Design your own law firm: A Law21 lawyer survey

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Not for the first time, and probably not the last, I find myself reading reports from the legal marketplace and wondering why lawyers are asleep at the switch.

The latest head-scratcher comes courtesy of Altman Weil and its fifth annual Law Firms in Transition Survey of 238 US law firms. Importantly, only one-third of the respondents were within the AmLaw 200 — we’re not talking about the giants here, but about firms whose lawyer complements range from 50 into the hundreds, and whose clients likely include some national companies, a lot of regional businesses, SMEs, and individuals. Here are a few highlights from the Am Law Daily report:

  • 80% of respondents think the move towards non-hourly billing will continue — but only 29% had made significant changes to their own pricing practices.
  • 96% believe the focus on improved practice efficiency has become entrenched — but only 45% had made significant changes to improve efficiency.
  • 67% think smaller annual rate increases are also a permanent change — but between 21% and 40% of all fees at all firms are still simply being discounted.
  • And despite all the foregoing, when asked to cite the greatest challenge they expect to face over the next two years, the #1 response (15.2%) was “increasing revenue.” Coming in at #8 (5.6%) was “delivering value to clients,” while the afore-mentioned “improving efficiency” — which, remember, 96% think is here to stay — finished at #11, with  2.8%.

Near as I can tell, many of these respondents must believe that permanent, radical change in the market is something that’s happening to other people. The disconnect between “This is really happening” and “We’re doing something about it” remains perplexingly wide.

Now here are the results of another survey, one that didn’t get quite so much attention, but whose implications are far more chilling. The UK’s Legal Services Board released the results of an incredibly comprehensive survey of small businesses — an astonishing 9,703 of them, ranging from solo entrepreneurs to companies with up to 50 employees. (Although the countries are different, the two survey populations suggest a high degree of overlap between the law firms and the clients in each.) Here are some of the findings:

  • 38% had experienced a “significant” legal problem in the past year, almost half of which had a tangible financial impact — a total market value of £100 billion when scaled up across all small businesses.
  • 91% of respondents took action to respond to their problems — but most either handled it themselves or got help from family and friends.
  • Of the minority who sought formal advice, only about 40% went to members of the legal profession — the rest sought out accountant, trade associations and the like, especially for tax issues.
  • Bottom line: Legal service providers were involved in just 16% of these matters. That means that roughly £84 billion worth of potential small business legal services are being resolved without the legal profession.

Oh, and here’s the kicker: When asked to assess the statement that “lawyers provide a cost-effective means to resolve legal issues,” only 13% agreed.

So I find myself wondering: faced with reliable, overwhelming, and readily available data that shows a near-complete misalignment between them and their markets, why are law firms doing so little in response? Why are firms, even while openly admitting that many essential marketplace fundamentals have permanently shifted, moving so slowly, it at all, to address these changes? I’ve previously suggested the confidence of the dinosaurs as a culprit, but I think there’s something more at work here.

When I talk with lawyers in law firms about these issues, I’m sometimes struck by the impression of powerlessness that I get. Lawyers, including partners, seem to almost shrug, as if to say, “Yes, but what can I do?” The structure and culture of the firm are presented as an unalterable reality, a mix of good and bad that’s just the way it is. The firm delivers profits, prestige, and security — albeit ever-decreasing amounts of each — but it’s also hidebound, reactionary, and highly vulnerable to change. But what are you gonna do? Priorities have been set and choices have been made, and we have to live with the results.

There are times, when confronting this malaise, that I feel like responding, with some force: “Yes, but you own the firm! It’s yours; you’re the equity owners. Nobody else is in a position to make the firm something different and better than what it is. The associates, the staff, the clients — they might not much like the state of affairs either, but it’s not their show; they consider both the firm’s successes and its shortcomings to be entirely your responsibility. If you’re not in charge, who is?”

What I would really, truly like is for more partners to accept full responsibility for their firms — to recognize the need for decisive action to adjust the firm’s bearings, to take that action, and to fully own the changes that follow. I’d like to see them act as the owners they are, not as the passive sideline observers many of them seem to have become.

