Strategic Legal Technology

The ILTA Knowledge Management peer group, in prep for a KM white paper, is gathering data to help assess the state of legal KM. Legal KM professionals, please consider participating. 

Respond to the ILTA KM survey here. It’s a brief questionnaire. Bonus incentive just for ITLA members: your name will be entered into a drawing for a waived conference registration fee! (Offer not valid for non-ILTA members.)

You must provide yourr business e-mail address so that ILTA professional staff can verify and de-duplicate responses and enter ILTA members in the drawing. Complete anonymity is guaranteed, and your identifier will be removed from the data before analysis. A report on the findings is scheduled to appear in a white paper this June.

I’m especially eager for KM professionals to participate because I am writing an article based on the aggregate data. The survey focuses on how many firms have incorporated ("baked in") KM to firm processes and functions. This article will follow-up to Baking KM into the System that I co-authored with Chris Boyd of Wilson Sonsini in June 2006.

The survey will be available through close of business May 6, 2009.

I had hoped that BigLaw would make fundamental changes, prompted by the crisis. Um, what crisis is that exactly? 

Dan DiPietro, client head of the Law Firm Group of the Citi Private Bank and noted BigLaw commentator, in Recession and Repair (American Lawyer, 1 May 2009) offers a grim prognosis for BigLaw finances and partner profits. Citi’s data are more current than the just-released 2009 AmLaw 100 report for FY 2008 offer.

Grimmer still is his assessment that partners have yet to recognize the magnitude of the crisis. An anecdote suggests that partners still don’t think the situation is bad enough to have to change anything. His article concludes: “So the need for bold action and innovative thinking is upon us. Firm leaders have the chance to fix a broken business model… These are times that cry out for boldness and innovation. But the window will not stay open for long. Who among you will be the first to act?”

Many commentators have spoken about not letting this crisis go to waste. That sentiment assumes recognizing a crisis. As I read DiPietro’s essay, BigLaw partners have yet to recognize the gravity of the situation. Perhaps they know something the rest of us don’t. Or perhaps they feel a 10 or 15% drop in income is not such a big deal when you’re still earning more than $1 million.

The new Am Law 100 results are in and they are not pretty. 

Lessons of The Am Law 100: Nothing Grows Forever by Aric Press and John O’Connor (The American Lawyer, April 29, 2009). As I commented last year, BigLaw CIOs who want a seat at the management table need to follow the money (and data). Read the article and accompanying tables but here are highlights:

• 2008 results do not show the full impact of the downturn, which started mid-year
• Gross revenue was up 4.1% to $67 billion, lawyer headcount grew faster at 5.4% to 82,000, and profits per partner fell by 4.3%
• A falling tide affected firms fairly uniformly; AmLaw reports little change in relative firm rankings
• The authors outline several interesting “performance points” to ponder, including controlling headcount, the future profitability of bulge bracket NYC firms, the likely vulnerability of non-equity partners.

[Side note: I Tweeted the preview Webinar yesterday, key word #amlaw100, at http://twitter.com/ronfriedmann.]

Update - Sponsored Link (5 May 08): Click here to buy the 2009 AmLaw 100 downloadable file, which provides a full set of data for analysis in Excel..

PBworks (formerly PBWiki) launched today (28 April 2009) a legal market version of their signature collaborative Wiki. I had a pre-launch demo and it looks very good. 

The company already has many AmLaw 100 firm users. A private group of large law firm KM professionals in which I am involved happily and successfully used PBWiki to organize a recent meeting.

For any law firm interested in wikis and collaboration, this product is worth considering. I do not review products and indeed that is not my goal here. Rather, this product release makes me wonder about the direction of legal applications generally. (PBworks legal launch press release here.)

Any new product, no matter how wonderful, faces three structural challenges:

• 1. The components of most of BigLaw IT infrastructure have been stable for sometime. SharePoint is the most recent widely adopted addition. Most IT departments avoid adding applications, especially where similar functionality is available. (In the case of PBworks, SharePoint offers some similar features.)
• 2. Lawyers, partners especially, famously spend most of their time in Outlook and a bit of time in a browser. Persuading lawyers not only to learn but regularly use another application is a big challenge.
• 3. Even if you can overcome 1 and 2, keeping content current in an inherently content-driven application is a chronic challenge.

