The need for change
Why do we need to change the way we do things? After all, we are not doing too badly from personal injury work at the moment. The short answer is that if many of you have found the changes over the past few years uncomfortable, with the abolition of legal aid, the implementation of a radical set of procedural rules for conducting civil litigation and the introduction of Byzantine rules for funding PI cases through CFA’s, then you are in for a rude awakening.
The Jackson reforms, ranging from the removal of success fees, an economic definition of proportionality, to costs budgeting, will shape the way practices do business in the future. (See Part 2 of Legal Aid, Sentencing and Punishment of Offenders Act 2012; 1st April 2013 will be the key implementation date.)
These reforms and other changes (an extension of the Road Traffic Portal to other personal injury work) will mean that there will be largely fixed and probably modest costs for the bulk of personal injury work. This will drive down profits significantly and will turn this sector into a tough place to do business. (See Data Monitor Report February 2012, which is alarming in terms of forecasting, compared with a previous upbeat analysis of the market less than a year ago.)
There are many who see these changes as leading to the end of personal injury claimant lawyers, as the hourly rate / success fee model that has sustained them for years will be swept away. However, one critical response is to see the reforms as an opportunity to “re-tool” their practices; a pragmatic solution is therefore provided to the new narrative of cost cutting.
In my opinion, there are a number of specific strategies that can be used in addition to business process changes to ensure the practice survives, ranging from developing clear business models to financing the firm in the new post Jackson world.
Business process re-engineering (“BPR”)
A number of commentators have coined BPR as a management fad of the early 1990s, associated with downsizing and large scale closures and management buyouts. In recent years, there has been a revival with activity shifting away from the traditional industrial sectors to retail, banking and insurance. Law firms have been slow to respond with many senior partners or chief executives being content with incremental and continuous change rather than a radical review of their processes and structures.
BPR has been defined as “a fundamental rethinking and radical design of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed” (Hammer and
Champy, p 35).
The first key element is asking fundamental questions about the firm and the way it operates in practice. In short, why do we do PI work in this way? It is critical here not to make any assumptions about industry norms or to get bogged down in partner led debates concerning their experiences about the way things are done and should be done. The need for radical design (second element) does not mean cosmetic changes or continuous improvement; it means throwing away the old structures and replacing them with the new.
The third element is for there to be dramatic improvements in performance; for example to increase profitability or client care not by a small percentage but rather a substantial increase which will be sustainable. Lastly, and perhaps the most important element is to look at the processes and not the tasks or activities.
The key is to think of processes associated with personal injury work and not the activities that are part of the processes.
We will see below what this means in practice, but re-engineering is not the same as automation by using existing or obsolete processes with new technology, because the result will simply be of course automating those obsolete processes.
By simply throwing money at a business problem, with new hardware or software, or bringing in consultants with no clear vision about what is required, rather than re-engineering the processes will result in a further erosion of profits or spell financial disaster for the practice. Partners in law firms have to remember that case management systems are not X Boxes, which can be plugged in and played.
Re-engineering in practice
We can discern five distinct processes with straightforward fast track PI claims: risk assessment, claims handling, supervision or quality check, litigation, and billing. We are able to see further, from organisations that have successfully engineered their processes, some of the themes and elements that will help us visualise a modern PI practice.
Here is a snapshot of a firm’s processes before re-engineering; the heading, in each case, indicates the change which needs to be made:
Several jobs can be combined into one. An offer is made by an insurer in a small fast track case and which is being dealt with by a junior fee earner, who wants to reject the offer but needs authority from a supervisor to do so. The file is sent to the supervisor who checks the file and agrees, sending the file back with a note which is in dictation. The problem here, with these examples, is that responsibility is fragmented and instead of being dealt with by one person from the start to finish, the processes are complicated, with no-one having overall control.
Fee earners should make the decisions. Instead of fee earners going vertically up the managerial hierarchy for an answer they make their own decisions. This empowering approach presupposes adequate training, education and support rather than what has happened in some firms who have neglected these elements in favour of IT. An alternative scenario is the firm who hires a number of paralegals but does not let them make any real decisions without the approval of a supervisor.
Work should be performed where it makes most sense. In most PI firms, work is organised around specific departments or units. Payments for disbursements must go through accounts because they have a cashier and that cannot be done by a fee earner because they do not understand solicitor’s accounts rules. Billing is done by an internal or external costs draftsman because they are the specialists and know how to deal with costs negotiators.
Checks and controls need to be streamlined. A requisition for the payment of a disbursement is made by a fee earner who dictates a standard letter typed by a secretary which is then sent to Accounts where it is checked by a junior cashier and posted, with the cheque then signed by a partner and then sent back to the fee earner who will send it out to a supplier.
By re-engineering processes, we can see the following changes emerge:
- Work units change from functional departments to process teams.
- Jobs move from narrow task based jobs to multi-dimensional work, with all staff understanding the process as a whole.
- Staff roles change from the controlled to the empowered, with fee earners not slavishly following manuals or procedures but adopting a consistent client focused service.
- There is a switch from training to education, with an emphasis upon flexibility and initiative.
- A focus upon results and not activities, with staff being rewarded not for time recording but for creating value; fee earners are allowed to earn as much as equity partners.
- Values change from working for clients and not partners or supervisors.
- Partners’ roles change from financial scorekeepers to leaders, acting as coaches, motivating and guiding staff; they also move closer to clients and staff.
BPR and information technology
The point has already been made that IT should not be used to improve existing obsolete processes but rather as an essential enabler to allow a practice to re-engineer the processes. IT, if misused, can make matters worse by adding further layers to an already bureaucratic set of processes. However, it is only through the use of IT that a fundamental change can take place to the processes which hitherto could only be done manually. Consider the following:
Conventional wisdom: PI fee earners need an office and a secretary.
New rule: PI fee earners work without support and use workflows to automate tasks.
Conventional wisdom: The best contact with a client is personal contact by interview.
New rule: Seek the most effective way to contact the client, which will often be by electronic and telephone communications.
Conventional wisdom: Clients must be given periodic updates by letter or by telephone.
New rule: Web-enabled systems allow clients to check their files when they want and obtain a progress report electronically.
Conventional wisdom: Costs draftsman prepares the final bill for submission to the insurers.
New rule: Case management system runs off the bill automatically from time recording and data to produce a Jackson-compliant bill.
The central message is that change is inevitable with all areas of the law but the pace and scale of change is likely to be even greater in the PI market and in particular fast track cases from April 2013 onwards.
The personal injury landscape in the future will not of course be inherited by the pinstriped, office based lawyers, but modern lawyers who are customer focused and commercially capable of restructuring their business processes in response to change. This analysis is not only relevant to the small and medium sized PI firms, but also those larger firms who may find that building cars by hand on a large scale will no longer be commercially viable when they face bulk providers who will be doing things more efficiently by clicks and mortar in the new economy.
Jeff Zindani LLB MA, is the managing partner of Forum Law Solicitors with a specialist site accidentcompensation4u.com and a blog. He is also an independent consultant advising law firms on growth strategies and business process issues. This article is an abridged version of one of the chapters from his forthcoming book, Surviving Jackson: A Personal Injury Practice Guide, to be published later this year.