We measure what we value

People love lists. We love the choosiness, the ordering, the nice linear way they stack up or count down. There’s a reason why every cover of Cosmopolitan includes at least one numbered list. You think Stephen Covey would be a millionaire today if he’d merely written The Habits of Highly Successful People? You think we’d even have heard of the American Film Institute but for its endless series of movie lists? We love lists, and we especially love rankings, which add the irresistible power of personal judgment: I declare “you” more important than “you.”

Sometimes it seems that no one loves rankings more than lawyers. We devour directories, books and websites that rate and rank our firms and competitors. We want to know what Chambers, Martindale-Hubbell, Avvo and other august authorities have to say about us, and if they’re saying good things, we crow about it. Lawyer magazines (and you can think of a few) generate attention and revenue every time they publish an article rating lawyers or law firms in a given region or field. Lawyers love attention, status, prestige, and beating the other guy, and rankings tick all those boxes. (Clients who want easy or lazy ways to choose a law firm like them too.)

The problem with rankings, of course, is that they’re riddled with subjectivity and bias. Who and what you rank, and in which order, has everything to do with the criteria you choose and the people you ask to apply them. What are the best corporate finance law firms in New York? How we answer that question says more about us than it does about the firms, and how those questions are phrased says more about the questioner than it does about us or the firms. When you stare into a ranking, the ranking stares back into you.

Rankings are in the news right now thanks to this recent article (and this follow-up, not password-protected) in the Wall Street Journal. It reported some discrepancies between the profits per partner (PPP) of the 100 biggest law firms in the United States (the AmLaw 100) published in The American Lawyer, and the same numbers apparently compiled by Citi Private Bank Law Firm Group, which lends to many of these firms. Specifically, the Journal reported that “[r]oughly 22% of the top 50 firms overstated their ‘profits per partner’ by more than 20% in 2010, according to a person briefed on an analysis prepared by Citi Private Bank Law Firm Group.” Citigroup declined to comment or to release its figures to the Journal. The American Lawyer also tried to obtain Citi’s figures and was rebuffed.

This has generated a lot of attention, and as those links demonstrate, many people have reasonably drawn conclusions that don’t exactly flatter the firms. At this stage, I’m inclined to think the likeliest explanation for the discrepancy is that we’re measuring different things here — Citi’s definition of “equity partner,” which lies at the heart of the calculation, is slightly different than AmLaw’s. That said, it sure seems odd that none of the discrepancies arose from firms under-reporting their profits per partner in 2010. And it does seem odd, when we really think about it, that the industry-bible ranking of large law firm profitability — a measure that is extremely important to these firms’ position in the market — is based on self-reported figures that do not, so far as I know, have anything like an independent audit standing behind them.

This story reminds us of a couple of things. One is that few checks and balances exist to ward off the potential for privately held law firms to inflate their publicly announced financials. This is especially a problem because whether or not every firm inflates (and I don’t think they all do), every firm is highly motivated to do so. A precipitous slide down the AmLaw rankings is often a prelude to an exodus of key partners and potentially the collapse of a firm. It was to avoid exactly that result that many firms sliced off so many staff and associates in the wake of the financial crisis — you have to prop up profits in the face of falling revenue by slashing costs or risk having partners flee the firm as if it were on fire. Moreover, to the extent partners pay attention to their firm’s overall financial situation (and that is generally not a great extent), they quite probably suffer from cognitive bias: they want to believe that their firms are highly profitable, so they’re not going to heavily scrutinize any report that says they are. This is a system inherently prone to inflationary bias.

The other reminder is of the stark reality that we’ve developed some pretty unhealthy priorities in the legal profession. We use rankings of the previous year’s self-reported partner profitability as a surrogate for the prestige and desirability of a law firm, and what that says about our profession isn’t good. (Do you admire companies based on their ability to make a profit off you? Do your clients?) I was speaking to a friend who advises law firms on professional development, and she mentioned that relatively few law firms track what their associates are actually doing — the opportunities offered to them, the tasks they’re engaged in, and the skills they are (or aren’t) developing. In fact, most law firms closely measure only one aspect of their associates’ work lives: how many hours they’re billing. The message about the firm’s priorities is clearly received by associates and is passed on in turn to the next generation.

