Changes brought about by the Legal Services Act 2007 have stimulated a number of new developments in the UK legal market. Chief among these is the ‘Alternative Business Structure’ (ABS) – effectively allowing non-lawyer ownership of law firms for the first time, with the aim of generating innovation and opening the market to new types of legal service provider.
Among other things, the ABS framework has opened the door to Big Four entry into the adjacent legal services space, as well as encouraging a slew of ‘new law’ volume providers in different areas of the market. However, one of the most surprising aspects of the new rules has been their application to public sector legal services.
LGSS Law Ltd is led by Quentin Baker, who has previously directed legal services at various large UK local authorities. It aims to offer a new model for cash-strapped local government organisations to effectively share lawyer resources in lieu of maintaining their own internal legal teams. It exists to serve its three chief shareholders – all large local authorities – but also sells its services into other similar organisations (over 140 customers in the public and third sectors) and increasingly into the private sector too.
Desmond Brady, Director of Public Sector Strategy at Thomson Reuters Legal UK & Ireland, caught up with Quentin to review LGSS Law’s performance so far.
DB: What benefits have you gained by spinning out of the public sector space?
QB: We wanted to become more business-like as a service, and this model offered us a number of advantages in doing so.
The first benefit is that this structure, the company limited by shares, is a good model for shared services between councils. Most difficulties with shared services arise from subjective perceptions that one party is putting in more than they get out. With LGSS, the different levels of ownership of different shareholders are completely transparent. Our General Meeting has three elected members who vote and exercise rights on behalf of the councils. This transparency flows through into separate bank accounts, financial accounting and so on.
It also gives us freedom to reward and retain our lawyers in ways that we couldn’t before. Within local government service, the prevailing standard employment terms and conditions attach promotions and salary progression relatively rigidly to management responsibility and the number of reports you have under you. If you just want to be a good lawyer, therefore, you may find yourself reaching a certain point in your career where your choices are to stagnate, or to leave for the private sector. Within our new structure, we are free to reward senior lawyers for great work regardless of management responsibility – and as a result, to confidently tackle more high value work within the team.
DB: What differentiates your offer from other legal service providers?
QB: I characterise LGSS as a ‘social enterprise law firm’. To begin with, we’re not focused on profit. Our baseline goal is to provide a good quality, resilient, and cost-effective service to our founding clients. As a consequence of this, we’re also able to provide a good value and cost-effective legal service with private sector characteristics to other clients in the public sector and elsewhere.
Further, we can afford to offer cost-effective services because of where we’ve come from – our cost base is relatively low. We don’t have the high remuneration and benefits expenses associated with a large body of partners. We don’t have the overheads costs that come with a prestigious shop front. Our non-executive directors donate time for free. Because of all these factors and economies of scale, we are able to keep costs down and still offer competitive salaries to our team along with what is still a local government pension scheme.
DB: Applications for ABS status go through the UK Solicitors Regulation Authority (SRA). Given that the public sector ABS is quite a new phenomenon, how did you find this process?
QB: Our contacts at the SRA were all very helpful and at pains to help us understand the process. To be fair, it was a new thing for them as well, and we devoted a good deal of time to discussing council governance, our shareholders, how the ownership would work. For the SRA this is a key point and we needed to provide absolute clarity. Subsequent to registration being granted, we have complied with the self-audit requirements and passed an SRA audit with no problems.
DB: Does your model require a different approach to time recording and billing?
QB: We have disciplined ourselves on how we’re using our time. We’ve found that more rigorous time recording and reporting helps us analyse and get better as a group, as well as focusing people’s attention. It’s a performance culture with a small ‘p’ – encouraging people to be timely and efficient, and to learn from past experience.
DB: What lessons have you learned on this journey?
QB: Our experience has been that setting up financial and accounting processes is more complicated that people may imagine. We have five bank accounts, operated under solicitors’ rules, billing hundreds of thousands of six-minute units. If you think about it carefully and get the right systems in place it’s not onerous.
Much of our billing is time-based, with a minority of instances of fixed fees. We do these in particular transactional or repetitive cases that suit them. This represents greater efficiency for the client.
DB: How would you say transferring from the public sector into the private sector has impacted your workforce?
QB: People’s reactions have varied according to the individual. A few colleagues decided it wasn’t for them, but we’re pleased that the majority embraced the new environment.
The key thing about this new model is that you have to have good client care skills. When you put yourself into this structure, clients are going to expect more from you, where otherwise an in-house legal team might get away with more leeway. You have to be more rigorous, and I think that’s right. We need to challenge ourselves to be more efficient, productive and client-friendly. We’re here to be business-like and effective with our time, and to proactively work to help the clients achieve their objectives.
Interestingly, I would estimate that 50 percent of new applicants to LGSS are from local government and 50 percent from the private sector.
DB: Finally, as a new type of entity in the legal services market, what is different about what LGSS offer its staff?
QB: We offer great career opportunities and the chance to do rewarding and high-profile work. We have over 150 client organisations, of which three are large local authorities with a total turnover of 1.3 billion sterling – and that’s just core budget, non-schools. They carry out big, high-value projects. That high-value, high-complexity legal work used to go largely to the private sector. Now we are able to retain that work ourselves while offering a substantial saving to the client. As an organisation we delivered a 10 million sterling turnover this year.
Colleagues joining us from local government will also notice the investment we’ve made in resources: IT, hardware, and research facilities. Our staff are fully mobile-enabled and can work from anywhere. A corollary of this is that we offer excellent flexible working arrangements. The organisation has grown to four offices, allowing us to accommodate people working across different locations based on their home address.
And finally we offer a positive and motivated working environment. While we offer a service with private sector characteristics, we are not here simply to make money for a partnership. We are working for the community and making a difference, and this is reflected in our open culture and avoidance of unnecessary hierarchy. At the end of the day, we are our people, and we succeed by inspiring and developing our lawyers.
In May 2018, after nine successful years in which he grew LGSS Law into one of the most innovative legal service providers in the public sector, Quentin Baker decided to branch out into new challenges and has recently taken up the role of Interim Director of Law and Governance at Bristol City Council.