Large law firm CIOs must decide when and whether new features warrant adding a new and possibly better app. So let me ask you two questions. Is there a principled basis for deciding when the cost and effort of a new app is worthwhile? And who ultimately should or does decide? These are important questions to consider, irrespective of your views of wikis.

Since not everyone is a Twitter fan, I reproduce here a selection of my recent Tweets. 

Watch sausage being made and the costs. Suit re Latham fees http://bit.ly/w5jDx law.com. Block billing and high rates - biz as usual. April 24

Has Mutually Assured Destruction (MAD) protected BigLaw? Smaller firms the new arms control? I’ll turn off my ICBM if you turn off yours.
@JoshuaFireman replies: isn’t it a tacit oligopoly?
MAD is more a demand side (law dept) issue than supply side (firms). GCs fear not having their BigBomb BigLaw firm. April 23-24

RT [Re-Twee] @pwoldow: Interesting article Legal Intelligencer - Open Letter to General Counsel in Tough Economic Times. http://tinyurl.com/d3yous. April 23

What would BigLaw do if faced with a choice: dissolve or innovate? Some firms may face this choice, they just don’t know it yet. April 21

ABA Journal has nice weekly e-mail of top stories. Links are incredibly slow to load at ABA site. Typical for ABA technology. April 17

BigLaw cuts associate salaries. Band-aid or genuine fix? Feels like Detroit moves over last 30 years - does not address real problem. True?. April 17

Just bought an Incisive research report (ALM). They send back e-mail with my password in PLAIN TEXT. Security alert, danger Will Robinson. April 14

Sprint Blackberry e-mail delivery stopped working for both my e-mail accounts. Sprint tech help fails so far. Not my 1st big Sprint trble. April 13

High-tech India Contrasts With Rural Ways on McNeil News Hour features LPO QuisLex at http://bit.ly/J0pu. Text with links to audio + video. April 10

What single change would most improve law practice efficiency and effectiveness? I vote use project manager if budget > $25k. April 4

In a tough economy with daily BigLaw lays-off announcements, it’s nice to see a firm innovate to help clients and prospects. Wilson Sonsini Goodrich & Rosati (WSGR) announced today a new online service, a term sheet generator. 

The WSGR Term Sheet Generator,

“will generate a venture financing term sheet based on your responses to an online questionnaire. It also has an informational component, with basic tutorials and annotations on financing terms. This term sheet generator is a modified version of a tool that we use internally, which comprises one part of a suite of document automation tools that we use to generate start-up and venture financing-related documents.”

Few US law firms have released interactive legal services in recent years. The WSGR online system illustrates how some investment and innovation can serve clients and extend a firm’s reach. WSGR is already the go-to firm for Silicon Valley start-ups and this service will further cement its leadership position.

Running through the term sheet generator, I can see it’s a sophisticated tool with extensive “logical branching.” That is, as you select options, the screen often changes dynamically to ask for additional information. I’m not expert in this practice area but it feels like a “heavy duty power tool”.

I suspect entrepreneurs will find it useful. I’ve invested in start-ups led by friends. My most successful entrepreneur friend is not a lawyer but has a deep understanding of the legal framework of start-ups. He’s complained bitterly about legal fees and BigLaw associates who know less about deal docs than he does. I think anyone like him will love the WSGR term sheet generator.

I doubt it eliminates the need for a lawyer. What it does, however, is allow an experienced entrepreneur to get started, to do the leg work. Then, when it comes time to working with a lawyer, the focus can be on those aspects of the deal or docs that really need advice or hand-crafting.

I wonder if other large law firms will invest some lawyer time to create equally useful and innovative online services. Lay-offs may be necessary but do not win new business and gain market share or share-of-wallet. Innovation, however, can.

Legal Professionals Role-Play the Future of Big Law in The American Lawyer (21 April 2009) reports on an exercise hosted by Professor Bill Henderson at Indiana’s Maurer School of Law to envision the future of large law firms. I applaud the exercise but it leaves me with a “been there, done that” feel. 

