YVONNE WAKEFIELD: How conflicts of interest have evolved between lawyers and clients

Our commercial legal system was designed to protect and enforce the rights of people and businesses — a service that is vital to the healthy functioning of any economy and society. But perhaps it is time to ask whether the commercial legal sector has remained aligned with its purpose to help, solve and build. Some say traditional legal practice has evolved to be in service of itself, its own academic and intellectual follies, and driven by the desire to fill its own pockets.

This is an uncomfortable question, but one that must be asked because until fairly recently there has not been much choice for organisations seeking commercial legal counsel. Over decades of incumbency large firms have shaped the sector, which the market was expected to follow. Legal services were provided on lawyers’ terms, at their offices, and in their own time.

Another example is the practice of firms setting fee targets. The way traditional law firms grow is giving their lawyers fee targets. Essentially, this means that to be retained and promoted the lawyers are required to work and bill a certain number of hours to bring in a defined amount of revenue each month and year.

This means lawyers are incentivised to make each brief bigger and more complex, and by extension more expensive, rather than to serve clients in the quickest and most commercially viable ways possible. Of course, many lawyers in the system don’t make mountains of molehills unnecessarily, but many do.

This misalignment of incentives can create an environment in which the lawyer’s interests are pitted directly against those of the client — a conflict of interest that is built into the very fabric of daily legal practice.

This practice isn’t unique to SA. It is the norm within traditional firms globally, despite the industry being so heavily regulated. It has been accepted as the norm for so long that regulators, which are there to uphold the integrity of the profession and protect the public, don’t seem to notice it.

Of course, clients who suspect their legal work has been unnecessarily inflated have the choice to brief different lawyers next time, but until recently the choice has been between lawyers working under the same incentives and pressures. Choice for consumers is the basis of competition, which is essential to any functional economy, but choice between similarly incentivised alternatives means consumers usually end up the losers.

While many large firms are still in denial, their ability to dictate to the market has been eroded. Buyers of legal services no longer have to be price takers, but actively shape the types of services they need and the terms on which they will procure them. But even though they have been forced to scale back their hiring and promotions, the big guns still believe they will shape the industry.

All the industry needs to do is listen to its market, which just wants excellent legal work provided quickly and without bulk or fanfare. Providing what the market wants has allowed us to grow rapidly. The growth is relevant because it has been driven organically without capital investment and without expecting our lawyers to bring in clients or to work towards fee targets. This is right for the profession and right for the market it serves. It gets us back to why we are here — to help, solve and build.

Business model

With this in mind and to test assumptions, we asked our lawyer peers what they wanted. They mostly wanted to be able to do the work they love in a way that fits in with the rest of their lives, without responsibilities they were never inclined towards or sought out.

Lawyers should not be incentivised to grow firms. As with any service business, this is the job of management and its marketing and sales initiatives. We are clear that the business model for lawyers of the future simply connects talented lawyers with clients to develop commercially viable legal solutions quickly, devoid of the pressure on lawyers to cover large overheads and meet targets, or participate in marketing, team management and other corporate clutter. That’s it. It is tragic that going back to the basics, to the core of why we are here, should be considered innovative.

The idea was to find a way of doing business that benefits everyone, without any losers. It really is possible. Change is in our hands. We encourage bold movers to be deliberate and discerning when choosing between legal service providers. Ask the questions, and get the information you need before briefing. Clients have real choice, and by exercising it deliberately they can force the change they want to see.

• Wakefield is CEO of Caveat Legal.