills in a particular area is able to make a living even though they may be poor at attracting work.

For esoteric work the network can maintain links with large firms

There are various ways in which Legal 2.0 can be implemented. A network between rural firms is an obvious application but city arrangements - say between smaller firms - work just as well. After all, this arrangement is familiar from a different setting - the various solicitors property centres.

The prevailing need to maximise income is a trigger for these arrangements but on any reasonable reflection they make sense at any time. The enabling factors are (a) the technology that allows these arrangements to be effected and monitored with almost no resources and (b) the rules that control the arrangements that all of the network participants require to be obligated by. Breaches would attract opprobrium from fellow network firms and experience with other network arrangements suggests that compliance would be very high.

It is important not to confuse the Legal 2.0 network with those networks of legal firms that were so popular (and arguably unsuccessful) in the 1990's. Those were marketing networks designed either to bring a perceived weight to the member firms or to promote the networks as alternatives to mega-firms. The whole point of Legal 2.0 is that it allows different firms with different abilities and profiles to co-operate for mutual benefit while retaining freedom within the market to compete on price and service.

Those interested in embarking upon such a network will naturally be curious as to the proportions in which income would be shared.. This needs to be driven by market forces and determination by a fixed percentage is dangerous. The margins in different types of work - say a conveyance and an executry - are likely to be different. Additionally the volume of referrals by a particular network member to another member is relevant. It is imperative that such arrangements are not fee scales or in any way breach either regulatory or competition law.

Where do lpc come in? Such arrangements need to be carefully introduced and moderated by a party in whom the network have confidence as independent and expert. While lpc would not recommend any particular piece of software, they can discuss options with the network members and in particular concentrate on how minimal the arrangements can be to effect a Legal 2.0 network quickly and practicably. Bells and whistles can be added at a later time.

It is important that competition requirements are not breached but in fact the opposite should be the truth. The benefit of the network should be to allocate the best available resources to work that is not mainstream to a particular firm while deriving income for that firm and maintaining client relationships.

As part of its consultancy lpc would be able to brief the prospective members of the network and answer questions on the intended workings of the arrangements. Hopefully the Community Rule makes more sense having read this note but lpc are always happy to be contacted to discuss this service.

Map courtesy of Google