Technology has enhanced every corner of our lives, but it is no secret that the legal sector has struggled to adapt. But where tradition lies strong, innovation can make it stronger. Franco Toffoletto is no stranger to technological innovation: from embracing his first floppy disk, to now creating new systems for his team, he speaks about how willingness to change and adopting technology has enabled him to progress up the legal ladder.
How have you seen the Italian legal landscape progress throughout your years of practice?
In my experience, the legal market usually follows a 5-year cycle. During the second half of the 1990’s, we came to terms with the fall of the customs barriers in Europe, which opened the doors for the arrival of many Anglo-Saxon law firms in Italy, during the beginning of the 2000’s. Italian law firms began to expand internationally late in comparison, but we’ve since caught up. Our firm actually extended our international reach back in 2001, when it became one of the founding members of Ius Laboris – Global HR Lawyers, the largest international alliance of law firms specialising in employment law. So, in actual fact, our firm has been an international firm for almost 20 years.
After the early 2000’s, the international economic crisis arrived, obligating many law firms to reorganise their business models and structures. The volume of business dropped and, at the same time, the previous balance struck between lawyers and corporate clients changed. Today, it is the client that decides the price that will be paid for legal services.
Now we are facing a new cycle, in which it is important to take note of all past changes and simultaneously take stock of new digital technologies, which, although already widespread, are nevertheless indispensible for increasing the efficiency of the production process.
It is important to organise people and business structures in such a way so as to keep up with innovation while ensuring that costs are kept within budget, as well as to preserve profit without stopping investments. To achieve this result, law firms need a sophisticated and precise accounting system to know the profit made on any single product and matter. In order to survive in the current legal market, firms must accept that the market will constantly assess them not only in terms of the quality of the work they provide, but also in terms of efficiency and their ability to create value. Unlike the past, clients are no longer willing to pay law firms for inefficiency.
Are there any developments you are looking out for?
One of the hottest recent topics in the legal world has been that of software development. I started to conceive and design software for lawyers in the late 80’s. Artificial intelligence is now on the horizon. Actually, AI has already arrived. At the firm, we have not only been experimenting with machine learning for a while now (with promising results), but actually use the technology in our day-to-day work. The software that our firm developed ten years ago is able to read court judgments and extract the names of the parties, the court and the judge, as well as court decisions and the laws cited etc. therein (metatags). It also automatically creates the database record and tags documents on the basis of the legal content, assigning set categories. Therefore, the software is now performing sophisticated tasks that were previously reserved for humans. This is not to say that professions in the legal market will shortly disappear. In actual fact, the advancement of robotics will also create new opportunities and new professions. And it is for this reason that the biggest challenge that we face is that of bringing education into line with the needs of the market. Scholastic programmes must change to take account of a new era in the world of work, one that requires the application of new skills.
In addition, as I’ve already mentioned, the power to set the price of legal services has by now switched hands into those of the corporate client - at least when it comes to companies of a certain size. However, lawyers must nevertheless be in possession of basic statistics to avoid quotations for work being made haphazardly, only to perhaps discover later on that the firm has been working at a loss, not a gain. With this in mind, we took action and implemented a cost accounting system, thereby enabling us to know the cost of each of our services.
To this day, the majority of lawyers still continue to take on work and issue quotations without knowing the true cost of the product they put on the market. I expect this to change soon enough, especially because it’s a case of sink or swim. With profit margins continuously getting smaller, working without knowing the true cost (and the relative price) of the legal services provided means risking the closure of a law firm. Working at a loss doesn’t make any sense. Not even if you risk that piece of work going to someone else, because, in any case, that other firm will work at a loss and, in the long run, it will be the one to close down.
Knowing the cost of our legal services has also allowed our firm to provide clients with new and improved products tailor-made to their respective companies. We’ve created special teams dedicated to a variety of specific employment law issues that are currently of particular importance in Italy, such as employee monitoring, data privacy, employee tax welfare and benefit plans, and flexible working policies (so-called “smart working”). Through these teams, our firm is able to provide more specific and efficient high quality services, with great added value and at a precise and predefined cost for the client.
What do you think is the toughest part of your job, and how do you overcome this?
Probably the capability of having vision, not forgetting the details and mastering the ability to make decisions quickly and decisively with the consent of the firm’s other partners. And not small insignificant decisions, but decisions that change the course of the law firm in a profound manner. A strong managerial capability and governance system has allowed our firm to take many important decisions and to execute them rapidly. This has been incredibly important for us.
The biggest hurdle within law firms is precisely the innate resistance to change. Lawyers are often reluctant to change. Law firms have to increase efficiency and this entails profound changes in the production process. Clients are no longer willing to pay lawyers for inefficiency and they increasingly impose fixed prices. To maintain the same profit, law firms must necessarily increase their efficiency.
