Two recent published comments about BigLaw associates illustrate what I view as the risk of thinking about the legal market as it has been instead of what it likely will be.
One comment comes from the GC perspective. A leading general counsel, commenting on lawyers learning concrete skills, was quoted: “I’m indifferent about whether they learn that at a law firm or in school, as long as I don’t have to pay for it.” It seems to me that GCs pay to train young lawyers one way or another. They can hire a law grad and directly incur the training cost. Or they can retain outside counsel and indirectly incur it.
Delivering legal advice over over the long term creates an economic cost to train lawyers. That is, there is a real cost and someone has to pay for it. So in my view, refusing to pay for junior associates is just a way to seek a discount or reduce partner profits - it does not make the cost go away.
The comment seems to suggest a “minor repair” to the old regime rather than to seek to usher in a new one. If I were a GC, I would seek regime change. For example, I would demand almost all work be priced on alternative fees, especially fixed fees. Then, as the buyer, I would not care about my law firm suppliers’ factor inputs (the mix of timekeepers). Instead, I would focus on cost and results. In how many other markets do buyers worry about supplier factor inputs?
A second comment comes from the law firm / recruiting perspective. The article Will Law Firm Changes Affect Hiring and Retention of Associates? (The Recorder, 21 Dec 09) expresses concern that law firms put their long-term health at risk by moving away from associate lock-step pay. The author argues that differentiating associate compensation is too hard and concludes that “Law firms that adopt dramatic changes in how they value and treat their associates in a time of economic stress may find themselves at a dramatic disadvantage in retaining and recruiting people as the economy recovers.”
This thinking is anchored in the past and apparently ignores many a change a foot. The evidence is that firms are differentiating now, that clients want alternative fees, that a wider range of suppliers (e.g., virtual firms, boutiques, and outsourcers) will prosper. Moreover, in the new regime, we will need to think about both demand and supply differently.
On the demand side, I suggested in Does the Legal Market Suffer the Same Over-Consumption as Health Care? that smart clients will find ways to make better risk-adjusted decisions, which will limit the need for legal advice. So I don’t assume a return of high demand any time soon.
On the supply side, my prior post argues that smart firms must adopt project management and business analysis. This discipline will help deliver advice without necessarily increasing the need for lawyers commensurate with whatever increase in demand may occur.
Also on the supply side, I don’t assume that in a new regime the labor factor input, aka new associates, will be the same. Who’s to say new lawyers will flock to the standard bundle of old rather than consider a range of “bundles” (mix of compensation, training, collegiality, etc) with different characteristics.
Of course I may be wrong. But in considering the future of the legal market, it seems more helpful to contemplate a new and better regime than to adjust the old one or assume that the old one will return unchanged. In my experience, tinkering with or trying to preserve a broken system typically fails. We need more legal market players envisioning how a new model will better meet everyone’s needs.
Law firm staffing is more an artifact of history than design. Forward thinking law firms need to re-architect themselves.
Most large law firms added staff over time without a master plan. Hiring lawyers meant employing more secretaries. Introducing PCs meant building an IT department. Doing marketing meant creating a new department. If firms’ decisions about how much staff were driven by data, it was benchmarks of other law firms. Benchmark data merely report other random decisions, not what’s optimal.
The massive BigLaw lay-offs over the last year reflect emergency cost cutting, not a conscious organizational re-design. Even after big cuts, firms have room to reduce still massive overhead (see my post Overhead Cost at Large Law Firms Matters After All.
Cuts alone, however, are not enough. Firms must also add to deal with the new normal. Now is the time for large law firms to consciously re-design their organization. It’s not easy; I don’t have answers but I do have questions.
I start with a comment I made a year ago in Law Firm Staffing Reference Model: “To determine what support lawyers need, firms must know what lawyers should do on their own and what they should delegate.”
It seems clear lawyers must delegate analysis and management to other professionals. So firms need more business analysts and project managers generally for effective service delivery and specifically to support and alternative fee arrangements. What is the right ratio of each to the number of lawyers? Does that ratio vary by practice? What other types of professional support personnel are needed? How should firms analyze and answer these questions? I don’t have answers but I think these are important - and the right - questions. Firms that answer them well can gain clients and prosper.
Since not everyone reads Twitter, I reproduce here a selection of my recent Tweets.
RT @robertsawhney Above the Law blog on the ACC value index for law firms http://bit.ly/2UMp0H || Any rankings better than none?
‘Glut of Law Firm Office Space Hits 6 Mil Sq Ft’ NLJ http://bit.ly/4eLW9a || When firms finally encourage working virtually, glut will grow
Hildebrandt blog post on new law firm metrics http://bit.ly/4FDByK || imo, best wld be: client success relative to reasonable expectation
LPO market update by Valuenotes http://bit.ly/2O5au9 || Growth slowed; 12.5k employees in India; $440mil in 2010; scale matters
Just met with 5 large law firms: all talked project management for lawyers + AFA; some best practices. New normal looks different so far.
For firms serious abt project management for lawyers: have person in charge of office moves involved in training
Lawyers who dismiss office move planning as just ‘logistics” are not ready for project management - stick to substance only!
LexisNexis sells HotDocs to Capsoft http://bit.ly/220zBO || LN ‘retired’ CompareRite, now sells HD… what’s next to drop?
Eight more UK top 30 firms size up legal outsourcing moves LegalWeek http://bit.ly/wUgwR || LPO tipped?
Lyceum Capital injects £25m into LPO start-up. The Lawyer http://bit.ly/1mEF1v || LRA move but w/ 140 LPOs, innovative?
