Trusted Adviser – what would happen if there was an unanticipated disaster at your law firm?

 In Comment, Gill's Blog

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How would you feel if you walked into the office to find the SRA, the police and the local press camped outside the door? Scandals have almost become commonplace at present – be it the News International ‘Hacking’ scandal; the Nat West IT glitch; the Barclays Bank Libor fixing scandal; the G4S Olympic Security scandal and the HSBC Money laundering scandal – I could go on. What links these disasters and could they happen to you?

Value destruction

Most businesses of any kind spend time and effort building their reputation. From time to time a simple slip of the tongue causes that trust to be lost e.g. Gerald Ratner wiped £500 million from the value of Ratners jewellers with one speech in 1991.

He said: “We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for £4.95. People say, ‘How can you sell this for such a low price?’ I say, because it’s total crap.”

What is the common theme of recent scandals? Is it that the culture underpinning the business had become focused only on greed e.g. selling more newspapers became the goal rather than upholding investigative journalism; not wanting to take a database ‘offline’ when updating the software and so presumably cutting corners; making more money for the Bank on which bonuses would be paid became more important than honesty; gaining huge contracts but failing to supervise them; turning a blind eye to crime and not caring enough about processes and systems to spot criminal activity became less important than opening new accounts.

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In each case a huge corporation has lost customers, respect and share value. In each case heads have rolled or are likely to roll. In some cases criminal charges may have been or could be brought. In every case value has been destroyed and reputations shredded.

The lawyer as ‘trusted adviser’

To build a positive reputation depends on creating trust between people be they in the business or outside the business. Over hundreds of years lawyers have built a trusted brand. We are regularly regarded as some of the most trustworthy people to do business with as a general group compared to others such as bankers or estate agents. Within every group there are of course bad eggs and lawyers are no exception. There are also plenty of jokes and literary references to why lawyers are not liked but that is quite different I would say to not trusting us.

It would be all too easy therefore to sit back and assume that your firm has no reputational risks. As Nick Jarrett- Kerr said in his article Scandalous risks in Law Business Review for December 2011 “…organisations can be brought to their knees by events which are highly improbable, often totally unpredictable but – if they happen – potentially catastrophic.”

The pressure on a firm’s personnel to produce high fees and the pressures of time and cost brought to bear from clients arguably causes reputational damage or even demise e.g. Arthur Anderson. This sort of pressure could just as easily cause a partner in a small firm to cut corners, inflate invoices or succumb to stress any of which might produce the horror of a client walking into the office and attacking the solicitor.

The solicitor’s brand in Will writing has been diminished by the work of those in the profession who dabble and who are not careful enough since the Legal Services Board Consumer’s Panel made it clear that their ‘mystery shopper’ exercise found Wills drafted by solicitors were equally at risk of being incorrect to those drafted by the unregulated. Would you see the behaviour of your firm as helping to damage the solicitor’s brand in this or another area?

What does ‘reputation’ mean to you?

Arif Zaman in The Risk Management Universe, Hillson (2006) BSI listed the following definitions:

  • “A collective representation of a company’s past actions and results that describes the company’s ability to deliver valued outcomes to multiple stakeholders
  • The shared values of the company by its stakeholders that drive the trust, confidence and support an organization can expect from the reputation held by a person
  • How each stakeholder group experiences the company’s brand through its operations and conduct in everyday situations and
  •  How close these experiences are to what those same groups expect the company to do in the same situations”

In a solicitor’s case the reputation may be for being quick to deal with a problem; to charge a fair price; to be a reliable employer. In a barrister’s case it may simply be based on the last case that they ‘won’.

In a partnership it only takes the poor behaviour of one partner to damage the reputation of the whole firm. Do you have an open and honest atmosphere at the office which would enable the junior partner to know what the senior partner is thinking and doing just as much as the senior partner might know about the junior partner’s activities? It would be a miserable firm where all activities were controlled by the leader. There is probably a strong presumption that everyone is acting properly and with integrity. Are they? How would you know?

Risk management

In our new world of Outcome Focused Regulation we must manage our risks but this tends to be about ensuring there is no loss to the firm which makes it financially unstable or a risk to clients and that crisis management ensures that there is a business continuity plan.

Reputational risk should be understood through the eyes of the firm’s clients, staff and partners. However, the danger is to assume that customer satisfaction means doing whatever it takes to keep the client happy or believing that client satisfaction from a survey leads to customer loyalty. The employees of to-day may become the team leaders of tomorrow and their view of what the company respects will inform their behaviour. The ‘war for talent’ which only rewards fee earners who generate high fee income and not those with emotional intelligence, for example, may result in a lack of internal knowledge sharing; poor delegation and client hogging.

What should you do?

Whilst it is impossible to predict something that has never happened to your firm and is itself a rare event for lawyers in general it is the adage ‘expect the unexpected’ which springs to mind.

It is not the particular unexpected event which has to be identified but rather how you and your firm are likely to respond to any disaster however unlikely or however serious. Considering how your firm’s ‘moral compass’ would operate and identifying the firm’s core values help when engaging new personnel; tendering for or acquiring new clients and seeking merger partners. Would you be able to answer the question ‘Are they likely to fit?’ and know why you came to that answer.

An open firm where the atmosphere was collegiate and supportive may have spotted the problems brewing for the partner who was recently sent to prison for theft but whose mental health problems were apparently exacerbated by marital breakdown. Equally, did the managers in the firm where the partner was suspended by the Solicitors Disciplinary Tribunal for writing intimidating letters to people on behalf of a client actually know they had been sent and what they said; or, if they did know, was this kind of behaviour in line with the ethos of the firm? Is your firm vulnerable to behaviour like this which could cause trouble?

Senior partners, team leaders and department heads who ‘walk the talk’ and don’t sit behind closed doors in an ivory tower are much more likely to be aware of what is going on under their noses and in the community. This enables timely action to be taken.

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You and your firm’s reputation is important….

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