4. Fondia: “We Law Your Business”
As the elevator door opens toward the entrance of law firm Fondia’s office, we wonder whether we mistakenly pushed the button to a creative company’s floor. A few leaflets that read “make law, not war” and “we law your business” assure us that we are in the right place but a distinct feeling of surprise remains. The scent of good coffee blends in with the feel of a unique and inspiring work environment. It is no wonder that Fondia has been awarded as “a best place to work.” More than 10 years ago, its founders realized that to follow their intent of rewriting the legal industry they had to break the taken-for-granted rules of their own profession. Could they turn legal counsels into business managers’ best friends?
Fondia is a law firm dedicated to business law, established in 2004 and headquartered in Helsinki, Finland, with offices in Sweden and Estonia. The firm operates with over 60 legal experts with knowledge of several industries. Its bold approach to legal services granted visibility to its practice through the award of most innovative law firm in corporate strategy in 2013 by the annual Financial Times Innovative Lawyers Report which is regarded as being among the best researched in the market and the top legal rankings in Europe.
Fondia rewrites the legal industry by taking a proactive approach to law and breaking with the culture of traditional law firms. The company designed a portfolio of services that is strongly customer-oriented and favors efficiency, effectiveness, and flexibility. It includes fixed fee services, standardized and free digital legal support, virtual tools to manage critical documents, and expert case-based counseling. Thus, the core of Fondia’s innovative service is its proactive approach to law that is substantiated mainly in an outsourced legal service model, based on a predefined fee, which is used by well over 100 companies.
Furthermore, legal services that can be standardized, such as advisory on contract models, are offered in a one-stop shop mode at low fees. This is useful for start-ups and entrepreneurs that benefit from getting off on the right foot by addressing their risks early, but have limited resources and cannot afford expensive legal counseling. After all, the management of legal affairs underlies a company’s business and its growth. Neglecting it might result in major liabilities and poor business performance. Fondia’s service model makes costs with legal compliance lower and predictable for clients.
Entrepreneurs and corporations deal with multiple demands concerning legal issues, which require distinct levels of expertise and work. There is routine work around contracts, expert in-depth work to deal with tough situations and litigation, and specialized work by which to deal with industry-specific issues that require know-how and skill. Whereas having an in-house legal department may prove inefficient for many companies, external legal counselors may be ineffective in dealing with critical problems and may lack substantial knowledge of an industry and the client at hand. Therefore, Fondia’s model creates conditions for its lawyers to focus on developing expertise, in order to offer tailored counseling for their clients when needed, by enabling efficient management of time and resources within the firm. Clients appreciate running their business without worrying about legal matters, provided that legal support is present in the background, first and foremost when clients are not aware of needing it.
WOW: From Hourly Billing to the Fixed Fee
Traditionally, external legal service is billed by the hour, regardless of whether it is a “Jaguar” or a “Mini” type of work. In this model, law firms have made substantial revenues by charging high hourly fees for work that was routine, repetitive, and highly standardized, carried out by junior associates who were paid much less than experts and partners. Although clients might have complained about expensive legal bills, this model remains the same until today. However, fixed fee billing models have been discussed more and more in the industry, partly because new entrants have introduced them and economic downturns have forced companies to cut operational costs, including reducing their budget for legal services.
Fondia’s outsourced legal service model consists of a fixed fee service that covers continuous legal support for the period agreed with the client. The fixed fee includes an initial legal analysis, a plan tailored to the client, the formation of a team of lawyers with the adequate competences for the client’s business needs, and continuous service for daily legal matters.
Fondia gets acquainted with their clients’ company and business model facilitating close collaboration and effective support for non-standardized legal work. Getting acquainted involves interviewing executives and managers to learn about the business in order to get an overall picture. This helps Fondia to build a suitable team of legal experts to work with the client. It is also a basis for discussing the necessary amount of work and the fixed price of the service. Furthermore, the client has access to the resources and know-how of the whole pool of experts if necessary. Close collaboration and a comprehensive understanding of the business help Fondia anticipate these needs and propose proactive approaches to address them.
The overall benefits for General Counsel are that he/she will not be surprised by the bill and thus it will also be easier to make the legal unit’s budget. Most important of all is the trust in the local lawyer who takes care of all important legal aspects of the business and the legal risks are minimized. The local business managers can concentrate on the business.
—Maire Laitinen, Legal Counsel/Sales Team Leader for Fondia’s blog
Furthermore, Fondia offers a special fixed fee service tailored for young gaming companies, which was developed in cooperation with these companies. The service includes a risk analysis that delivers the legal issues to which the company should pay attention, phone support with an assigned lawyer who is available during office hours for an unrestricted number of phone calls, and access to an online legal database that stores answers to legal questions compiled by lawyers, contract templates and online tools for managing legal matters. The service has a fixed setup fee of €300 and a monthly fee of €150. Otherwise, legal support for specific matters is agreed separately with Fondia and billed hourly or with a fixed price. The fixed fee service benefits start-up companies, especially in the high-risk gaming business, by providing legal support at a low cost.
