The hyperlocal lawyer

You’ve seen plenty of references to the decline of traditional news media here, usually in the context of similar struggles in the legal marketplace. Instead of dwelling on that industry’s problems, however, here’s what looks like one of its future successes, and how it might have potentially profound applications to the law. It’s the rise of hyperlocal news.

Maybe the best way to define “hyperlocal” is to cite new media commentator Max Kalehoff’s question in his blog post: “What is hyperlocal? Can someone please tell me?” We all know what “local” means, he says: content and advertising focused on a specific location or area, rather than on a state, provincial or national level.  City, town, and community newspapers, TV stations, and radio stations all fit the definition of “local,” as do the organizations and subscribers who support them. So what does “hyperlocal” media mean, and how does it differ in a meaningful way from these local media that are dropping like flies all around us? A good answer comes in a comment from Mark Josephson, CEO of hyperlocal news provider Outside.in:

Historically, “local” was defined by city, town or zip. It was very “top down” and assumed that everyone who lived in a certain city, town or zip was interested in the same thing. Now, hyperlocal has come to mean “smaller than city, town or zip” and usually refers to neighborhoods or small town blogs. I think hyperlocal is defined by the individual, built from the ground up; that is, local media, news or information that is personalized by you and YOUR location. Hyperlocal is unique to everyone: what are the places, locations and neighborhoods that are important to you. Continue Reading

Law firms on demand

What if you could take a law firm, carve away all the parts of it you don’t like, and keep all the parts you did? What if, from the client perspective, you could get rid of high and rising prices, time-based bills, gratuitous overhead costs and unfamiliarity with your business? What if, from the lawyer perspective, you could do away with brutal billing targets, inflexible work schedules and long commutes into the downtown core? But what if in both cases, you could keep the high quality of talent and the brand-name assurance that comes with a respected legal services provider — what would that be like?

It’s an intriguing question, but not because of whether it would be feasible — it already is. Firms following this model are blossoming across North America and Europe. They offer corporate clients the services of lawyers with pedigreed credentials (large-firm and law-department experience) who will work from the client’s office or from home, for limited periods of time, at much lower rates than traditional law firms charge. The selling point for clients is the services of an excellent lawyer on the client’s terms, at a competitive price that excludes traditional firm overhead costs and revenue expectations; for lawyers, the challenge of high-end work on a short-term, flexible or even itinerant basis.

Maybe the best-known of this new breed of firms is Axiom Legal, which is closing in on the 300-lawyer mark, but there’s a growing collection of similar operations like Virtual Law Partners, FSB Corporate Counsel, Paragon Legal, Cognition LLP, Virtual Law [UK], The Rimon Law Group, and Keystone Law. They’re often called “virtual firms,” but that’s a little confusing, in light of the growing number of small cloud-based law practices. I prefer VLP’s self-description, a “distributed” law firm, or Keystone’s, “dispersed.” Concerns about these firms usually focus on the scope of their expertise, their value for money, and their KM and quality-control systems, all reasonable worries.  There doesn’t seem to be much question, however, that these firms are sustainable and are already legitimate players in the marketplace.

No, what’s really intriguing about these firms is the fact that they developed at all — that the traditional law firm has become sufficiently unpalatable to the people who retain it (and to some of the people who work inside it) that something new and different can flourish. Dispersed law firms directly challenge the traditional law firm model, presenting themselves as at least a complementary service to what traditional firms offer, and at most, a full-fledged alternative provider. These new firms question the fundamental nature of traditional firms, arguing that the physical concentration of legal talent in a high-priced centralized location with a rigid hierarchy and pyramidic revenue structure is outdated and self-serving. Flexible, project-based, techno-savvy, client-focused law firms are the way of the future, they contend: they’re more efficient, more accessible, and more rational. Continue Reading

2009 Clawbies now accepting nominations

Steve Matthews, my colleague at Stem Legal, has announced that nominations are now being accepted for the 2009 Clawbies, which recognize the very best in Canadian law blogging. The fourth annual awards are seeking your recommendations for Canadian law blogs that deserve widespread recognition for excellence over the past year. In particular, we’d like you to create a post nominating three blogs for Clawbies, along with your brief reasons why these blogs merit an award. If you’re inclined to include Law21 on your list, thank you, but as a Senior Consultant with Stem, I’m officially and happily conflicted out of the running.