The prescriptions include the usual suspects: change associate compensation, lower leverage, offer alternative fees, appoint relationship managers, and re-calibrate partner compensation and expectations. Ho-hum. We’ve read these ideas for decades. Merely stringing them together may not suffice to save a firm in trouble.

The exercise strikes me as geared to tinkering with the business model rather than fundamentally re-inventing how lawyers practice. I think a more productive exercise would be to re-envision practice and then figure out what business structure supports it. I’ve oft blogged about ways lawyers can change how they practice. Examples include using risk assessment to gauge how much to invest in litigation, automating transaction documents, practicing real preventive law, encouraging clients to pursue alternate dispute resolution, developing interactive intake and advisory systems, working virtually (mentioned at least), helping clients manage the entire life cycle of contracts, and outsourcing the middle office. In other words, create value by actually doing something different, not just re-arranging what you are already doing.

To close, I find it ironic that Hildebrandt put up $15,000 in prize money. Hildebrandt is a large and long-serving consultancy serving BigLaw. My sense is the firm has had engagements for many firms over the years. Did Hildebrandt and other consultants, with their hands partially controlling the BigLaw rudder, help steer firms into the shoals where they now find themselves bottoming out? And will BigLaw pay them more fees to save them?

In response to my recent blog post asking Is BigLaw Still the Inhouse Counsel Parachute?, which discusses why inhouse lawyers have not done more to evaluate outside counsel, Jeffrey Carr, General Counsel of FMC Technologies, Inc., wrote a very interesting comment. 

I have blogged about lawyer ratings from time to time, arguing that they are key to a more efficient legal market. So I read Carr’s comments with great interest. He posted his comments at the Legal OnRamp, the leading collaboration and social media site for legal professionals. With his permission, I reproduce his comments here:

“Your points about the usefulness of objective ratings are spot on. Lawyers worth their salt – whether in house or in firm – should readily accept and embrace the concept of providing and receiving meaningful feedback, evaluations, and continuous improvement. Those that fail to do so based on concerns of having a safe haven landing zone [meaning, landing a BigLaw partnership], are at best misguided, probably fundamentally wrong, and do lawyers in general a grave injustice.

In a world where surveys show the vast majority of outside counsel think they do a great job for their clients, but the vast majority of in-house don’t share that view, there’s a cognitive disconnect that must be addressed. To do so requires open and meaningful bilateral communication on what is expected, whether those expectations were met, and what to do in the future to improve. Our community desperately needs an easy to use, meaningful, and standardized set of evaluation criteria and metrics for this purpose. Serengeti Tracker has an exceptionally good one in it’s matter mangement system that also benefits from making evaluations part of the normal workflow process. This is great for an in-house team with it’s own stable of matters and firms, but it does not facilitate the sharing of information across companies and firms. To address that challenge, LOR [Legal OnRamp], the ACC, Martindale Hubbell and others are looking at data and metric aggregation platforms to facilitate the creation of such a facility.

While I applaud those efforts, I implore their backers to look to standardize and accept data from existing sources. As an in-house counsel, my most precious commodity is time, not money. Don’t ask me to devote bandwidth to multiple sites or facilities with conflicting and inconsistent standards, questions and measurement scales. I for one, simply won’t do it – and neither will the team that works for me. I will, however, gladly share my data with others in the hope that an aggregated database provides meaningful and truly useful feedback on firms and individual lawyers.

We have over 1100 evaluations in our own database today – and we add to it everyday because we believe that this tool is one of the most important to drive performance which translates directly to value. And by the way, we use exactly the same evaluation criteria to assess the performance of our in house team and we seek input from our alliance counsel as well as or corporate customers.”

In recent posts, I suggested that BigLaw pyramids may need to become cylinders. Effective lawyer ratings would be one of the vises that help squeeze BigLaw into better shape. [While BigLaw partners might view ratings as a vice, I do mean vise.]

The legal market is contracting - the fight for market share is on. Cutting rates and fixed fees may not be enough. Innovation in law practice can help win new business. If you have innovated, help earn new business with recognition for your inspiration and hard work. 