What enabled you to determine that the legal profession was for you? How did your legal career begin?
I initially wanted to be an architect. Then, I wanted to study medicine to become a geneticist. I only chose law school because we had a family business: my father and my grandfather were both lawyers. I remember the day I made that decision very well. It was September 1975, and every time I think of that day - which is often – I’m happy with the decision I took.
I started in my family’s law firm as an accountant and office manager. It was 1st October 1975 when, at 18 years of age, my father opened the doors of his firm to me, so that I could shadow the firm’s accountant who would retire in few months. At the same time, I started University to get my law degree. I certainly learned a great many things from this experience but, most important of all, these first few years laid the foundations for my knowledge of the management part of the profession. Having learned the ropes from the people who managed and governed the law firm, it was just a question of time before I began to understand the importance of the organisational and technological aspects of a business, in addition to the potential competitive advantage that could be gained from the same. I was short on time: technology would have been a great tool to allow me to study and keep the business running. From then on, our firm has committed itself to the constant definition and improvement of internal processes and technologies, which are in a delicate balance with operational needs and a drive for innovation. Since the 80’s, technology has given us the possibility to grow.
Besides employment law, it’s clear that you have a passion for technological innovation. In fact, the firm is well known for its innovative approach to the legal profession. How did this passion come about?
In 1980 I came across an Olivetti ET351 with a floppy disk drive and immediately purchased it. Before then, we composed our documents with a typewriter; word processors weren’t around yet. A single typo meant ripping up the document and having to type everything out again from scratch. It became immediately clear to me that that device, which was very expensive back then (6,200,000.00 Lire, more than 3,000 Euro), would have revolutionised the drafting of documents in law firms and created efficiency. We needed less employees.
I also took a training course to learn how to operate Italgiure-find, a very innovative Italian database of Italian Supreme Court decisions built at the end of the 70’s. This experience opened my mind to information retrieval and the use of databases. Then, my first Macintosh in 1985 and on to using some of the most innovative computer programmes of that era: MS Word, MS Excel and MS File, an Apple LaserWriter PostScript printer connected to a local network (1986) and e-mail, which our firm has had since 1986. In the early 1990’s, I also contributed to founding the Mac Law Group, a group for lawyers using Apple technology in the legal world.
Then, in 1995, in collaboration with another group of lawyers, we created EasyLex – a very innovative management software that includes all functions (from e-mail to document management, billing and accounting), which quickly became widely used in law firms around Italy. We already understood back then what technology could do in terms of increasing efficiency and quality of work.
Then, in the early 2000’s, the firm began to develop a complex knowledge management system, which was completely integrated with Easylex.
In 2012, we decided to begin developing a new management software, together with another Italian firm – NCTM. This partnership came natural to the firms, as we’ve had a longstanding relationship with NCTM; I was actually one of its founding members, in addition to being in charge of managing its processes and IT. The new software that we created together, named iLex, was born in 2015 and has been operative in both firms for almost three years now. In 2015, the firm was even recognised as “Standout” by the Financial Times Innovative Lawyers Report for its use of technology.
Using just an Internet browser, iLex provides lawyers with everything they need: diary, to-do-list, timesheets, document management and creation, cost accounting, pricing and staffing. Thanks to the inclusion of KM functions (an integrated system for sharing knowledge), each lawyer also has all of the information and tools they need to perform any single task, without having to search for them: templates, firm precedents, statute, case laws, news feed etc. For example, if I had to write a legal opinion, the system would give me a list of the tasks that need to be performed: just one click on the legal opinion in my to-do-list and the system provides me instantly with all of the relevant case law and the legal opinions already written by the firm on that same subject. Another click on the most useful precedent and I can have a document that’s already addressed to the client and connected to the file matter I’m working on. Once I’ve finished the legal opinion, it’s automatically stored and inserted in the system so that the next lawyer having to do similar work will be able to find it. In addition, the system will also automatically create the timesheet for the work that's been done.
According to our calculations, the value of the firm’s improvement in efficiency as a result of iLex is equal to € 350,000 a year in less operational work, allowing lawyers and employees to dedicate themselves to more valuable activities. In the last 2 years, we’ve increased our turnover, despite having less people than 5 years ago. We have one administrative employee for every 4 lawyers. In 2017, our costs were 52.4% of the firm’s takings and 50.7% of the turnover in the year.
It’s clear that both you and the firm take an innovative approach to the legal profession. Does this approach extend to clients as well?
Well, clients obviously benefit from the increase in efficiency; they can also benefit from lower prices without sacrificing the high-quality work provided by a specialised firm. However, we’ve also developed a number of digital tools for our clients to help them keep up with employment law issues in Italy and internationally. These tools are developed, maintained and added to by the firm’s internal Research and Development department, which was inaugurated in January 2016.