To that end, I’ve decided to try introducing a third questionnaire into this mix — my own. I’ve created a very short survey — only three questions — at SurveyMonkey, and I’m making it available to anyone who wants to take it. It’s directed towards lawyers in law firms, and I hope they constitute the majority of respondents, but anyone in the legal industry is invited to take part as well.

The title of the survey is: Design Your Own Law Firm. And that’s exactly what you’re invited to do. The survey provides you with 10 features of a law firm, gives you 100 points to distribute among those 10 features any way you like, and asks you to use those limited resources to design the kind of law firm you want to be part of. Here’s a preview of the 10 features, listed in alphabetical order (they’re randomized in the actual survey):

  • Affordability: The firm’s services are priced for maximum client accessibility.
  • Client Service: Clients reward the firm’s efforts to provide extraordinary service.
  • Community Leadership: The firm is widely praised for its active community efforts.
  • Diverse Workforce: The firm is more race- and gender-diverse than its peers.
  • Elite Reputation: The firm is considered among the very top tier in its market(s).
  • Funded Pensions: The firm ensures post-retirement income for both lawyers and staff.
  • Good Workplace: A positive, collegial atmosphere produces collaboration and referrals.
  • New Lawyer Development: Junior lawyers receive superb training, mentoring and work.
  • Partner Profit: Equity owners derive highest levels of annual revenue from the firm.
  • Prestigious Clientele: High-profile or respected clients frequently retain the firm.

Here’s the link to the survey – it’s open today, May 23, and will stay open for either one week or until I have enough responses to draw some conclusions. Please take the survey — Note: print out your choices before pressing “Done,” so that you retain a copy — and forward it to your friends and colleagues. Be honest with your answers: give the responses you really feel, not the ones you think you “ought to” give.

I’m very interested in finding out how — when given several good options, but only a limited amount of resources — lawyers prioritize the structure and culture of a law firm. And I’m hopeful, maybe even optimistic, that by going through this process, lawyers will realize that they really do have the power to make their firms the way they want them to be.

Here’s your chance to be the architect of your law firm. You’re responsible for its priorities. What will you create?

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.  

 

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3 Responses to “Design your own law firm: A Law21 lawyer survey”

  1. Jon Busby

    It will be interesting to see the results of your survey Jordan but I think all of us reading your excellent blog, perhaps, know them already.

    In other words I suspect it will just confirm what we all know and be a n other survey. Sure the futurists will blog and Tweet it but they don’t hold that much sway. Sadly it will probably be more Tweet, RT noise. More people shouting rather than doing. It is the ‘doing’ (and by that I mean proper doing not PR doing) that will be the difference.

    Sorry if I sound negative, your writing is inspiring, but are we, in our blogs and Tweets, exacerbating the problem or solving it? I am not sure.

    I think we all know what the problem is, some even know what the solution is but it all falls down, every time and without exception because of a systemic inability to execute. Innovation isn’t just about thinking of an idea or solution. It is about making it happen.

    The harsh reality is this; this generation of lawyers has been caught and found out and it lacks the creativity or imagination or decision making structure to change which will lead to a creative destruction of the sector.

    We can blog all day about what needs to be done. But it doesn’t get done. Nothing matters until this sector solves why that is. Can it? I really can’t as yet say yes to that question.

    The key driver will be ‘better’ and that better will be for the customer not the lawyer. It can be for the lawyer too but it must be for the customer first.

    It will get ugly over the next few years as a misaligned sector gets realigned but then it will normalise and stabilise and develop.

    Unfortunately for the lawyers that will be a painful process caused not by change but their inability to accept and adapt to it.