We like to complain, as a profession, that law firms only seem to care about partner profits — but we assiduously follow and legitimize rankings that not only endorse that outcome but effectively create it. We measure what we value. So you might try asking yourself what your own firm records, measures and acts upon. Those are your priorities. That’s your culture.

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.

Goodbye to all that

Last week, having written about the rise of online disruptors and the emergence of super-boutiques, I promised that the final entry in this de facto trilogy would identify how lawyers and law firms can ensure their profitability in this new environment. But then I spent three days at ILTA’s Rev-elation, the 2011 annual meeting of the International Legal Technology Association, and it seems to me that that ship is already sailing out of the port.

What I saw and heard at ILTA, about document assembly and contract standardization and reverse auctions and KM advances and outsourcing services and a host of other developments, is that the storm we’ve been warning about for the past few years has finally broken (read the linked articles for more details). Tired of waiting for law firms to lead change, the market has itself developed tools and processes to provide the certainty, efficiency, transparency and cost-effectiveness that legal services have long needed. Clients love these innovations and are telling law firms to use them, even (and especially) where they conflict with firms’ traditional ways of working and making money. And firms are obeying, with the vague but dawning realization that they’re now being told how to do their jobs.

What’s happening is this: law firms are finally losing control of the legal marketplace.

Law firms used to dictate the terms upon which legal services were performed — work assignment, work flow, scheduling, timeliness, format, delivery, billing, pricing, and many others — because buyers had no other options. Those options have now emerged, powered by technology and driven forward by market demand.

  • They promise legal documents not just faster and cheaper but also, incredibly, better, in terms of quality and reliability.
  • They promise greater efficiency and transparency in the previously laborious RFP-driven process of choosing and pricing law firms.
  • They promise real-time integration of world-class legal knowledge into the legal work production process.
  • They promise alignment of a legal task’s value with its performer’s skills, qualification and location.
  • And at ILTA, they demonstrated delivery on all these promises and more.

But the emergence of these options isn’t the real story. The real story is that firms are buying these new products and services, not selling them. They’re taking marching orders about their use, not issuing them. They’re accepting the new realities of the marketplace, not inventing them. Law firms are now drifting to the periphery of the marketplace, trading places with technology-driven outsiders whose own importance increases daily. Law firms, whether they realize it or not, are settling into a new role: sources of valued specialists called upon to perform certain tasks within a larger legal system that they did not create and that they do not control.

New providers and new technologies are not going to replace lawyers. But they are going to marginalize lawyers and render law firms mostly irrelevant.

Lawyers are smart, knowledgeable, creative and trustworthy professionals who, unfortunately, suffer from poor business acumen, terrible management skills, wildly disproportionate aversion to risk, outsized revenue expectations, and a business model about 25 years out of date. The market won’t abandon them — they have unique and sometimes extraordinarily valuable skills and characteristics — but it will find the best use for them: expert specialists with limited influence over the larger process.

Law firms are widely decentralized partnerships that charge on a cost-plus basis, retain no earnings from year to year, and pray every morning that their best assets will walk back through the same doors they exited the previous night. That’s not good enough. The new legal market demands systematization, collaboration, transparency, alignment, efficiency and cost-effectiveness within and among its providers. A few law firms have already adapted these traits, and some more will follow. Some law firms are so powerful they won’t have to change. The rest are in grave danger.

Here’s a revealing thought experiment to illustrate these points. Consider the flurry of investments and acquisitions that have taken place in the legal technology area recently. I’ve already written about Google Ventures’ $18 million investment in Rocket Lawyer and LegalZoom’s acquisition of $66 million in venture funding. During ILTA, Aderant acquired Client Services and CompuLaw for an undisclosed but certainly massive sum. And in the biggest news of the week, Hewlett-Packard purchased Autonomy, which among other things is a leading e-discovery provider, for no less than $10 billion.

With those figures in mind, ask yourself: what would you pay for a law firm? What price would you meet for any of the world’s ten largest law firms? Some very smart people discussed that question during a conversation at ILTA, and we reached this likely conclusion: nothing. Not a cent. Because really, what do law firms have to sell? They have no patents. They have no unique business methods. They have little unique knowledge. They have few long-term client commitments under contract. They have limited goodwill. Their only real assets are a handful of partners with great technical expertise or amazing rainmaking skills, and these assets can leave anytime with no penalty. What, precisely, would you be buying?

