The impact of the 2007 Legal Services Act on organisational form, the legal profession, and future skills requirements.
Lead Research Organisation:
University of Leeds
Department Name: Leeds University Business School (LUBS)
Abstract
The legal services sector is of fundamental importance to the UK economy both in terms of its contribution to national wealth, and because it plays an important enabling function for other enterprise in the UK. The sector is, however, undergoing a period of substantive restructuring as it responds and adapts to a range of endogenous and exogenous factors. Arguably, the 2007 Legal Services Act (LSA) is one of the most important developments precipitating sectoral change. Designed to promote competition and choice, the Act allows non-lawyers to manage and/or own law firms by introducing new types of organisational forms - Legal Disciplinary Practices (LDPs) and Alternative Business Structures (ABS). These changes are already intensifying competition within the sector and transforming the way in which legal services are delivered. To date, about 6% of law firms have either adopted a new structure or are in the process of doing so. Whilst this represents a small proportion of firms within the sector, emerging evidence (albeit somewhat limited) highlights the way in which 'traditional' firms are responding in other ways to the Act, for example, by adapting their business strategies.
ABS and LDPs are generating much interest in the market-place as well as amongst policy-makers and academic circles. Yet there is little, detailed empirical data about them or the way in which traditional law firms are responding to the emergence of ABS/LDPS and/or or their strategic response to the LSA more widely. The implications this raises for the skills required of future lawyers are also little understood.
The first objective of this research, therefore, is to collect empirical data of two kinds: quantitative and qualitative. The former will enable the study to present an overview of the legal sector's response to the 2007 LSA, whilst the latter will facilitate a deeper and in-depth understanding of such responses - essentially, the rationale underpinning them, the process and mechanisms through which change is effected and tensions associated with this, the impact on the firm in terms of governance, management and human resources, as well as its competitive position in the market place. The second objective is to use the empirical data to inform existing theoretical literature within organisational studies and economic sociology. In so doing, the research will focus on three core strands:
The organisational form: the way in which the emergence of new structures (i.e. ABS/LDPs) and other responses to the LSA 2007 is exacerbating the decline of the 'P2 firm', the theoretical, archetypal form associated with autonomous professional organisations such as law firms. The possibility of developing a typology of newly formed ABS/LDPs will also be considered.
Reconfiguration of the legal professional: ways in which the traditional power and dominance of lawyers is being challenged and contested both from within the organisational setting and externally by those delivering non-reserved legal activities. The study will examine the interaction and power dynamics between lawyers and non-lawyers in ABS/LDPs. It will also examine the threat posed by the commoditization of legal services and ways in which lawyers seek to redefine what it means to be a solicitor or a barrister - essentially ways in which they protect their 'professional project'.
Skills demands of lawyers of the future: as the emergence of ABS/LDPs is changing the role of lawyers, the skills and competencies expected of them is also changing. Within the wider context of the Legal Education and Training Review, this research will examine the types of knowledge, skills and values expected of lawyers in new organisational structures. The implications this raises for the type of training and education required for lawyers of the future will also be explored.
ABS and LDPs are generating much interest in the market-place as well as amongst policy-makers and academic circles. Yet there is little, detailed empirical data about them or the way in which traditional law firms are responding to the emergence of ABS/LDPS and/or or their strategic response to the LSA more widely. The implications this raises for the skills required of future lawyers are also little understood.
The first objective of this research, therefore, is to collect empirical data of two kinds: quantitative and qualitative. The former will enable the study to present an overview of the legal sector's response to the 2007 LSA, whilst the latter will facilitate a deeper and in-depth understanding of such responses - essentially, the rationale underpinning them, the process and mechanisms through which change is effected and tensions associated with this, the impact on the firm in terms of governance, management and human resources, as well as its competitive position in the market place. The second objective is to use the empirical data to inform existing theoretical literature within organisational studies and economic sociology. In so doing, the research will focus on three core strands:
The organisational form: the way in which the emergence of new structures (i.e. ABS/LDPs) and other responses to the LSA 2007 is exacerbating the decline of the 'P2 firm', the theoretical, archetypal form associated with autonomous professional organisations such as law firms. The possibility of developing a typology of newly formed ABS/LDPs will also be considered.