    Jon

  2. Christopher Eddison-Cogan

    A very insightful article. My experience of working in law firms over 20 years and subsequently running three firms has been that while partners will pay lip service to the need for client service, the reality is that the primary goal is increased revenues. That is seen at legal conferences the world over. One problem is that it is difficult to be a lawyer and to simultaneously run a firm, and yet most firms are run by practicing lawyers. The law firm CEO/GM job is known to be an challenging one because your board of directors and your shareholders are also your department heads. Your predecessor is there to help, but most changes are not what he or she would have done…The lines of authority are insufficiently clear and so leadership, a prerequisite for change, is diluted to the point of impotence. The water has been very warm and comfortable for senior lawyers for a long time, but the struggle for senior partnership or to build a profitable practice is so grueling that many of those who get there have run out of energy. In larger firms they lack the training, the experience and the time for either management or leadership. In smaller firms they have the experience of management but with so much competition it is difficult to become sufficiently profitable to work on the business rather than just in it. Competition doesn’t just drive prices down, it makes marketing and growth more difficult, expensive and risky. Those who succeed are either very exceptional or they have sacrificed other important areas of their life. The fact that there are some brilliant law firms leaders is more a testament to their intellect and capacity for hard work than it is a confirmation of good business structures. To have those capabilities and also to be a leader capable of inspiring tired senior partners to make potentially expensive changes to work practices before they retire is, in almost all cases, a bridge too far. Hence the appearance of rigidity in the profession and the risk of the warm bath of partnership turning into a cooking pot. It is easy to criticize senior lawyers, and I do, but most large businesses have a momentum and an access to capital that make it easier for senior management to concentrate on management and leadership. Momentum is more difficult to achieve in law firms because we are engaged in piece-work, paid per job. Lawyers necessarily have a job by job focus, and most jobs are hard work. Our reputation with our client often depends on how well we managed their last case, and in litigation and negotiation we are in direct competition with the other side, usually another very smart hard-working person. Where there are the equivalent of recurring revenues which might lead to momentum, such as in defendant insurance work, price competition is genuine and margins are much lower than in commercial work, again making it difficult to get momentum and to think beyond the next tender. Very successful firms have often created some kind of reputational or brand advantage such that either price or volume are much higher than competitors, and this gives them the momentum, profits and energy to manage better. It’s a benevolent cycle that contrasts with the vicious cycle that so many firms are now finding themselves in. I think this is a major difference between law firms and accounting firms, accounting firms enjoy the equivalent of recurring revenues as they manage compliance year after year for the same customers. Small law firms are small businesses, and suffer from the same problems of undercapitalisation, distracted management and expensive marketing as other small businesses. Most small business fail. Large non-legal enterprises have the appearance of better management than law firms in part because their scale necessarily makes them part of an oligopoly in which there is some kind of stable pricing. Very large law firms have been extraordinarily successful by most measures, but it is hard not to conclude that they have put their commitment to their own profits ahead of all else. The story of Arthur Andersen shows what a dangerous path that is.

  3. Mark W Miller

    Several of my colleagues and I have been discussing this very thing in recent weeks. The consensus seems to be that Clients are driving this change. Economic factors of recent years have caused Client’s to demand more efficiency, lower rates or fixed fees in some cases.

    Increasingly too Clients are managing their information proactively so when a need for discovery arises, the Client can effectively respond to the scope of the request. In the past, the Client typically gave the law firm everything and allowed them to do the culling to the responsive documents under the billable hour model.

    One aspect I see on the horizon is akin to the dot com boom in which we had many who tried and few who succeeded in making a transition from a brick and mortar retail store to a virtual one. The analogy in law is that we will see the further development of virtual law firms. They are here now. I believe we will see an expansion in virtual law firms as a means to provide clients with better value.

    As a matter of fact I applied to one a few weeks ago. As an example of the mindset differences I was asked “do not send a resume but provide a video statement under two minutes explaining why you feel you would be a good fit for our firm”. To me that’s the progressive forward thinking company I would like to be involved with.

    Large ships turn very slowly and we’re seeing that in the “what should I do?” attitude. I believe these firms may be so entrenched in “we’ve always done it this way” that they cannot determine what is the best way to solve the problem because their businesses are built on the pyramid model that has existed for the last 100 years.

    Consider the story a colleague told me recently. He spent about 4 hours creating a spreadsheet macro to manipulate a mass of data that if done manually, would have taken probably 100 hours of time to complete. Upon presenting it to the lawyer who engaged the work, he was reprimanded with the comment “This is a hourly billable client, what the heck are you doing?”

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