Steve is asking nominators to think about “sleeper picks,” blogs that might not get as much attention as more widely-known candidates. Accordingly, while I’m a fan of many Canadian law blogs and would be happy to place them on my ballot, I’m going to give my 2009 nominations to what I consider three underrated and/or important blogs:

1. The Court. Osgoode Hall Law School’s blog covering the Supreme Court of Canada is part of the revolution in how we think about law journals. With regular, sometimes even daily posts about SCC rulings and/or lower-court decisions interpreting those rulings, The Court has become required reading for law students, law professors and lawyers who want to stay up to speed on the rapid evolution of Canadian jurisprudence. I’d put it up against SCOTUSblog or any similar site worldwide for the depth and insight of its coverage.

2. The Cross-Border Biotech Blog. The next generation of law blogs is going to be deeply niched, client-focused, social-network-savvy and above all, about more than just the law. The Cross-Border Biotech Blog scores in all four respects, with industry trend updates, science news, Twitter recaps, and a consistent focus on what biotech clients care about. Jeremy Grushcow of Ogilvy Renault LLP is the lead author, but other contributors come from both sides of the border and a wide range of specialties — possibly the first multidisciplinary law blog, definitely not the last.

3. Fired Without Cause. I wish I could find a regularly updated Canadian law blog that focuses on access to justice and public legal education, because we sorely need one. But Fired Without Cause, the eponymous blog of a Vancouver-based wrongful-dismissal legal services provider, has some of that spirit. Its posts are accessible, plain-language guides to help both employees and employers navigate end-of-employment challenges with minimum damage to both parties. It’s no coincidence that a law blog written to be understandable to the public does not come from a law firm.

Who are your nominees? You don’t have to be Canadian to cast your votes — and if you need a refresher on the potential candidates, check out Steve’s Canadian Law Blogs List. Vote early, because the winners will be announced New Year’s Eve.

Law21 makes ABA Journal Blawg 100

Just a quick note to pass on some good news: Law21 has made the ABA Journal‘s Blawg 100 list for the second straight year! My thanks to the Blawg 100 committee for including this site in its listings — it continues to be an honour to be in such excellent company. Check out the other blogs in the Careers category and in all the categories, and please cast votes to show your support for all the sites you like. And thanks, as always, to you for continuing to tune in!

Beyond billing

Even a dyed-in-the-wool optimist like me didn’t think there’d be so much progress so fast on what’s increasingly referred to as “alternative fee arrangements” (AFAs). Fulbright & Jaworski’s 6th Annual Litigation Trends Survey says 45% of clients are using AFAs like fixed and outcome-based fees. Hildebrandt’s survey of 231 companies showed about half are or soon will be employing non-billable-hour fee arrangements with outside counsel, with another quarter considering them. An Institute of Knowledge Development poll reported that in-house legal departments in Australia are using fixed fees for almost 40% of their external legal spend. AFAs are the subject of panels at the ACC annual meeting and discussions between top GCs and managing partners. And all this talk is bolstered by some remarkable initiatives by several large corporate clients:

* Orrick will handle all of Levi Strauss’ legal work worldwide for a fixed annual fee, according to The Recorder. Levi Strauss will keep only one other firm to continue its brand protection work. Where Orrick doesn’t have an office, the law firm itself will retain and pay outside counsel.

* United Technologies not only requires fixed-fee arrangements with its law firms — it also wants the firm to show exactly how it arrived at the fixed fee in question and how it intends to make money off it, Corporate Counsel magazine says.

* Cisco Systems now buys all its legal work through AFAs, again from Corporate Counsel. Routine matters are bundled together and firms are invited to bid for the work on a flat-fee basis. For more complex or protracted files, Cisco pays a flat monthly fee and a bonus for a good result.

* DLA Piper won a tender process to handle most of Kraft’s legal work, aside from major M&A deals, LegalWeek reported. While the article doesn’t mention fixed fees per se, the DLA lawyer quoted in the piece uses phrases like “controlling costs” and “operational efficiencies.”