I said at the outset of these posts that lawyers and law firms need to decide carefully what they do and how they do it if they want to remain profitable and valuable. Let me instead suggest more questions for lawyers and law firms to ask themselves in order to even remain in the conversation.

What: Identify your inventory — what you sell to clients — and determine how much of it involves the application of lawyers’ high-value performance or analytical skills. Assume that the price for everything else you sell will plummet, and that you’ll be able to stay in these markets only if you adopt various high-efficiency systems. Absorb the reality that you will need many fewer people within your law firm to be competitive in these areas.

How: Study the means by which you accomplish the work you sell to clients and determine whether and to what extent you can adopt new technologies and processes to be not just more efficient, but also more effective in terms of quality, relevance and responsiveness. Don’t think in terms of adapting your current approaches; think in terms of starting from scratch. Use your creativity and ask: How should we go about doing what we do?

Who: Identify every person who receives a salary or a draw from your firm and ask: what is their primary contribution to the firm? Good answers will include proven business development skills, outstanding professional expertise, and amazing management abilities. These are your irreplaceables, and you’re probably underpaying them. Everyone else will require a clear demonstration of why they occupy a place in your office.

Where: In association with the previous entry, determine the best physical location for the services you provide. We are past the time in which a law firm’s four walls house all or almost all of its functionality. Some services might best be performed in a suburban location, others in a home office, others in a low-cost center elsewhere in the country or in the world, and others from a server farm.

Why: This might be the most important question of all, and I posed it in an article last month: what is the point of your law firm? I don’t mean generating profits for partners; I mean your marketplace purpose. Why do you exist? What specific need for what specific audience do you meet? If you disappeared tomorrow, who would find the loss irreplaceable? Believe me when I say: The market is asking you that question right now.

We’ve begun crossing over from the old legal marketplace to the new one. Lawyers still have outstanding value to offer in certain quarters, but we need to concentrate our market offerings around that value, and we need better platforms for our services than traditional law firms provide. We need to understand what technology is doing to legal services and either adopt that technology, adapt to the client expectations it’s creating, or leave. We need to understand our role in this new market and appreciate that it does not lie at the center of the legal universe. We’ve missed our chance to lead the new market, but we can still flourish inside it. It’s up to us.

Welcome to the crucible.

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.

 

The rise of the super-boutique

Yesterday, I advanced the notion that lawyers’ profitability now depends on what they do and how they do it. One reason is disruptive internet-based providers that not only are grabbing commodity work and profiting from it, but more dangerously, are also changing the values clients associate with “good legal service” to emphasize speed, affordability and convenience, threatening to replace firms as platforms of choice for many legal services. Today, I’d like to look at parallel developments within the legal profession that further illustrate this point.

Earlier this year, I wrote about the stratified legal market and its implications, and more recently, for The Lawyers Weekly, I described the consequent need for law firms to do what they do best and outsource the rest. With a hat tip to John Wallbillich’s fee pyramid, I’ve put together the following rough approximation of what the market for legal services now looks like (click to enlarge):

So you have bet-the-company work at the top, ordinary course of business legal tasks in the middle, and low-value commodity work at the bottom (the stratified legal market post explores these tiers in more detail). The top tier is now shrinking — it’s probably on its way down to 10% of the total market — and the bottom layer is growing, soon to encompass about half of what clients need.

Clients enjoy seeing their legal needs settle into segments with different price points, but they still find most lawyers and law firms frustratingly amorphous and undifferentiated, both individually and collectively, in terms of skills, methods and attitudes. They sure would like to see the legal profession recognize and respond to the realities illustrated by this pyramid.

That’s why the news last week from CMS Cameron McKenna looks so significant. The London-based global firm announced that it was essentially outsourcing its entire immigration law department to an equally global but fully specialized immigration law firm, Fragomen, Del Rey, Bernsen and Loewy. Understand, Camerons isn’t sending some low-value aspects of immigration work to Fragomen — they’re sending everything, lawyers and all. Camerons will no longer provide immigration law services within its offices — but it will still provide those services to its clients, using Fragomen as its preferred supplier.

This, I need hardly tell you, is something new. It’s so new that we don’t have a verb for what Camerons has done. The Lawyer uses “divests” and “offloads,” LegalWeek uses “transfers” and “spins off,” Fragomen uses “acquires” and I used “outsourced,” but none of these really seems to fit. Fragomen is now a little bit Camerons, and Camerons is now a little bit Fragomen; they’ll always be separate entities but they’ll always be joined. We probably need a term borrowed not from business, but from biology.

