Kent County Council plans to launch its wholly-owned alternative business structure in April 2017 and has set ambitious targets for revenue growth at the legal services provider.
The business, whose working title is Invicta Law, will be organised along four specialist work-streams: corporate and commercial; litigation; employment and education; and social care.
The turnover at present for Kent Legal Services is £10.8m and the aim is to grow that to £11.3m in Year 1, £17.8m in Year 5 and £29.8m in Year 10.
Geoff Wild, the ex-Director of Governance and Law at Kent, has become chief executive of the business. His former post has been deleted, with Ben Watts becoming the county council’s interim General Counsel ahead of a permanent appointment to the new role before the end of the year.
The county council hopes to secure an ABS licence from the Solicitors Regulation Authority in November.
The vast majority of Kent Legal Services staff are to TUPE transfer across to the new business in due course. There are 138.62 FTEs. This amounts to 150 people of whom 14 are in business support and finance. There are also 22 locums.
The county council will, however, retain a commissioning and ‘intelligent client’ function. A small core team of four lawyers working under the General Counsel will handle corporate governance work, such as constitutional advice, ethical issues and advice to members and chief officers on political and legal issues arising at the heart of the organisation. All transactional work will go to the ABS.
The Cabinet at Kent backed a detailed business plan for the wholly-owned ABS in March this year, having previously conducted an unsuccessful 18-month search for a joint venture partner for the Kent Legal Services business.
Interviewed by Local Government Lawyer this week about the plans for the ABS, Wild said that although a number of organisations had expressed interest and several had “put their hats in the ring”, ultimately none of them had proved to be either suitable or able to meet the council’s criteria for establishing the joint venture.
“Although it was fruitless in one respect, in that it didn’t deliver what it was intended to do at the outset, it was a very useful exercise in establishing what the market would sustain and what it was willing to do and indeed what the expectations were of the market when thinking about setting up an ABS of this kind,” he suggested.
“A lot of valuable intelligence and information was gathered during that period which was used in formulating what eventually became the council’s preferred option, which was to set up this ABS on its own. Having gone through that process, it reflected upon all the information and experience it had gained and recalibrated its business model to say ‘well, this is something we can do on our own, something we can create ourselves with the right skills, the right investment and the right planning’.”
Wild said the last 12 months had been taken up with painstaking preparation “because this is not something we would embark on lightly, this is not something that anyone would take on without a great deal of preparation and planning”.
He described the legal services market as “very congested, very competitive and cutthroat” but said that his team had identified a very clear niche in focusing very much on the public sector.
“We are not trying to be all things to everybody. We are very much looking at where our strengths are, where our tradition and reputation lies and that’s very much with the public sector and that’s where we are going to focus first and foremost,” he said.
“There’s still huge demand in the public sector for good quality, cost-effective legal advice which identifies with that sector, that can really understand [its] needs. That’s not readily available at the moment, in my opinion. We have some very good in-house teams and we have a number of law firms who profess to specialise in the public sector, but what we think we can do is provide an alternative to that which fills a gap in that market.”
The business is “not looking to take over the world” but is looking to take “a fair chunk” of the market for providing legal services to local authorities, blue light services, the NHS, transport authorities and educational establishments, Wild said.
“We are looking to grow the business in a way that we wouldn’t have been able to do if we stayed in-house. We did look seriously…. as to whether or not that [staying in-house] would be right for us. Frankly, what we saw was that we would basically be presiding over our own decline with the restrictions coming forward from the SRA,” he said.
Invicta Law’s chief executive argued that the ability for in-house legal teams to trade widely and profitably in the future was going to become more and more restricted. The same was true of their ability to gain necessary funding and investment in improved technology, in improved marketing and sales capacity and business processes, “which we see that we desperately need because they are things we have had to do without up until now”.
If the business had stayed as it was, it would have had to reduce its capacity, he said. “Standing still was not an option, staying as we are was not an option.”
Describing the ABS as the natural next step in Kent Legal Services’ journey, Wild suggested it was approaching it in a different way to a number of the other established ABSs in local government such as Harrow/Barnet and Essex. “They are basically preserving the in-house form and structure but they are having the ABS as a bolt on to that, so they can put a different hat on, pop into that ABS capsule when they need to do that work and then come back to the mother ship. We are setting the whole ABS apart from the council and transferring all our staff into it and setting up as a freestanding entity, albeit wholly owned by Kent County Council.”