The College of Law Practice Management (I am a trustee) sponsors the InnovAction Award. InnovAction honors innovation in law practice management. Law firms, law departments, and other legal service providers (but not vendors) can apply. Innovation can range from creative office design, to technology, to a marketing campaign. For the first time, this year applicants can win Honorable Mention.

Review the InnovAction web site and consider submitting an application. For more information:

• Prior InnovAction winners.
• About the College.
• How to Enter for 2009 and download InnovAction Entry form.

The College of Law Practice Management is accepting entries for the 2009 InnovAction Awards through June 2nd at www.innovactionaward.com. Rules and application forms are at http://www.innovationaward.com; the Hall of Fame display of previous winners is at http://www.innovactionaward.com/halloffame.php.

If you are fortunate enough to have created a competitive edge, let the world know. But do it by June 2nd.

Inhouse counsel fail to control outside counsel for many reasons. One is to maintain cordial relationships with future prospective employers. This may change and, if so, could make developing lawyer ratings easier. 

In the era of the incredible shrinking law firm, can inhouse counsel reasonably expect to land jobs in BigLaw? I suspect that BigLaw is no longer the parachute or escape hatch it once was. Cynthia Cotts’ Wall Street Lawyers Dumped for Lower-Priced Boutiques (Bloomberg.com, 6 April 2009) suggests that economics at last trump cordiality and long-standing relationships.

If this is really a sea change, then perhaps we will finally see good law firm ratings by inhouse counsel. Ratings of both individual lawyers and firms would help clients select the most appropriate and cost-effective counsel. Aside from the usual “quality” ratings, there are objective ratings that would help:
- Propose a budget and deliver regular variance reports
- Respond quickly to questions
- Takes time to understand the company and industry
- Offers to use low cost resources such as managed reviewed services.
- Good knowledge management system that saves time

If clients are less concerned about landing jobs at law firms, perhaps they will be more willing to participate in or even initiate ratings. A lawyer rating service may be a good counter cyclical business.

I met Ken Adams of AdamsDrafting several years ago. Ken is a practicing lawyer turned contract guru and consultant. He writes a great blog about contract drafting, from nitty-gritty language stuff to big-picture issues. He’s devoted a lot of time to thinking about shortcomings in the drafting process and how it could be improved. I’ve long complained that BigLaw clients whine about costs but fail to exercise their market power to do something about it. One thing they could do is retain experts who could show them how to get out of their rut. Ken is one such expert, so I thought a conversation with him would be enlightening. Ken has also posted Bringing Change to Contract Drafting: A Conversation Between Ken Adams and Ron Friedmann on his blog. 

Ron: Ken, most of the lawyers I’ve dealt with think of themselves as artists. Does contract drafting involve artistry?

Ken: I suppose that lawyering might occasionally be sufficiently inspired that you could analogize it to art, but it’s hard to see how that could be the case with contract drafting. Instead, I suspect that transactional lawyers regard contract drafting as a craft, in that it involves application of technique to utilitarian ends. But even that does contract drafting too much credit, in that two features of contract drafting severely limit the scope for creativity.

First, any transaction will closely resemble any number of deals that have gone before, so at its most efficient, contract drafting would be an exercise in efficient repetition. But as things stand, drafters endlessly reinvent an imperfect wheel, with the result that much time and money is frittered away and risk is needlessly added to the contract process. Of course, some creativity is required to come up with language to express innovative solutions arrived at in negotiations, but that currently represents a small part of the drafting workload.
Second, because contract language states rules governing conduct, it’s very limited and stylized compared to other kinds of legal writing. And of the various usages available to accomplish any given drafting goal, generally one will be more efficient than the others, and that’s the one drafters should use. So contract language is somewhat like computer code.

Given the nature of what currently passes for mainstream contract language—a recent Dilbert cartoon described it as “impenetrable gibberish"—contract drafting would seem less a matter of artistry than of voodoo. Contracts should use standard English—the English of educated readers.

Ron: It sounds like you think contract drafting should be a commodity.

(more…)

My prior two posts suggest that BigLaw may be going the direction of Detroit: slow motion train wreck explained as perpetual re-structuring. Consider that a few large firms have already had 2 or 3 rounds of lay-offs. If BigLaw re-thinks its business, what might it look like? Try a cylinder replacing a pyramid. 