John Wallbillich, again on the case, wonders if this is the end of the full-service law firm, and he may be right. But at the very least, it’s a major mutation in the full-service firm’s evolution. Camerons hasn’t abandoned immigration law altogether; it has simply recognized that immigration work was neither strategically nor financially significant enough to remain a core activity of the firm, yet was still important to the firm’s key clients. You solve a problem like that by figuring out what you do best and outsourcing the rest, which is exactly what Camerons did here. It’s closest to the Wave system pioneered by Lovells (as it then was), but a Wave circulates work from a major urban firm through smaller regional providers and back again; this is a different animal.

What we may be seeing, in addition to the evolution of the full-service firm, is the rise of the super-boutique. Fragomen, as Ron Friedmann explains, is a walking illustration of what he calls Law Factory principles:

  • Focus on a single practice: with 250 lawyers, it is much bigger than its next biggest immigration firm competitor at 35 lawyers.
  • Handle high volumes: it has handled 50,000 immigration transactions annually for 3 years.
  • Keep overhead low: its offices are not fancy (and until a then-recent move, the offices sounded pretty shabby).
  • Leverage non-lawyer professionals: the firm has more than 500 paralegals, putting the ratio to lawyers at more than 2:1.
  • Work on fixed fees: 95% of its work is charged on a flat-fee basis.
  • Take legal technology seriously: the firm has provided web-access to case files for more than 10 years; its paralegals have access to a digital best practices library of key flowcharts.
  • Keep lawyer pay in check: new associates earn $125k, not $160k and do not come from top-tier schools.
  • Be global: the factory is global with 15% of work outside the USA.

You know what leaps out at me from that list? Fixed-fee work is ninety-five percent of Fragomen’s business. You can charge fixed fees when you only practise one type of law and come to know the area intimately; you have to charge fixed fees when your margins are so thin that you need to know exactly how much it costs you to carry out a given task. That’s the world Fragomen lives in, and it has adapted itself accordingly. It’s a world foreign to most law firms, who like to do everything and charge it all at cost-plus. But it’s a world that’s growing.

Take a look at the insurance defence bar, at least in the UK (which, thanks almost entirely to the Legal Services Act, is now the world’s legal laboratory). This article in The Lawyer describes the rise of insurance defence mega-firms, most recently highlighted by Clyde & Co.’s merger with (acquisition of) Barlow Lyde & Gilbert to produce a firm with 280 partners and revenue just south of half a billion dollars. Think about that for a second: $500 million a year largely from insurance defence work, possibly the least remunerative and most demanding corporate legal practice area in existence. And that merger simply lets the new firm tackle rivals that are about to grow in a hurry: Irwin Mitchell (soon to convert to an ABS), Parabis Law and Minster Law (both with aspirations in that area). Says The Lawyer:

This change is being ­driven by savvy in-house counsel,?who?can see ­financial savings to be made from their service providers. … Clydes chief executive Peter Hasson said the ­merger was driven in part by the anticipated reduction in panel places for global insurers. “The insurance industry is consolidating suppliers on a global basis. The UK insurance industry is much more international. Our clients are saying, ’We’ve just opened in Canada – we want you there’,” he said. [And so Clydes is, recently acquiring Montreal-based Nicholl Paskell-Mede to become the second global firm to enter Canada.] …

The insurance legal ­market is changing the way legal services are being delivered. This is a change that is being driven by the volume markets squeezing profit margins and forcing their peers to play a different game. Consolidation can only continue in this sector for a limited time before it starts to seep into other key legal areas.

And so it will. Take a look at Littler Mendelson, 71st in the 2011 AmLaw 100 with 750 lawyers in 50 offices across the US and annual revenue of $381 million, and the only thing it does is labour and employment law. Like other super-boutiques, Littler is a sharp, savvy firm that knows how to maximize the value of its investments. Just as an example, read this description of Littler’s CaseSmart system, nominated for an InnovAction Award this year:

“[It] streamlines the way that cases are managed and provides attorneys with a ‘smart system’ designed to anticipate their needs as they investigate facts, conduct research, prepare responsive documentation and perform their legal and risk analyses. The system also provides clients transparent, online access to information about the status of their individual legal matters, as well as key performance indicators regarding the overall work being performed in this system.”