Reconfiguration of the legal professional: ways in which the traditional power and dominance of lawyers is being challenged and contested both from within the organisational setting and externally by those delivering non-reserved legal activities. The study will examine the interaction and power dynamics between lawyers and non-lawyers in ABS/LDPs. It will also examine the threat posed by the commoditization of legal services and ways in which lawyers seek to redefine what it means to be a solicitor or a barrister - essentially ways in which they protect their 'professional project'.
Skills demands of lawyers of the future: as the emergence of ABS/LDPs is changing the role of lawyers, the skills and competencies expected of them is also changing. Within the wider context of the Legal Education and Training Review, this research will examine the types of knowledge, skills and values expected of lawyers in new organisational structures. The implications this raises for the type of training and education required for lawyers of the future will also be explored.
Planned Impact
There will be a unique inter-disciplinary focus to the Fellowship in that this study aims to bring together world leading academic mentors from the fields of business law and practice, organisation studies and the management of professional service firms and engage with cutting-edge established firms and new entrants and with peak organisations including the sector regulators (LSB/SRA) and professional bodies.
The timing of this study allows for a unique opportunity to explore the impact of the new regulation on professional law firms, responses to a more commercialised environment and the implications for management. As well as highlighting changes in 'market conditions' and the 'institutional contexts' (Hinings, 2006) impacting upon organizational form and the legal profession, the study will have specific implications for the development of human resources in the sector and the skills needs facing the sector as identified by professional bodies, such as Skills for Justice. A key question is how far changing regulation will lead to changes not just in the organisation and delivery of legal services, but also in the skill mix of professionals themselves? A 2009 report, for example, indicated that the future skills needs in the legal sector include generic managerial skills around partnership working, business planning and change management, as well as commercial skills and tendering and unit cost skills. The Legal Education and Training Review (due to report in May 2013) is currently exploring these themes looking at the skills and knowledge required by lawyers in future and the impact of reforms on their monopoly status.
The timing of this study allows for a unique opportunity to explore the impact of the new regulation on professional law firms, responses to a more commercialised environment and the implications for management. As well as highlighting changes in 'market conditions' and the 'institutional contexts' (Hinings, 2006) impacting upon organizational form and the legal profession, the study will have specific implications for the development of human resources in the sector and the skills needs facing the sector as identified by professional bodies, such as Skills for Justice. A key question is how far changing regulation will lead to changes not just in the organisation and delivery of legal services, but also in the skill mix of professionals themselves? A 2009 report, for example, indicated that the future skills needs in the legal sector include generic managerial skills around partnership working, business planning and change management, as well as commercial skills and tendering and unit cost skills. The Legal Education and Training Review (due to report in May 2013) is currently exploring these themes looking at the skills and knowledge required by lawyers in future and the impact of reforms on their monopoly status.
Organisations
People |
ORCID iD |
Sundeep Aulakh (Principal Investigator) |
Publications

Aulakh S
(2016)
Changing regulation and the future of the professional partnership: the case of the Legal Services Act, 2007 in England and Wales
in International Journal of the Legal Profession

Aulakh, S.
