David Lee: Firms under the microscope Some CEOs don't seem to know what they stand for - and that could prove very costly, reports David Lee WHEN I interview managing partners, chief executives or chairmen of law firms, I always ask this simple question: "What is in your DNA?" It is a question designed to find out what lies beneath, what makes a firm tick, what makes it different. In these challenging economic times, everyone agrees that standing out from the crowd is absolutely vital if a firm is to retain and win sufficient business to secure a bright future. Yet perhaps the question isn't so simple after all - and I am constantly surprised how limply some captains of our legal industry answer it. Several times, the reply has been "What a good question" - and from experience, I take this to be a stalling tactic which means, "Oh hell, I never saw that one coming" or possibly "I need to speak to the marketing manager afterwards and complain about the poor briefing." One managing partner of a large firm rocked back in his chair, went slightly flushed and bug-eyed and, for a split second, looked at me as if I had just walked in and placed a pile of dogdirt on his desk. He recovered his composure relatively quickly, but his gibbering, stream-of-consciousness reply was little better than "What a good question." Not everyone answers so badly. One recent interviewee simply replied "Quality," then elaborated by explaining that his firm sought to be excellent in everything it did. If genuine quality is running through your veins and imprinted on your DNA, then that's not a bad start. Another big firm boss gave a very detailed answer encompassing quality, exceptional client service and, interestingly, authenticity. Yet the failure of so many firms to answer effectively suggests one key conclusion; although all of them might have been through endless reviews of all aspects of their business, many have not stopped to reflect on their core purpose. They have not gone beyond the bottom lines of income and expenditure to try to understand the beat of their own firm's heart. I found this very puzzling, as all firms talk ad nauseam about providing a high-quality service to clients - and understanding what makes the client and their business tick. "It's all about the clients and excellent client service" has become a kind of mantra of the economic downturn, as if clients didn't really matter that much in the past, as if they were just another notch on the financial bedpost during those heady days when the good times just kept on rolling. Surely, law firms shouldn't need to say it's all about clients - it should be a given, a very basic building block to which much more sophisticated layers of excellence can be added. Basic client service has to be good in 2012 - because clients expect much more, and are far more likely to be shopping around for their legal services and demanding that those services are delivered in a more, ahem, cost-efficient manner. This twin challenge of lower prices and greater competition will only be exacerbated with the coming of alternative business structures (ABS). It might take time for ABS to have a significant impact in Scotland, as the opportunities in commoditised areas of law will be much greater (and more attractive in the short term) in the far larger English market, but those challenges will certainly come, whether from Rocket Lawyer, the Co-Op or elsewhere. As ever with challenges, there are also opportunities - especially for those law firms that have kept the "man o" business" mentality. Step back a couple of generations and it was natural for lawyers to offer holistic advice and support, above and beyond the technical work that all clients expected as a matter of course. Lawyers were trusted business advisers - and, interestingly, this sort of language is now making a strong comeback and is another regular feature in interviews, though it is delivered with varying degrees of confidence and self-belief. Again, surely this ability to act as trusted advisers should be a given for any firm worth its legal salt. So why only now is this sort of language returning to the parlance of managing partners and chairmen? Possibly because a generation of lawyers have not had to go that extra mile. The work was there, they did it, then they moved on to the next transaction, whether it be a house sale or a huge corporate deal. I am not seeking to tar all lawyers with the same brush, but when the work was there, they often didn't need to add the bells and whistles - a quick and efficient service was what the clients wanted, so they too could move on to their next project or deal as the business world spun at an ever more frantic pace. In 2012, that business world is very different, and surely it will be those who have continued to play the part of the trusted adviser - and instilled those values throughout their firm as part of a well-rounded, long-term strategy - that will have the competitive advantage as the legal pips start to squeak. Another common refrain from interviewees is that Scotland has too many law firms and too many lawyers - and that we will see more of the consolidation that has already picked up pace at all levels in early 2012. If Scotland is indeed overlawyered - and if there is more economic pain to come - then all firms really need to know what is in their DNA. If not, to borrow the words of Private Frazer in Dad's Army, they are surely doomed. A shorter version of this article originally appeared in the January-February edition of Signet, the magazine of the WS Society.