How many full-service law firms do you suppose create and support something like this? Not many. Yet firms like Littler, Clydes and Fragomen make investments like these, because they’re responding to the realities of a legal marketplace that demands better and more cost-effective ways of producing legal work. That’s why Camerons’ move is so significant: it has created a visceral and structured relationship with a super-boutique, increasing its effective reach and capacity while simultaneously reducing its size and spend. That’s a pretty neat trick, one that other firms may find hard to duplicate.

So we come back to the theme at the start of this post: how do lawyers and law firms ensure their profitability in this environment? That’s going to take more space and time than I have right now, so it looks like this series will have to stretch to Part 3 next week.

But I want to emphasize the trend that seems to me undeniable: as commodity work grows in volume, more law firms are stepping up to take that work and profit from it through a relentless focus on volume, specialization and systematization. Go back to the pyramid: these firms are eventually going to dominate that third tier of client work (or at least, that percentage of the work that doesn’t leave the legal profession altogether). The first tier, mission-critical work, is shrinking, and the very top law firms have already locked in on it.

What’s left for the vast majority of non-specialist law firms? What do they get? In my opinion, they get an existential crisis. More on that next week.

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.

Here come the disruptors

Lawyers used to have the Midas Touch: whatever we did, however we did it, we were profitable, because no one else could do it (and no one else was allowed to try). From now on, lawyers’ and law firms’ profitability hinges completely on what we choose to do and how we choose to do it. That’s what I want to spend the next two days talking about.

Tomorrow, I’ll look at what’s happening inside the legal profession. Today, I want to talk about what’s happening outside it, starting with last week’s most dramatic news: $18.5 million in venture capital announced by online legal service Rocket Lawyer.

Rocket Lawyer, if you’re not familiar with it, provides legal forms that online users can fill out, store and share on the Web. For $20 a month, reports Forbes, consumers can also have their documents reviewed by a real lawyer and even get legal advice at no additional cost. It boasts $10M in annual revenue and 70,000 visitors a day. The $18.5M figure, by itself, is less significant — rival LegalZoom recently announced a $66 million VC infusion — than the identity of the secondary investor in Rocket Lawyer, Google Ventures.

It’s important to note that this is not Google Inc. we’re talking about — Google Ventures invests in (it does not acquire) companies independent of Google, and it supports a range of startups that develop things like carbon-neutral fuels and yeast-based antibody discovery platforms. No one is suggesting that Google Inc. will take over Rocket Lawyer, make its forms free and sell ads on the content — although you know what, that’s more than merely plausible. But note what Google Ventures’ Wesley Chan says in Rocket Lawyer’s press release:

We see a large market opportunity for legal solutions that are easily accessible and affordable to users. Rocket Lawyer’s combination of an intuitive user-driven front-end with a strong technology-based platform uniquely positions the company to scale and deliver the type of “wow” user experience that online customers love.

Note the drawing cards for GV: ease, accessibility, affordability, user-driven, user experience. They have nothing to do with the intelligence of the lawyer or the quality of the legal offering and everything to do with the manner in which clients find and access legal services. As I’ve said before, convenience is the new battleground, a fight for which law firms still haven’t even shown up.

Those same features are what drew Google Ventures to its first foray into the legal sphere: Law Pivot, a legal Q&A website that allows companies (especially startups) to confidentially (or, as of yesterday, publicly) receive low-priced, crowd-sourced legal answers from a roster of private lawyers. Similar to Rocket Lawyer, LawPivot gives lawyers a platform to market their legal services by sharing advice and engaging in discussions (the company’s personalized search algorithm provide users with relevant lawyers to provide answers to their specific legal questions). Again, note the words of Wesley Chan in the announcement:

There are inefficiencies in the delivery of legal services, and there is a huge opportunity for a technology-driven disruption in the legal industry. The LawPivot team has created an intelligent online solution that connects companies to the legal answers they need.

Those are the two key terms we need to focus on: inefficiencies and disruption. Those of us who scan this marketplace have been warning for years that the legal profession’s backward business model is in the gunsights of aggressive entrepreneurs that want to exploit those inefficiencies and push lawyers out of the driver’s seat. Well, Les voila.

