146. Liability: limitation plus mitigation

Limiting liability is great in that it protects you from a one-off almighty clanger. But, whether or not you ever have to resort to it, limited liability will do nothing for your reputation and little for your client relationships. These are the keys to long term success.

The continuing rise of consumerism and the decline of deference, mean clients - including business clients - are more aware of their rights and more likely to act against their legal advisors accordingly.

This year, solicitors in England and Wales, and Scotland, face the prospect of complaints against them being handled by a body independent of the profession.

The cost of professional indemnity insurance is expected to go up, after a period of relatively low pricing.

In response, 45% of top firms, according to Legal Week (28/02/08), now limit their liability either across the board or in specific matters. Also, firms of all sizes and types throughout England and Wales are changing their status to LLP. But what we find remarkable is the general unwillingness of law firms to incorporate proper management into their business strategy - the type of management that mitigates risk and significantly reduces the likelihood of the need to hide behind the bulwark of limited liablility.

Management doesn't bring in any fees, it's true. But effective management does safeguard your business from strategic, operational and regulatory risk. It also improves productivity and enables your business to grow sustainably, proactively adapting to changes in the legal services market environment. It is this long-term view that some firms of solicitors seem unwilling to take.

For hundreds of years, management has, arguably, been unnecessary in a firm of solicitors. The legal professionals you employ are responsible individuals who are aware of the risks associated with the work they do. Why not just leave them to get on with it?

Because things do go wrong - especially in the modern world of law with all its time pressures and fast communications.

Virtually all such big issues we have come across in legal firms could have been avoided by very basic management such as you would find in virtually any other business and which, once the system is established, need take only minutes every week to operate effectively.

Many firms know this. The topic appears frequently on parters' meeting agendas in one form or another (Lexcel, ISO, CEO, FD, COO...). The two big problems are where to start, and how to stitch it all together. This is where quality standards such as Lexcel and ISO 9001:2000 come in. They provide a simple framework for the management of quality (and hence risk). On their own they can do little for your firm but, if you are longing to get a grip and set your house in order, they are superb tools for you to use. We know of a number of firms that have been transformed - not just in deed but also at heart - by the adoption of quality management. Lexcel and ISO may be the tools you need to turn the culture of your firm around.

Limiting liability is a sensible precaution and a comforting last resort, but how much better for the future survival and prosperity of your business to manage it effectively, so the people you employ and the work they do don't give rise to client dissatisfaction or a beating from the regulator.

Why not ask for an exploratory meeting to discuss your firm's situation - free and without obligation.

Click here for an online enquiry form or phone 0127 865 1110.

copyright © 2007 j t-w consulting ltd. e&oe.

Law Society registered Lexcel Consultants. Quality Assured: An ISO 9001:2000 certified and registered company.