Re-regulation and change in professional organisational fields: The case of UK legal services
in Jounral of Professions and Organizations
Description | The study took place in two phases. Phase I comprised analysis of secondary data sources and took place between July 2013 and February 2015. The second phase comprised qualitative research with Alternative Business Structures and private equity firms. Data collection began in March 2015 and continued through to August 2015. This data set has yet to be analysed and will be reported on next year. Thus, key findings reported upon below relate to Phase I of the research. The introduction of the Legal Services Act 2007, depicted as part of a "global tsunami against self-regulation" (Patton, 2008), represented a powerful mechanism to transform the delivery of legal services. Indeed, the removal of historic restrictions relating to the financing, management and ownership of legal practices - via the introduction of 'Alternative Business Structures' - attracted international comment and controversy for their 'radical' nature. The official and academic literature anticipated the legal services market to change radically as a result of increased competition, innovation, the entry of new providers, and extensive capital investment. As one of the first in-depth studies focusing on Alterative Business Structures, this study provides evidence of slow, incremental change, thereby challenging the official assumption that radical reforms would encourage radical change. To arrive at this conclusion, the The study employed the following proxies to measure radical change: (a) change sin the population of the field (market), either by an influx of new entrants or a large proportion of existing law firms converting to an ABS status; (b) a large proportion of ABSs extending ownership to non-lawyers through the appointment of managers; (c) large proportion of ABSs extending ownership to non-lawyers by raising capital investment. Taking each of the proxies in turn, the study found that the LSA did not lead to a radical change in the composition of the legal series market. ABSs represent little more than 3% of the total solicitor firm population and the majority of these comprise conversions by the incumbent population. However, the study did find that conversions were not spread evenly across the incumbent population. On the contrary, it highlighted uneven impact across market segments with law firms providing personal legal services, particularly those relating to personal injury, the most like to convert to an ABS. Their conversion reflects the joint outcome of policy reforms unique to this segment (LASPO 2012) and wider competitive pressures, including the fallout of the 2008 financial crisis. Moreover, the study found that, contrary to official and academic expectations, new providers did not enter the legal services in the scale imagined. On the contrary, new entrants are conspicuous because they are few in number. Yet, even though new entrants are few in number, the study uncovered important insights as to their characteristic and motives. The study revealed that new entrants primarily originate from two adjacent fields, that is, accountancy and insurance, although motivations and strategies for entering the legal services differed between the two sets of actors. With regards to the former, the study found that the vast majority of ABSs have extended ownership to non-lawyers and that often this was a primary motivation for seeking this status. With regards to external investment, the found that few firms had opted to take advantage of this opportunity. The study provides three explanations for this: (a) the business model of private equity firms; (b) the resilience of the partnership model; (c) disinclination of law firms to access external investment. Overall, conclusions from Phase I of the study are that the structural characteristics of the legal services field supported convergent change and hindered radical change. |
Exploitation Route | Findings from this study would be of value to regulators of the legal profession in the UK as well as international regulators and professional bodies in Canada, the USA (and elsewhere) to inform policy decisions about liberalising legal services in their jurisdictions. In the UK, findings from this study will benefit the SRA, the LSB and the Legal Services Consumer Panel by drawing out conclusions concerning the impact of liberalisation and making an informed assessment regarding the degree to which reforms are making legal services accessible and helping to address the justice gap. This will prove particularly valuable as enabling legal need to be effectively met constitutes a primary aim within the LSB's strategic plan for 2015-18. |
Sectors | Other |
Description | In January 2016 the CMA launched a market study into the legal services sector in England and Wales. The CMA's market study is seeking to examine whether the legal services sector is working well for consumers and small businesses and - if not found to be working well - how it might be improved. As a result of my research on ABS (funded by the ESRC) I was formally asked to submit evidence relating to a series of issues identified by the CMA. I submitted evidence through a formal interview, which took place on Thursday 25 February 2016. This evidence will help inform CMA's assessment as to how well the legal services market is working and, based on this assessment, lead to a range of outcomes. These include: • a clean bill of health • actions which improve the quality and accessibility of information to consumers • encouraging businesses in the market to self-regulate • making recommendations to the government to change regulations or public policy • taking competition or consumer law enforcement action, and • making a reference for a more in-depth ('phase 2') market investigation, or accepting formal undertakings in lieu of a reference In addition, as this study is focusing on the market in England and Wales, the CMA plans to use the outcome of this market study to inform any future consideration of similar issues in Scotland and Northern Ireland. |