Because here’s the thing: neither Rocket Lawyer nor Law Pivot are doing anything that even an average law firm couldn’t have done already. The former has created a client-facing document assembly system that provides channels to licensed lawyers who can review the completed documents and answer more complex questions. The latter offers lawyers the opportunity to engage directly with potential clients and demonstrate their expertise through the dissemination of their real-world knowledge. Law firms have had the capacity to create these services for years, but they’ve been unwilling or unable to risk changing the nature of their business.

Both Rocket Lawyer and Law Pivot (and LegalZoom and Epoq and many others both present and future) have recognized that the production of legal documents and the provision of legal insight have become so systematized, routinized or borderline-commoditized that their market value has fallen below law firms’ profitability thresholds. So they have converted the legal advice process and legal document assembly system into marketing and business development opportunities for lawyers. And they have one simple goal in mind: to replace the law firm as the primary platform by which clients find and engage with lawyers. That is a realistic goal, and both their ideas and their execution have been good enough to interest Google Ventures and other investors.

I guarantee you will see more of these deals financing more of these operations in future, and when the UK finally launches Alternative Business Structures, watch the stream turn into a flood. But the fundamental trend to understand here is the legal marketplace finally recognizing and responding to the inefficiencies lawyers have created in the delivery of legal services. The result will be disruption for lawyers and upheaval for law firms. Tomorrow, I’ll talk about what that’s going to look like.

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.

Innovation pays

I’m willing to wager that the one phrase most frequently spoken in partnership meetings, when the subject of potential new initiatives comes up, is: “Are any other firms doing this?” Law is virtually the only industry where a negative answer to that question is met with disappointment.

Doing what everyone else is doing will get you everyone else’s results. This is patently obvious, and lawyers are more than smart enough to recognize it. So the continued insistence by many lawyers that new and better results must be obtained by employing the same old approaches will have to remain one of life’s great mysteries.

Happily, there’s a sufficient (and growing) number of lawyers and law firms breaking that habit to enhance my own confidence that some members of the legal profession really are starting to get it, from the smallest solo practice to the largest global firms.

Back in the spring, for example, I announced a contest seeking five examples of 21st-century solo practice, which would be rewarded with a free one-year scholarship to Solo Practice University, courtesy of Susan Cartier Liebel and the rest of her team at SPU. I’m now very happy to announce the winning entries!

Our winners range from virtual family law practices focused on low-income clients to a special-education niche firm and an online environmental law practice. Our winners are June Gold of Connecticut, Jack Lebowitz of New York State, Diane Littlejohn of North Carolina and Neal Rice of Pennsylvania (the fifth winner will be announced at a later date). My best wishes and congratulations to these scholarship winners, and my thanks again to Susan and SPU for helping launch five more innovative law practices!

I also spent the spring and summer helping promote the College of Law Practice Management‘s InnovAction Awards, which recognize law firms and legal organizations that are committed to doing things differently and better in this marketplace. Today, I can announce that out of a near-record number of entries, we have three InnovAction Award winners from three different countries:

  1. Law Without Walls, a multi-school initiative to rethink legal education, spearheaded by the University of Miami Faculty of Law
  2. Lawyers on Demand, a brand-new legal service delivery model pioneered by London-based law firm Berwin Leighton Paisner
  3. The Internationally Trained Lawyers Program, a bridging program for qualified foreign lawyers at the University of Toronto Faculty of Law

Yes, you read that right — two winning entries from law schools, confirming that the legal academy is part of the changing legal landscape as well.

I’d be seriously remiss, though, if I didn’t also recognize the excellent entries from law firms and legal organizations worldwide, especially from large law firms, that didn’t take home an award but that definitely merit your attention. They are:

Take the time to click through and read the one-paragraph descriptions of each of these entries, and then find out more by visiting the firm’s or company’s website. These are lawyers and legal service providers who are making the effort, successfully, to redefine the terms upon which lawyers create legal services and by which clients access them.

Take a good look, because this is the future of the legal marketplace, arriving early.

On the road and on the Net

Before providing a series of links to articles I’ve recently published elsewhere, I want to bring your attention to my next two public speaking appearances and encourage you to come check them out.