For example, our firm offers clients access to an exclusive App available on the Apple App Store, which provides them with important employment law information and news. We also created the Law Maps™, an interactive website that allows specific employment laws and regulations of different jurisdictions to be compared. We’ve also published an e-book on the Apple Store covering the recent Italian employment law reform, and have another two in the works; one is an e-book on internal investigations and another is an employment law manual for start-ups.
These are all in addition to the webinar service provided by the firm for clients, as well as the portal created by the member firms of Ius Laboris, which provides in-depth information on employment law in over 40 countries.
We also had success in providing a tailor-made online contract generator. One particular company is currently evaluating its implementation in all 52 countries in which they have operations worldwide.
For many years now, our firm has worked with technology and not against it, which is precisely why we are able to offer so many interesting and innovative solutions to our clients.
What was one lesson you learnt when transitioning from law school to practising?
I think the biggest lesson I’ve learned from practising in a law firm is that the value of a firm is not solely measured on its clients or the matters it handles, but also depends on its organisation. This is something that isn’t taught at law school.
A firm that isn’t organised well, isn’t worth much. This means that, when implementing the use of new technologies firm wide, it is necessary to review all internal processes. In our case, we started with a review of our graduate recruitment procedures. To date, two-thirds of our lawyers were born after 1980 and each semester, the growth achieved by each individual is evaluated in an appraisal.
It was during those first days in my father’s firm as an accountant, and not as a lawyer, that I began to comprehend just how much of an asset the firm’s organisation was. For example, I introduced written procedures and job descriptions to describe and define the responsibilities and the relationships between all of the firm’s legal professionals and administrative employees. This was a revolution. For the first time in a law firm, everyone had a job description. Or better, they knew exactly what their tasks and duties consisted in. Whereas, in other professional service firms, the employees were usually used to giving importance to who gave them orders and nothing else.
In other words, I envisioned an organisation made up of clear and defined processes, guaranteeing transparency and efficiency within the firm; something that is also for the benefit of the firm’s clients.
Can you think of three things which enabled you to progress as Managing Partner?
1) Technology; 2) Efficiency; 3) Willingness to change.
What are you hoping to achieve in the next five years?
We just completed the 2010/2015 plan. Basically, the delay we’ve had is connected with implementation of some very smart features in iLex. For example, we included a function for e-filing court claims (in Italian, PCT – Processo Civile Telematico) and we spent more time than foreseen on some technical problems with the public platform. We will also soon finish a very efficient pricing and staffing module, which takes the past into account when suggesting the price and the people you need to involve on a project in order to maintain a profit. In the future, this module will automatically assign the job to the right lawyer or group, according to their availability.
I believe that a specialised law firm such as ours has to profoundly change its business model and have a more global dimension than it does today. We are working on it.
What has enabled you to progress as Managing Partner and the firm to achieve its leading position in the Italian market?
First of all, passion and dedication. But also, always being willing to change. Neither the firm nor I have ever been afraid of implementing change, of pushing the envelope, or being different from other law firms. I guess that’s why we are where we are today.
Franco Toffoletto, Managing Partner
Toffoletto De Luca Tamajo
Via Rovello 12, 20121 Milan
Italy
Tel: +39 02 721441
Email: sft@toffolettodeluca.it
Firm Profile
Toffoletto De Luca Tamajo is one of the leading Italian law firms specialising in employment and labour law. The firm has been working with companies for over 90 years from the firm’s offices in Milan, Naples, Rome, Bergamo and Brescia and provides advice on all aspects of HR management; from day-to-day legal advice to handling labour disputes in court.
Toffoletto De Luca Tamajo is one of the five founding members of Ius Laboris, the largest global alliance of leading employment, labour and pensions law firms. Through the Alliance, the firm is able to offer clients the highest standard legal services across 53 countries: truly global coverage, with local knowledge and expertise.
The firm regularly manages cross-border projects across multiple jurisdictions, always providing innovative solutions tailored to its clients’ ever-changing needs.
About Franco Toffoletto
Franco Toffoletto is widely regarded as one of the leading employment lawyers in Italy, described as an exceptional talent and an extremely confident lawyer. He provides employment law advice to both domestic and international clients in all sectors, such as banking, insurance, financial services, pharmaceuticals and healthcare, advertising, media, telecommunications, information technology, etc.
Franco has a very solution-orientated approach, developing a close and long-term partnership with each of his clients to ensure easy, efficient and productive business relationships.
He is consistently recognised in the top tier by the foremost international legal directories such as Chambers & Partners, Legal 500 and Who’s Who Legal.