Large law firms in the UK, US, Canada, and Australia are “pyramids.” A few equity partners sit at the top, supported by non-equity partners, counsel, associates, and a huge staff. Over the last decade, many large firms have increased their leverage - the number of fee-earners and staff who support the top. The economics of firms has depended on maintaining this pyramid with its high leverage.

What if the legal market transforms and the pyramid no longer works? What if the new shape of law firms is a cylinder instead? In a cylinder, equity partners remain at the top but the number of fee-earners and staff supporting them is much less.

Two recent UK articles suggest a possible move to cylinders. Focus, Law firm management: A year of living dangerously by Matt Byrne in The Lawyer (30 March 2009) is an excellent, in-depth analysis of the future of large law firms. “The current financial crisis has been widely characterised as the most severe downturn since the Great Depression… Is it a cyclical downturn or does it represent a paradigm shift?… ” The article presents the varying views of managing partners of large US and UK firms on this question.

The Lawyer article reaches no definite conclusion. In contrast, Redundancy in the City: painful lessons for the big beasts in Times Online (2 April 2009) interviews Linklaters managing partner Simon Davies and suggests we may see a paradigm shift:

“Simon Davies, the managing partner of Linklaters, spoke exclusively to The Times… Davies sees a very different model emerging for the future… ‘Partners are spending much more time executing transactions or giving advice and, in each case, working with smaller number of lawyers to ensure that quality is maintained.’ … In this context it is inevitable that the firm should prioritise the very high-value work that needs the most experienced and creative skills while starting to slew off the lower value work that could be undertaken by more junior staff… ‘We are now moving to the right size for the new realities in the legal marketplace.’ ”

It’s not clear what the “right size” is. Suppose, however, large law firms must adopt more cylindrical structures to succeed. This would require major changes in how they operate. The huge and costly infrastructure supporting partners and other lawyers would need to shrink. For individual lawyers and staff, that surely would mean more pain than we have already seen. For institutions, it would require a careful reconsideration of how they support high-end fee earners.

In such a transition, the question would be how much support partners need and how best to provide it. We’re not unbiased of course, but we think that outsourcing is a natural answer for this potential new regime. Large firms can do away with much of the expensive and hard-to-manage middle office services required to support armies of lawyers. Instead, they can outsource support on a more flexible basis. Even some of the support junior lawyers currently provide can likely be outsourced to legal support staff onshore or off.

One way to think about the potential de-leveraging is a big squeeze: the traditional BigLaw pyramid must squish down to a cylinder. No longer will there be armies to support a few generals. In a cylinder, the size of support layers differ little from top to bottom. If slabs of the pyramid must become smaller disks of a cylinder, firms need to consider whether the economics of operating all those layers on their own will still make sense. As functions shrink in scale, the economics change - usually for the worse. So moving services such as document product, finance and accounting, and business research to an outsourced, shared services model may become much more attractive in this new world.

[I originally posted this as How Law Firms Can Survive Transforming from a Pyramid to a Cylinder at the Integreon blog.]

In my prior post, I asked if Is BigLaw Going the Direction of Detroit?. Fred Bartlit, founder of Bartlit Beck, wrote a great comment on the post, reproduced here with permission (plus more of my own commentary). 

Bartlit commented at Legal OnRamp, a collaboration system for in-house counsel and invited outside lawyers and third party service providers. LOR has great forums and many other resources; in my view it is the best and most promising “social media” and “web space” for lawyers.

Bartlit left Kirkland & Ellis to start a new kind of litigation firm, one based on going to trial, alternative fees, and a diamond rather than pyramid structure. He’s been thinking differently about the legal market for decades. His response to my blog post:

“‘Ron says: “The real problem is the product. The cars are not good enough. The management is insular.”

It is always very interesting to go to conference of “managing partners”. For many years the discussion has centered on doing the same old wrong things better: “get the hours up” “have quotas of hours” “recover all costs” ‘cross market” “hire more people” “our business model is based on most people leaving before end of 8 years”

I rarely, if ever, hear the word “quality”. Little or no discussion on how to improve the quality of our product. Just discussion of how to get more $$$ from the existing product. Likewise, I hear the BS “lean and mean", but never a real discussion of “efficiency” - of working to improve project/business methods to do the important work faster, better

Maybe the auto industry analogy is a good one?”