First, I’ll be in Toronto this Friday, August 5, at the Annual Meeting of the American Bar Association. I’m honoured to be appearing on a Presidential CLE Panel sponsored by the ABA’s Standing Committee on Technology and Information Systems. “eAttorney, MiAttorney: How Technology Has Changed Communication and Collaboration With Clients” runs from 8:30 a.m. to 10:00 a.m. at the Metro Toronto Convention Center, Room 716B, 700 Level, South Building. My fellow panelists are the real draw: Dennis Kennedy, Daniel Schwartz and Michael Downey will join me to discuss the impact of technology on the lawyer-client relationship, legal ethics, and the legal marketplace generally.

Secondly, I’ll be in Nashville on Monday, August 22, at the International Legal Technology Association’s 2011 Rev-elation Conference. I’m greatly looking forward to moderating the panel “Offshoring and Outsourcing: What It Means for Your Firm and Your Job” at 1:00 pm in the Governor’s C Ballroom at the Gaylord Opryland Resort. I’ll be joined by two high-profile experts in this field, Toby Brown and Kevin Colangelo, in a session introduced by V. Mary Abraham. We’ll be discussing the impact of outsourcing on lawyers, clients, and law firms’ operations, technology, infrastructure, while forecasting where the future will lead us in  this area.

If you expect to be at the ABA or ILTA conferences, please drop me a line and let me know.

With those two stops noted, here’s my regular roundup of work published elsewhere.

1. Two entries at Law Firm Web Strategy, the Stem Legal blog:

(a) “Politeness, please: Etiquette for LinkedIn and Facebook connections” — Avoiding the “Hey, you!” approach to online networking.

(b) “Law firm branding, social media and strategy” — First you get a brand, then you take it online: putting the horse before the cart.

2. Two articles from Edge International’s monthly newsletter Communiqué:

(a) “The myth of the two-tiered associate track” — In which I try to deflate a popular but misleading buzzword.

(b) “The purpose-driven law firm” — What is the point, from the market’s perspective, of your law firm? Think carefully before you answer.

3. Two columns for The Lawyers Weekly:

(a) “Pricing risk in the legal process” — Risk can be quantified, and lawyers can (and will) prove this as we get better at pricing our services.

(b) “The truth about (online) branding: it’s all about the client experience” — The original column on which the previous Stem post was based.

4. Two posts for Attorney At Work:

(a) “Be the world’s most client-accessible lawyer” — Meet your clients at their times, on their turf, and on their terms.

(b) “Shall I compare thee to a summary judgment?”– I really enjoyed writing this one: poetry as an exercise in lawyer clarity.

5.  Two columns for Small-Firm Innovation:

(a) “When it comes to marketing, small is powerful” — I really think solo and small-firm lawyers are poised for a marketing breakthrough.

(b) “Will your client someday say: You’re Dead2Me?” — Excellent client service is a legitimate competitive advantage. Really.

6. And for a change of pace, one regular column at Slaw:

(a) “Articling: back to basics“– Wherein I take a good, long look at Canada’s articling student system and ask some hard questions.

7. Finally, I’m always pleasantly surprised to hear from the media and happy to give them my time. Here’s where I’ve shown up recently:

(a) “Ontario attorney makes the case for (legal) poetry in motion— Montreal Gazette (re: my Attorney At Work post)

(b) “Outsourcing pioneer blazes a new trail: bringing work back from India” — National Law Journal (re: the repatriation of outsourcing)

(c) “Half off: Nevada lawyer bets on discount model” — ABA Journal (re: the coming rise of low-priced legal services)

That’s about enough links for one post. Again, please drop me a line if you’ll be at the ABA or ILTA meetings this month — I’m always very happy to meet my much-appreciated readers.

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.

Legal outsourcing’s AFL moment

It’s July, we’re in the middle of a record-breaking summer of heat, and the major-league baseball trade deadline is just days away. So naturally, I’m going to talk about football.

This isn’t entirely a propos of nothing: the National Football League lockout recently ended with a 10-year collective bargaining agreement, and a frenzy of free-agent signings has followed. But I actually want to go back several decades and tell you about an upstart operation in the 1960s called the American Football League, because the AFL has something to say about a legal process outsourcing (LPO) industry at a crossroads.

Here’s a brief summary of the AFL’s short but extraordinary history, from Wikipedia:

The American Football League (AFL) was a major professional football league that operated from 1960 until 1969, when the established National Football League (NFL) merged with it. The upstart AFL operated in direct competition with the more established NFL throughout its existence. Though downplayed by the NFL as inferior, the AFL signed half of the NFL’s first-round draft choices in 1960, including All-American Billy Cannon, perennial All-Star Johnny Robinson, and Hall of Famer Ron Mix. Overall, AFL teams signed 75% of the league’s draft choices that first year. It continued to attract top talent from colleges and the NFL by the mid-1960s, well before the Common Draft which began in 1967.