A ten-year contract to deliver the county council’s legal work will provide a platform for growth, he said. “Our challenge with Kent is obviously to reduce our dependence upon them, to reduce their legal bill over the course of time and to generate income from other sources. For Kent, what they want is a reduced legal bill each year, they want guaranteed levels of performance and quality, they want an income stream by way of a shareholder dividend and they want an appreciating capital asset, which are the benefits they see from investing in this.”
The financial model for the business assumes that external income will grow to £3.5m in Year 3, £6.7m in Year 5, £10.8m in Year 7 and £17.1m in Year 10. By Year 7, 52% of the income will be generated from external clients.
Wild said the business was looking nationally for its growth. “We work for over 600 other public bodies nation-wide, which can be as far north as Cumbria and as far west as Cornwall and all points in between. We are used to working for clients on a national basis.”
He acknowledges that “geography is not in our favour, we are not central to the UK, we are in a peninsula in the South East corner of a very congested country. We can’t just be in somebody’s offices within an hour at the drop of a hat, so we have to take that practical, logistical difficulty into account."
But he says that there are ways of doing much of the work remotely or by having arrangements with local contacts so Invicta Law could have “almost like a franchising or agency arrangement with like-minded organisations whether in the public or the private sector who could act as our representatives in particular locations”. If the business is successful in building up its national portfolio, it could then look to establish more permanent presences, he added.
Wild said the ABS’s approach will be very much geared towards putting the customer first in everything it does and the procurement of a new IT system is key. “We are designing it around a customer portal, making it as easy as possible for our clients to access not only their lawyers but their work in progress, their billing and so on. We will have mobile phone apps and other means by which they can access their lawyers in the same way as they might for example access their online bank or other professional services.”
Wild said the new system will automate a significant amount of what the team does now and give clients more input into their legal work. “It will make it far easier to them to do business with us,” he suggests.
The team will also be leaving County Hall for new premises in Maidstone. “It will be a much more modern and professional environment because we are having to instil a new working culture which would not have been so easy if we stayed in this building, plus SRA rules require us to move out anyway,” Wild said.
He added that the staff at Kent Legal Services had been “amazingly positive” about the plans.
“They have had to be very patient, as we all have, in waiting for the council to arrive at its conclusions and decide where it wants to go, and that has been perhaps the most frustrating part of this, the length of time it has taken to arrive at a conclusion,” he said.
“But that was time that wasn’t wasted. They have known about the changes afoot for a long time, they have had their questions answered, they have had the opportunity to raise concerns and issues and there has been lots of communication with them around the transition that’s going to happen. They all, almost bar none, have seen the positive benefits in this for them.
“There was a genuine question which we all asked - staff asked, management asked - namely why couldn’t we stay as we are? We are not a failing service, we are doing very well and we have been very successful, why don’t we just carry on as we are? But the stark answer is that unfortunately we can’t. Things won’t stay the same. If we did, the risks to job security of staff would be greater.”
Wild said staff had had the opportunity to be part of something new, to help form and shape the company in which they were going to be working and this was very appealing.
“I am trying to engage as many of them as much as possible in this process so that they can feel that this is their company, that this is something they have had a real stake in. That takes an awful lot of work and preparation but it’s a key element because if I can’t bring my staff with me on this, then I have no hope of succeeding. So it’s very important that the staff are absolutely 100% signed up to this and, so far, I am very pleased with how that has gone.”
The move to ABS status will also give more flexibility for staff to be rewarded properly for the effort that they put in, Wild said. “The ability within a local government environment to move outside the rather rigid pay scales and reward structure is not easy. In a company of course we have got that ability to be flexible, to really incentivise, to motivate and to reward staff depending on their performance and productivity. The opportunities for them are far greater.
“Having said that, a lot of staff have wanted the reassurance that we have been able to give them that they will TUPE across under their current terms and conditions and their pensions benefits as well. That’s very important to begin with, for staff to have that reassurance. The opportunity will be there from day one for them to switch onto the company’s terms and conditions which many of them may well see as being more attractive and beneficial to them.”
Wild added that the development of the ABS would be “an unfolding story” over the next few months, with key appointments to be made (a Finance Director and a Head of Business Development), non-executive directors to come on board and a new website to be launched.