So there you have it, an inside view of how managing partners think and behave.

Extending the Detroit analogy, perhaps the drivers (clients) are happy with the equivalent of my family’s 1972 three-on-the-tree Ford Torino station wagon, which handled horribly, was uncomfortable, and rusted out in five years. Maybe the drivers have never experienced a true luxury car; a compact, efficient but comfortable car; a sporty car with some zing. Detroit did fine until Japanese car makers introduced affordable, well-designed, efficient, comfortable, low maintenance, and long-lasting autos, from econo-boxes to luxury-mobiles.

So, does BigLaw face the equivalent of a “Japanese invasion?” As long as drivers keep buying clunkers, it may not matter. At least that’s what Detroit thought. And who are the invaders of BigLaw?

Lots of news about the legal market this week. It feels like we could be at a tipping point. Wait, I hope we are. The alternative may be worse. 

On the editorial page of the New York Times today, Adam Cohen penned With the Downturn, It’s Time to Rethink the Legal Profession. “The silver lining [of recent bad news], if there is one, is that the legal world may be inspired to draw blueprints for the 21st century. ” Cohen goes on to explain potential changes - a very good read.

Let’s hope he’s right about those blueprints. For a great visual view of what’s happening in BigLaw, take a look at the rolling 12 month large law firm lay-off chart at Law Shucks. The surging layoffs of lawyers and staff is personally disastrous for many. What does it portend for the legal market?

To help answer that question, read the Tuesday David Brooks op-ed piece Car Dealer in Chief (31 Mar 09). He observes that the real problem at GM is that it has implicitly viewed itself as in the restructuring business for 30 years. “There are many experts who think that the whole restructuring strategy is misbegotten… The real problem is the product. The cars are not good enough. The management is insular.”

Hmmm, with a word substitution or two, might he say that a few years from now about BigLaw? When I look at the lay-off chart, it looks like BigLaw is, so far, following the GM plan. Let’s hope not.

“Be careful of what you ask for you, you might get it.” In response to lawyer concern about the ethics of outsourcing; the ABA issued in August 2008 an ethics opinion. Does it implicitly set a new, higher standard for lawyers who delegate work, irrespective of to whom they delegate? 

EDD consultant and author Conrad Jacoby wrote ABA Outsourcing Opinion - What it means to You as a Litigation Support Professional in Litigation Support Today (Feb/Apr 09). He analyzes the American Bar Association (“ABA”) formal opinion 08-451 regarding outsourcing legal and ancillary services. [See my blog post on ABA 08-451 or buy it from the ABA. I won’t link to the ABA because I am outraged that an organization charged with protecting consumers and promoting lawyers’ professionals values charges for ethics opinions.] Jacoby writes

“ABA’s opinion was driven by the need to clarify the role of third party document review services, the language of the opinion is much broader, serving as a yardstick to measure any outsourced service provided to a legal team….. the Opinion makes it clear that blaming performance issues entirely on a vendor is no longer a winning defense inside a litigation matter.”

The opinion suggests specific due diligence steps for offshore work but the implicit standard it sets apply to any outsourcing, including domestic. Jacoby writes “the burden on law firms has shifted from demonstrating that they outsourced a project (and its liability) to demonstrating the reasonableness of their oversight of an outsourced project.” He presents good practical advice for legal assistants and litigation support professionals, especially concerning keeping records of their interactions with vendors. He also notes that the opinion makes “clear that a legal team that elects to outsource work still retains full responsibility for the quality of the work, just as if the work had been performed directly by members of the legal team.”

Have lawyers, by shining the spotlight on outsourcing and raising the specter of quality fears, inadvertently illuminated the dark corners of their own firms? Would the due diligence steps, when applied to in-house practices, pass the ethics opinion standard? My friends in BigLaw frequently tell me about poorly supervised document reviews in-house. Applying the duty of care implied by the opinion, would law firms pass the same tests to which they must subject vendors?