@DougCornelius Billable hour _is_ doc assembly barrier…. that’s why PE investment in UK could change market
Thinking about implications of seminal move from a ‘read only analog’ world to a ‘read-write digital’ world. #in
Found today http://www.reason-ed.com by Greg Buckles. Matrix of EDD software. Looks useful.
Anyone try Xiant filer yet featured in LTN Daily Alert on Wed? Looks good but would love to hear reviews before dealing with Outlook add-in
RT @IntegreonEDD An Overview of the Latest ValueNotes Legal Process #Outsourcing Report http://bit.ly/8R2eLx | Mark Ross’ Integreon Blog
With exact written record of e-mail supplanting imprecise recall of phone conversations, is truth any easier to ascertain at trial? #in
If clients don’t want to pay higher lawyer rates, don’t. Debate unnecessary, switch firms. Action will affect rates, not talk. #in
Do lawyers want the benefit of change without the pain? #in
Citi GC thinks he should not have to pay for lawyer training http://bit.ly/7r0cQr || GCs pay in the end, it’s just where the charge shows up
First legal conferences monetized speaking, now magazines. Just got offer to pay for editorial space in reputable legal mag
Orange Rag reports on Fronterion Top 10 outsourcing predictions for 2010 http://bit.ly/4TCKaN
True/False: In Florida, judges socializing in person with lawyers to face ethics charges? FL - “The Forward Looking State” ?
Thinking abt communication: bright line used to separate synchronous + a-sync modes; social media blurs that. Implications? #in
Legal professionals debate if the ‘new normal’ will differ from the ‘old normal’. Aric Press’ American Lawyer editorial, The Change Agenda: Can You Hear the Ice Melting? shifts the question from ‘if’ to ‘how’. The answer to ‘how?’ is ‘process’.
Press writes that even when demand picks up, the changes so far are ‘likely irreversible’. There are ‘plenty of disparate events that support the observation that this change business is more than just a sideshow’. He focuses on two: 1. alternative fee arrangements (AFA) and 2. legal process outsourcing (LPO).
According to the editorial, one-half of the 20 ‘A-List’ firms are on record as doing AFA for marquee clients. And a survey AmLaw conducted to quantify the change found that one-quarter of large firms have outsourced work to LPOs.
In my view, the ascension of AFA and LPO mark the beginning of a deeper shift: lawyer as artist or craftsman to lawyer as manager and engineer. As Press says, ‘this year it became clear that LPO is really about the “P.” It’s not whether the work is done in Bangalore or Bangor or on Broad Street; it’s how the work is done”.
I agree that that process is key. In my 2003 post When Clients Come Knocking, I wrote “paying attention to the process [of law practice] seems at least as important as evaluating the ‘outputs’ such as results and costs…. One could even imagine formally analyzing the processes to determine best practices across firms. It seems likely that the firms using better processes will produce better results at a lower cost.”
While LPO has the word process in it, AFA has the idea of process in it. In my recent post Alternative Fee Arrangements (AFA) are Not as Hard as You Think, I suggested that process is one of three AFA pillars (with tech and staffing the other two).
A related signal of process importance is a surge in legal project management. PM is just the beginning. In support of process, lawyers will need data, metrics, analysis, and structure. So expect to see far more business and financial analysts working side-by-side with lawyers to collect data, analyze them, and create rational, tested processes.
This blog, Strategic Legal Technology, “has been selected as one of the ABA Journal’s Blawg 100. [The ABA] annual list of the best of the blawgosphere appears in the December issue of the magazine, and was posted online.
I am honored that my blog is included in the the ABA Journal’s editors’ choice of the top 100.
Now, the ABA Journal is inviting its readers to vote for their favorite blogs from among the top 100 in each of 10 categories. Voting ends December 31. Registration is required to vote. Winners will be featured in the February issue of the Journal. Anyone interested in voting for this or any other top 100 blog can click the image below to go to a ballot page.
The line between blogging and Tweeting just blurred a bit today.
Today, document assembly company Exari wrote the blog post The insidious nature of the billable hour. It discusses why the billable hour is a barrier to building document assembly tools. Central to its point is a Twitter conversation among Mary Abraham, Jeff Brandt, Doug Cornelius, and me [links are to Twitter]. This spurs some observations.
1. A Tweet I wrote is first. I can’t remember why I wrote it nor do I remember the entire dialogue at Twitter. So much for knowledge management of Twitter content. Skeptics might think there is nothing worth preserving but this suggests otherwise. So I ask my knowledge management friends… any hope of ‘doing KM to Twitter’? Personally, I periodically copy my Tweets to a spreadsheet, which is a manual and clunky process. And it saves only mine, not exchanges like Exari captured.
2. Seeing what Exari has done here, I wonder whether there are other Twitter conversations I’ve had that are blog-worthy.
3. In August I posted Divining Meaning and Intent in the Modern Era, commenting on Dan Regard’s comment that “re-assembling fragments of what once was” will create meaning as well as EDD challenges. I would have been very hard-pressed to re-assemble the dialog that Exari presents. If asked about it, I probably would have had, at best, a dim recollection. So I view the Exari post as a great illustration of “re-assembling fragments”.
4. And finally, I can see the lawyers starting to swarm on the copyright issues. I’ve not spoken to Mary, Jeff, or Doug but I suspect they, like me, are perfectly happy to have their content re-purposed with attribution and links (as Exari does). Is such reproduction fair use? Will reproducing a Twitter thread that never really existed as thread lead to legal issues? I certainly hope not but Tweets have already given rise to libel actions.