OOMPH: Virtual Tools for Legal Support
Fondia developed virtual tools to support basic legal services and make available safe information storage for the combination of a fixed setup fee and a fixed monthly fee regardless of the amount of users or content managed. For clients, using the online tools is more cost-efficient than requesting work directly from a lawyer.
The VirtualLawyer tool is a free legal databank compiled by Fondia’s lawyers which functions as an information source for a company’s personnel working in a wide range of functional areas, including HR and corporate governance, as well as for entrepreneurs. VirtualLawyer was developed for non-lawyers, cutting all the jargon that characterizes legal documents and is difficult to understand by lay people. The online tool was designed to be a 24/7 self-help tool for businesses that need to find answers to straightforward legal questions, covering the typical issues encountered by companies in their daily business. It is accessible by anyone by registering on the website a mobile phone number to which an access code is sent. VirtualLawyer can be complemented by a document model package, including over 150 contract templates and implementation guidelines, for a fixed annual fee (€240), updated by legal experts free of charge.
I don’t see how anybody [in the legal sector] could think they can survive without innovation, or rely on traditional ways of doing things—there is no longer such a thing as traditional.
—Jorma Vartia, former Managing Director, in a comment for the Financial Times in 2013
The transaction services offered by Fondia, which include mergers and acquisitions, are very much supported by virtual tools. They systematize procedures, streamline standardized processes, and help clients manage their information pool and follow the legal counseling projects. Thus, these services facilitate Fondia’s approach of having the same lawyer managing the whole transaction project. Information blackouts are avoided and electronic tools to manage and process documents increase effectiveness and safety in the due diligence process.
Avoiding Disputes and Legal Risks: the “Make Law Not War”
Law firms are popularly seen as doing business that lives off litigation and dispute resulting from problems raised in their clients’ business. In a traditional professional service industry, such as the law, which has not been transformed yet by the digitization and commodification of services, change has been slow. Although other professions that also deal with business risks, such as accounting and finance, have adopted risk management strategies, corporate law firms maintain a model of dispute resolution and reactive problem solving rather than anticipatory and proactive risk management for their clients. Not surprisingly, reacting to legal issues and litigating on a case-by-case basis is deemed the primary operating model in the industry.
Fondia proposes a distinct approach in which it proactively develops anticipatory suggestions to its clients, based on long-term cooperation, to support the business and secure the company’s legal base. The proactive law approach decreases potential costs by laying down legal strategies to anticipate and manage future risks.
Open Culture and Shareholding Structure
Traditionally, law firms have a pyramid organizational structure with a few partners on top and many junior associates at the bottom, which is generally reflected in the kind of legal work each type of legal counsel does, their engagement in the firm, and their monthly pay. The Financial Times reported in 2013 that this structure was increasingly threatened. Indeed, Fondia had anticipated this expected change. Fondia was founded as a shareholding structure without partners and is not registered as a member of the country’s bar association so that all employees can be shareholders. According to professional rules, only lawyers can be partners in registered member firms. The more open ownership model challenges the established boundaries of the professional practice in an industry where normative codes define the credibility and reputation of a firm.
This decision also speaks to another mold-breaking trend in the legal business, in which non-lawyer staff is playing noteworthy roles in creating valuable services for law firms. For instance, at Allen & Overy, another innovative law firm based in Europe, a non-lawyer developed online legal risk management services that are used by more than 160 institutions and 6000 users. Riverview Law is a new entrant in the law industry that also offers fixed-fee services and recruits people for non-usual functions such as project manager and data analysts.
The open culture of Fondia is reflected beyond its internal work practices toward clients and stakeholders. The firm organizes training seminars in its Fondia Academy in the spirit of “developing expertise by engaging in productive dialogue.” The training is arranged six times a year to develop legal skills and continuous monitoring processes. On Fondia’s blog, internal legal experts discuss various issues related to innovative practices and industry-specific issues and post practical advice for clients and potentially interest parties from a legal perspective. For instance, in the blog, a legal counsel presents general tips for successful crowdfunding rounds and discusses in broad terms how start-ups are valued and how to proceed when start-ups seek financing.
In recent years, Fondia organized training seminars dedicated to different themes relevant to the gaming industry and posted those videos online for public view. For instance, one of Fondia’s legal counsels and experts in the gaming business discussed legal approaches to freemium games, what is involved in meeting national and international legislation, and the implications for compliance with consumer law and advertising to children. The seminars illustrate how Fondia has developed specific services for the gaming industry, which has recently become increasingly important in the Finnish and Swedish business landscapes.
Outlook
Fondia’s approach to legal services is completely unconventional and innovative for industry standards. Indeed, the company is rewriting the legal industry using lean services with fixed fees, digital infrastructures, and a proactive approach to law, which reduces its clients’ costs with legal affairs. In traditional industries, the mold is so thick and solid it makes it tough to break. Only a pioneer with a bold spirit and an inspiring vision like Fondia could do that. Well beyond changing pricing practices, the company has carved a place at the heart of business. Will this pioneering approach be amplified to make legal matters not a nuisance and afterthought for business but a foundation for strategy?
