Geoff Wild looks at what lawyers can learn from the way GP practices have been run.
Alternative business structures for law firms expose a number of interesting issues about what lawyers actually do and how they charge for it. There is possibly some learning that lawyers can draw from what is happening in GP practices.
Traditionally, GP practices were partnerships which were owned by GPs. The NHS contracted with the partnership and the GPs decided between themselves who would provide the services to patients. This model meant that the running of the business unit was in the hands of professional doctors and hence, so the theory went, they would take management decisions that took proper account of the interests of patients. However, the model had three major flaws which have been exposed in recent years.
First, paying GPs to be managers of the business unit was very expensive. Every time a GP was needed to undertake management functions, an employed GP (or worse a self-employed locum GP) needed to be engaged to cover the surgery that the GP would otherwise be doing. This meant that the NHS was paying way over the odds for management of GP practices.
Secondly, the GPs were by and large not very good managers of both the people they employed (practice staff, nurses, etc). This is hardly surprising as they were trained as doctors and not managers.
Thirdly, GPs are traditionally very risk averse in their approach to the delivery of services and do not have easy access to capital. Some practices have been highly innovative but they tend to be the exception, and quality standards have been driven from the centre through incentive schemes.
The net effect is that when GP practices come up to tender (as they must under the Public Contracts Regulations 2006), GP partnerships are very often losing out to companies with professional management who employ GPs and just pay the GPs for the delivery of professional services.
The traditional partner model in a law firm seems to have all the defects of the GP practice, and however they restructure themselves (and many have done so in a highly effective way), there is still the fundamental problem that the owners of the business are the same people who are trained to deliver the professional services that the business is delivering, and a relatively high proportion of the hourly rate paid to an assistant solicitor is used to pay the profits of the partners.
So the traditional law firm model is under great pressure. Perhaps we have too many lawyers and the law of supply and demand will mean that the lawyers just have to accept earning less than they have done under the partnership model. Like most professional footballers, lawyers may need to accept that the days of sky high earnings are at an end and they will have to put up with the same type of salaries that other professionals (who do not own their own businesses) are paid.
Geoff Wild is Director of Governance and Law at Kent County Council.