Building an Ethical Law firm
Building an Ethical Law firm is a multi-pronged issue that many lawyers within the industry wish to tackle but are sometimes unsure how. It is worthwhile first defining what ethical actually means in this context, different businesses have varied concepts of what an ethical business is.
In this piece, in conjunction with the SRA’s guidance ethical means: socially responsible, profitable and community-driven.
A business needs to be profitable in order to remain in business but this does not come at the cost of social responsibility or the community to which the business is constituted of and serves.
For example as a small business Hayachi Services have benefited from the Federation of Small Business’ partnership with the Good Business Foundation to make Good Business Charter (GBC) accreditation easier for SMEs.
Hayachi Services accreditations includes us being a Prompt Payment Code signatory which is also covered by our commitments under the GBC, this impacts our cash position but is perfectly manageable and improves our supplier relationships.
Reforming our business to align itself with the GBC allowed us to reflect on the kind of business we want to be: socially responsible, profitable and community-driven. Our move to become a more ethical firm in turn resulted in major changes to our culture.
Culture as the foundation
At Hayachi we decided we wanted to build a culture akin to that of our legal clients, in particular a top-10 UK law firm that our Director is an alumnus of has been the inspiration for this.
Culture is interwoven in everything a business does be it with customers, staff or suppliers. It is also the premise on which legal services are delivered, this includes payment terms and billing rates/structure.
Law firms typically charged on an hourly basis for fee-earner’s time since the mid-C20th and this has had certain consequences on the sector. Building a culture of billing on an hourly basis can cause high levels of stress for fee-earners and supporting staff.
An example of the many reflections of this within the legal sector is Chris Parsons’ excellent LinkedIN vlog on sleep and the false-economy long hours have on the delivery of legal services.
Aside from the impact billable hours has on your team(s), customers may find it difficult to place how much any given matter will actually cost them without significant investment in communicating fees. This can harm transparency and trust in the profession and can result in a poor experience with complex matters with your firm in particular.
As an professional services firm ourselves we prefer to bill on a fixed-fee basis for continuous services and projects, billing on a fixed-fee basis enables our business to be wholly transparent in our pricing and value-driven in the services offered even for complex and high-value projects.
Moving away from billable hours is something many of our customers have done and many Magic Circle leaders are actively doing to benefit the legal sector. Adopting flat fees is a worthwhile endeavour and enables your firm to pay your staff a fair wage for their time, while still remaining profitable. Note that staff wellbeing is also a major focus of the Good Business Charter and is intrinsically linked to running an ethical law firm.
Using technology to enable particular cultures can be central to your success but culture must always triumph over technology: technology is a tool – an enabler – for your vision of what an ethical business culture means in practice, and it must be practiced. Who argues a nail-gun is anti-ethical and not instead the human element?
Our favourite lawtech provider is Clio because they enable law firms to be happier, more ethical, and this is afforded through making law firms more profitable. Profitability is enhanced through contract automation, modern payments, and more.
Environmental, Social and Corporate Governance (ESG)
Environmental, Social and Corporate Governance is a difficult subject to broach for most organisations because it is often associated with charitable activities. Many larger businesses have a charitable arm, or offer pro-bono services but this may be secondary to their business operation (nonetheless being a worthwhile endeavour).
But ESG aligns with the United Nations Sustainable Development Goals (SDGs) and these are designed not to be an afterthought but a fundamental element of your operation. ESG demands that there is a ‘Green Thread’ which runs through your business’ activities on a day-to-day basis.
Going back to our definition of ethical, socially responsible, profitable and community-driven, it follows that law firms should treat ESG as a consideration prior to an activity rather than a sticking plaster acting as an afterthought.
By integrating ESG into our daily activities you can conscientiously achieve business goals while ensuring there is buy-in from the business more widely. Remember the Social element of ESG: if the culture of your practice isn’t agile or inclusive then change will generally be more difficult or outright obstructed due to poor participation and adoption.
An ethical business does in fact save a large sum of money, often engagement is higher and this also means your business is more productive (and profitable); a lower footprint naturally translates into lower costs and higher returns on investment.
It is much more effective to sustain a client-centric law firm which reflects the concerns of its customer-base. An example is the law firms who install solar-panels at their offices, saving money on electricity bills as well as demonstrating action on environmental concerns.
The Legal Sustainability Alliance can share best-practice on how your law firm can mitigate emissions within your community, do remember to act holistically rather than in an isolated way solely on the built environment.
Incorporating ESG in your day-to-day activities can be challenging. Use roadmaps to consistently plan and demonstrably act on the things which make your law firm socially responsible.
Making a change
Planning plays a large part in successfully delivering projects for law firms regardless of size, in fact nearly 70% of digital transformation fails due to a lack of appropriate planning among other considerations.
Businesses which fail to be consultative will therein fail to identify and mitigate risks, be this on social or environmental harms as well as those which directly impact your law firms’ profitability. Making a change is often better than no change, on the balance of risks making no change at all can in fact be the riskiest option.
Instigating change is not often done on a macro-level, meaningful improvements are often achieved close to the issue at hand: small victories do add up over time. There is no one silver-bullet which will resolve the challenges your firm faces, which is why adopting an agile culture is fundamental so that you can incrementally solve issues.
(Mind you, agility here means moving when you need to and not for the sake of it.)
Building an ethical law firm does require relevant investments in technology, such as contract automation, but it is fundamentally about culture. Culture takes time and planning to develop otherwise it will be constructed organically, perhaps in a direction which is not altogether ethical.
Nonetheless it is the case that everything starts with a definition and a goal, for this piece it was being a socially responsible, profitable and community-driven business as our definition of being ethical but your firm may approach things differently. It is totally fine to vary the definition of what ethical is, so long as your firm consistently upholds your particular definition.