First Year Of Impact | 2016 |
Sector | Government, Democracy and Justice |
Impact Types | Economic Policy & public services |
Title | Database of Alternative Business Structures |
Description | I have created a database of ABS firms, which includes information about firm characteristics and qualitative information about motivations for becoming an ABS, views on equity investment and organization structure and management arrangements. |
Type Of Material | Database/Collection of data |
Year Produced | 2016 |
Provided To Others? | Yes |
Impact | The database has allowed me to create a taxonomy of different types of ABSs, which hitherto did not exist. It also brings together essential data about them in one place, again, something which has not been undertaken. Analysis of the database deepens our understanding of ABSs. It will also help inform future research questions and applications for funding. |
URL | http://dx.doi.org/10.1080/09695958.2016.1214135 |
Description | Evidence submitted to Competition and Markets Authority (CMA) |
Form Of Engagement Activity | A formal working group, expert panel or dialogue |
Part Of Official Scheme? | No |
Geographic Reach | National |
Primary Audience | Policymakers/politicians |
Results and Impact | In January 2016 the CMA launched a market study into the legal services sector in England and Wales. The CMA's market study is seeking to examine whether the legal services sector is working well for consumers and small businesses and - if not found to be working well - how it might be improved. As a result of my research on ABS (funded by the ESRC) I was formally asked to submit evidence relating to a series of issues identified by the CMA. I submitted evidence through a formal interview, which took place on Thursday 25 February 2016. This evidence will help inform CMA's assessment as to how well the legal services market is working and, based on this assessment, lead to a range of outcomes. These include: • a clean bill of health • actions which improve the quality and accessibility of information to consumers • encouraging businesses in the market to self-regulate • making recommendations to the government to change regulations or public policy • taking competition or consumer law enforcement action, and • making a reference for a more in-depth ('phase 2') market investigation, or accepting formal undertakings in lieu of a reference In addition, as this study is focusing on the market in England and Wales, the CMA plans to use the outcome of this market study to inform any future consideration of similar issues in Scotland and Northern Ireland. |
Year(s) Of Engagement Activity | 2016 |
URL | https://www.gov.uk/government/news/legal-services-study-launched-by-cma |
Description | LSB research into investment in the legal sector - workshop |
Form Of Engagement Activity | A formal working group, expert panel or dialogue |
Part Of Official Scheme? | No |
Geographic Reach | National |
Primary Audience | Professional Practitioners |
Results and Impact | Legal Services Board organized a workshop on 1 December 2016. I gave a presentation on research findings and subsequently contributed to design of survey that is currently being sent to legal practices. A further workshop is planned in April 2017. |
Year(s) Of Engagement Activity | 2016,2017 |
URL | http://www.legalservicesboard.org.uk/news_publications/LSB_news/PDF/2016/20161208_LSB_Launches_ABS_S... |
Description | Media interest - article published in local press |
Form Of Engagement Activity | A press release, press conference or response to a media enquiry/interview |
Part Of Official Scheme? | No |
Geographic Reach | Regional |
Primary Audience | Media (as a channel to the public) |
Results and Impact | Article sparked interest of Law Society and I was contacted to support the Society's research on ABSs. I was also contacted by an MA student from Edinburgh University and was interviewed as part of her dissertation on ABSs. I developed links with Law Society that did not previously exist. I will be contacting the Law Society to be involved in future research projects. |
Year(s) Of Engagement Activity | 2014 |
URL | http://www.yorkshirepost.co.uk/business/business-news/big-four-accountants-pose-very-serious-challen... |
Description | Participation in rountable discussion about regulatory risks facing law firms |
Form Of Engagement Activity | Participation in an activity, workshop or similar |
Part Of Official Scheme? | Yes |
Geographic Reach | Regional |
Primary Audience | Professional Practitioners |
Results and Impact | The talk stimulated discussion and contributed to production of the SRA Risk Outlook. I engaged with practitioners, developed new relationships which are proving useful to the current research. |
Year(s) Of Engagement Activity | 2014 |
URL | http://www.sra.org.uk/risk/outlook/risk-outlook-2014-2015.page#start |
Description | Presentation to industry and professional body in February 2015 |
Form Of Engagement Activity | A talk or presentation |
Part Of Official Scheme? | No |
Geographic Reach | Regional |
Primary Audience | Professional Practitioners |
Results and Impact | Presentation stimulated much discussion. It helped with the second phase of the research and the recruitment of practitioners. It enhanced the knowledge of the SRA. The SRA subsequently disseminated these findings to the Law Society and the Competition and Market Authority. |
Year(s) Of Engagement Activity | 2015 |