A merger between the two leagues was sought by the senior league and announced in 1966, but was not finalized until 1970. During its final two years of existence, the AFL teams won upset victories over the NFL teams in Super Bowl III and IV, the former considered one of the biggest upsets in American sports history. When the merger took place, all ten AFL franchises became part of the merged league’s new American Football Conference (AFC), with three teams from the original 16-team NFL (the Pittsburgh Steelers, Cleveland Browns, and Baltimore Colts) joining them. The remaining 13 original NFL teams became the inaugural members of the National Football Conference (NFC). The AFL logo was incorporated into the newly minted AFC logo, although the color of the “A” was changed from blue and white to red. The NFL retained its old name and logo and claims the rights to all AFL products including the eagle logo.

This tells most of the story, but the key learnings lie in the details. The AFL originated with the NFL’s rejection, in 1959, of attempts by eager would-be owners to add expansion franchises and share in the growth of a prosperous league. Undaunted, these entrepreneurs started their own league, and despite shaky beginnings (and lower-quality offerings), persevered to the point where the NFL was forced to take the upstarts seriously. The AFL succeeded by entering markets overlooked by the NFL (such as Kansas City, Houston and Buffalo) and by raiding the NFL of talent: first by drafting and outbidding college players previously bound for the NFL, then (by mid-decade) poaching established players (especially quarterbacks) from NFL rosters. Striking a lucrative TV contract also gave the AFL access to outside capital it needed to compete with the incumbents. Eventually, in order to control runaway salaries and stem the talent bleed, the NFL agreed to a merger with a league barely six years old.

You can probably see where I’m going with this. The legal process outsourcing industry shares a remarkable number of characteristics with the 1960s’ American Football League: reacting against established providers who refused to allow new competitors, they start up their own business catering to under-served markets with lower-budget offerings. But then they start making talent inroads, first with raw recruits and eventually with respected veterans. The real break comes with access to outside equity that allows them to fully compete with the incumbents, and eventually, head-to-head competition proves the quality gap isn’t so great after all.

But there’s more. The AFL didn’t just force its way into an established league: it changed the way that league did business. The NFL was never glamorous or especially exciting, whereas the AFL went out of its way to market itself that way; today, excitement marketing is the foundation of the NFL brand. Even by the time the merger took place, many of the AFL’s innovations (arguably including the Super Bowl itself) had spread to the NFL:

  • Players’ names on the backs of their jerseys
  • Stadium scoreboard clocks to track the official time
  • A 14-game schedule (up from the NFL’s traditional 12)
  • More colourful uniforms
  • More passing attempts per game (though not as much as legend would have it)
  • And perhaps more importantly, more black players

Real agents of change don’t just disrupt the marketplace position of incumbents: they change the nature of what that market provides. This is the opportunity, and the challenge, that lies before outsourcing companies in the legal market right now. If all they intend to do is offer the same basic services in the same basic way as law firms, but at lower prices, these companies will have a very short lifespan. The key to LPO’s survival is not just to evolve upwards from the traditional law firm model, but to be so successful that law firms have no choice but to adopt their innovations.

We’ve seen very small degrees of innovation and adaptation from lawyers in private practice, and even smaller responses from lawyers in corporate law departments, and it’s not enough. Law firm and in-house lawyers are, for the most part, trapped in the same closed, cyclical eco-system, perpetuating an unsustainable business model out of short-term self-interest. Only an outsider can break that system, and only by coming at it with sufficient force and from the correct angle. The best opportunity for powering real change in the legal marketplace today lies with LPOs — and behind them, with the business and corporate entities awaiting the arrival of Alternative Business Structures in the UK — ready to do things differently and better.

But the critical questions are: will they decide to be pioneers, or merely opportunistic entrepreneurs? Will they come up with enough crowd-pleasing innovations to attract financial support within and outside the legal industry? Will they build a better model, one that law firms eventually will have to adopt simply to safeguard their own livelihoods?

Those are the three strategic challenges that outsourcers and other would-be change agents need to answer. How they respond could very well determine the nature of the legal marketplace for decades to come.

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.