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Alternative Business Structures raising the performance barr

September 16, 2013

Alternative Business Structures are beginning to make their mark on the legal sector. In a preview of next month’s fully-published report, the LSB goes some way to showing the extent.

Is your concept of a personal injury solicitors’ one of a company staid in its ways? Do you picture lawyers asking ‘secretaries’ to reach files from the cabinet in a dusty store room rather than e-mail them across in a zipped folder or download them from the cloud?

If the preview of a recent study into the growing role of ABSs released last week is accurate, you’re probably not far off the mark.

LSB cited ABSs as being more “productive and innovative” than the longer-serving members of its ranks. Furthermore, this new outlook is “starting to have an impact” on the whole law sector.

Aside from the fact that ABSs account for 5% of the market now, here are three other areas of growth of particular interest.

One may be as a direct result of another or the progress may be symbiotic. One thing is for sure: traditional practises under the SRA need to take heed of this growth, and soon.

Innovation in the law sector

Going back to the original analogy of doddering old solicitors still trying to work out how a fax machine works, the fount of innovation in law seems to be springing solely from the ABSs.

Whether this is accounted for by insurance firms, accounting for many ABS newcomers, bringing in fresh blood from the tech sphere rather than relying on the barr is yet to be proven.

However, with 13% of Alternative Business Structures looking beyond the confines of the traditional solicitors’ organisational structure to achieve this progress, it does seem to suggest so.

Injection of new ideas from somewhere certainly correlates with the newfound dynamism, if it’s not proven the direct causation thereof.

CRM improving in leaps and bounds

One of the unexpected aspects brought about by social media is the ability to have a presence online at any given time. Firms from all industry sectors who are incorporating CRM into their social media strategies seem to be resolving disputes at record speed.

Again, this is supposition, but innovative ABSs are handling more than twice as many complaints inhouse as any other sector under the SRA.

For every one complaint referred to the Legal Ombudsman, the following is true:

  • ABSs resolved 11 inhouse
  • LDPs dealt with 5 inhouse
  • other types of solicitors’ practises mopped up 4 complaints

Again, the innovations may not have been directly responsible for a better clear-up rate, thus a happier consumer base.  However, ABSs have been availed of more efficient techniques to handle complaints from somewhere.

And more efficient complaint-handling is not necessarily due to more bums on seats, as the bottom line suggests.

The nett effect is that ABSs now account for 20% of the personal injury solicitors’ market. 10% of those are made up of new companies altogether, whilst 10% are traditional firms that have opted for change.

What’s the bottom line for alternative business structures?

“Okay,” I hear you say, “that’s market share. What about profit and sustainability?”

Unlike other sectors, prosperity in the personal injury sector can be judged by the average turnover per head that each fee-earner brings to the organisation.

This is a simple table representing precisely that breakdown:

Annual turnover per fee-earner
ABSs LDPs other
113,000 105,000 84,000

As you can see, this innovation is leading to success, both from income per fee-earner and in the clear-up rate of complaints.

When the full report is published next month, we’ll have more of an idea exactly how Alternative Business Structures are innovating and how traditional law firms can learn from their ingenuity.