At Fondia, anticipating risks and standardizing procedures has proven to be a key element for generating credibility and reputation for the mold-breaking legal pioneer. The company commoditized routine and highly standardized work, so that limited human and capital resources can be applied to develop bespoke, creative, and strategic solutions to support legal compliance and growth. Many of these lean and low cost-operating processes can be tailored to support growth in young start-ups, for whom expensive legal support is either typically out of reach or prohibitive for a budget-strapped business development. Currently the digitization of work, production, and leisure is not only a fad. Indeed, it brings about various challenges for companies already today, namely already known legal issues (e.g., property rights, data protection) but also new ones that come about as new markets and new industries emerge. The pioneering approach of Fondia might well be what companies need to help them break the mold of their own industries.
From the Perspective of Dr. Liisa Välikangas, Professor-in-Residence at Fondia
On Work, Resilience, and Legal Environment1
1This blog post has been published on March 26, 2015 on Fondia website: http://www.fondia.fi/en/blog/work-resilience-and-intent-changing-legal-environment/. Republished with permission.
You have work to do you don’t have time for? Ask TaskRabbit, a US-based company that provides task performers called “Rabbits” on demand. Through their online platform, 4 million USD worth tasks are offered each month, and the demand for their Rabbits, including an Elite service, is growing fast.
Task performance is increasingly automated, and platforms for ever more sophisticated problem solving are emerging. Kaggle, for example, invites those scientifically inclined to compete on solving tough problems related to ocean health, flight paths, or malware with predictive analytics. Kaggle partners with many leading companies to address issues of strategic importance to them. GE Aviation for one, learned how to save millions in engine fuel through a Kaggle competition.
Such innovation is accelerating. For more than 10 years Fondia has been changing legal industry rules and ways of engaging clients. Digital channels (virtual lawyer services) and novel pricing models have been introduced that allow professional law experts to focus on proactively contributing to business decisions.
Inspired by the example set by Fondia, I reflect on some observations that may have bearing on future innovation.
First, as business environments are becoming open in terms of the flow of ideas and innovations, legal astuteness is needed. It is not enough to have a lawyer on the other end of the telephone but employees need to be more skilled in continuously coping with sharing and protecting knowledge. In an article with Professor Sirkka Jarvenpaa (California Management Review, Fall 2014), we identified a number of such interactive revealing practices in an opportunity creation network. These sharing and protecting practices allowed the network participants to innovate together. I suggest legal astuteness is of increasing importance as employees work together across company boundaries. Much like quality became “everyone’s job” in the 1960, using knowledge to innovate is now “everyone’s responsibility” but it will require astuteness to do so: Know what to share and what to protect, and how. Experienced legal professionals may be good teachers of such astuteness.
Second, business risks are harder and harder to manage in any planned way. New strategies are emerging that suggest continuous testing of company defenses to reveal their vulnerabilities. Cyberattacks exploit such weaknesses. The vulnerabilities are exposed only after someone has managed to breach through. There may be an analog to law here. How resilient is the foundation on which the company builds its legal defenses? Similarly as in cybersecurity, constant testing of the foundation may be needed to find the vulnerabilities before someone is able to exploit them. Perhaps lawyers—on your side—increasingly provide the smart evaluation of such potential exposure.
Third, strategy literature knows the term strategic intent that suggests a direction the company is heading. Strategic intent also describes the ambition that the company sets for itself, perhaps a stretch target or a visionary goal. A few decades ago Canon sought to beat Xerox (and did). More recently, Toyota—before (ironically) succumbing to quality problems—became a larger car manufacturer than the-then-world-leader, GM.
I suggest companies would do well to reflect on their legal intent. In a competitive business environment that challenges companies to consider their innovation strategies, from open to closed, it seems legal intent, or the company’s direction and ambition in terms of sharing and protecting its knowledge base, is important. In business models that build on freemium-pricing or that provide the code free, service on charge, or that include a free product in a package of services, or that uses fluid resources from outside the company to perform work, legal intent may increasingly be the most important component in the company’s strategy. How do we enhance our competitive edge while building our ability to continue innovating and engaging customers?
Making the client as an effective co-innovator, partnering with competitors, or outsourcing key tasks means opening the company’s knowledge resources and sharing them with others. The legal intent ought to guide those involved in their engagement and ensure that the company is able to innovate faster than its competitors or otherwise protect its future business potential.
In the world where work is splintering and being shared around—TaskRabbits, Kaggle data scientists, and others performing tasks and solving problems and perhaps even finding the soft underbelly for attack—it is easy to lose sight of the big picture.
The big picture starts with
1. Ensure legal astuteness as a widely shared skill among employees;
2. Support resilience by exposing business vulnerabilities before they have been exploited by less than friendly parties; and
3. Develop carefully thought out legal intent for guiding business development and partner engagement.