How are lawyers responding to all this? Generally speaking, not well. Many continue to believe this is a temporary phenomenon, not a complete re-ordering of the pricing of their services. Some are panicking: Jim Haslett reports that some law firms are engaging in de facto price wars, offering flat fees well below normal with no clear plan how they can deliver at that price. And even well-meaning, sensible lawyers are now tying themselves up in knots over how they should charge for their services: fixed fee? Discounted billable hour? Blended rate? Success fees? What’s clear is that to an unprecedented degree, the legal profession is finally ready and willing to have a serious discussion about billing methods. Which is kind of too bad, because the whole discussion is, to a great degree, now irrelevant. Continue Reading

Resolving the legal education disconnect

In conversation last week with a law school professor, the subject of law firms’ tunnel vision when recruiting law graduates came up. Firms focus relentlessly on the students with the highest grades, the professor lamented, even though these students can be one-dimensional performers with an affinity for the academic environment and no competing pressures outside the classroom. Contrast that with an older student, perhaps with a couple of kids and a part-time job, with or without a partner at home, who took an unorthodox route to law school and perhaps struggles to compete with the younger students — but who is still bright, hard-working, experienced and capable of being a standout lawyer. The firms never even look at graduates like that, and an opportunity is missed on both sides.

At first blush, I agreed with this. I’ve complained myself about the relatively unsophisticated approaches to recruitment that many law firms still take. The students most in demand are the top academic performers from the “top” schools, even though there’s nothing beyond the Cravath Theory to prove that students with high law school marks will make the best lawyers. Does a fleet of “A”s guarantee good lateral thinking, business acumen, client awareness or collaborative work habits? Of course not. Yet firms continue to flock to the academic stars while overlooking graduates who despite (or even because of) their unusual backgrounds would make superb lawyers whom clients cherish. Typical narrow-minded law firms.

Then I was struck by this thought: “Hang on. Who’s giving out these marks in the first place?” I turned back to the prof to ask whether the schools don’t bear responsibility of their own. If the older mother of two with a part-time job is more deserving of employment consideration than the 20-something with his nose in the books all year, why is she at the bottom of the graduating class while he’s at the top? Why doesn’t she get the A, if in fact she’s the stronger candidate to succeed?

But even as I asked the question, I already knew the answer. Law schools don’t assess students in terms of their likely success at the bar. They assess them the same way schools everywhere assess all their students — by the satisfactory achievement of knowledge standards, usually expressed in written form in short-term exams and long-term papers. In the same way that IQ tests measure only the taker’s ability to score well on such tests, so too do good marks in law school only measure one’s ability to complete law school courses to the school’s satisfaction. It has nothing to do with whether you’ll be a good lawyer someday. This is not a secret and it’s not a novel discovery. But the idea that law school achievement augurs professional success remains the fundamental assumption underlying law school, and the bar has accepted it for decades. It’s time for that to change.

The problem with using a law degree as the de facto qualification to seek admission to the bar, and the disconnect between the priorities of academia and the practicing bar, have never been so clear. A good example is a report recently released by a task force of the Federation of Law Societies of Canada on the common-law degree. It is not, by most measures, a radical document. It recommends that law societies in common-law jurisdictions adopt a uniform national requirement for entry to their bar admission programs, which has never existed and would certainly be nice to have. It does not recommend that law schools transform their curriculum, nor does it go nearly as far as the Best Practices Report, the Carnegie Report, or the ABA’s recent decision to focus on output measures when certifying law schools.

What the report does recommend is that every law school in Canada teach a stand-alone ethics and professional responsibility course, given the importance of these attributes to the practice of law. This has not gone over well with the law school community, to judge from comments in this Canadian Lawyer article from, among others, widely respected law professor Harry Arthurs:

[H]e finds it odd that the federation “took it upon themselves to lay down what law schools should be teaching and how they should use their resources and what their job is in general. Law societies, much less the federation, have no statutory power to tell law schools what to teach or to what end they should spend their scarce resources,” he says. … While Arthurs notes that the law society has the right to say who it will admit to practice, “they certainly can’t say to law schools, ‘You are going to teach legal ethics, you are going to teach certain skills competencies, and you are going to file a report annually which provides us with detailed information to demonstrate that you’re doing that.’”

Professor Arthurs is, of course, absolutely right. Law schools don’t report to law societies and are under no obligation to teach anything to their students simply because the law societies say so. His comments bring that fact into sharp relief — and should, I think, serve as the launching pad for the profession to rethink its traditional acceptance of the LL.B. or J.D. as the default qualification for entry into the profession. The first three years of its lawyers’ education and training are almost entirely out of the bar’s hands. That should strike the profession’s leaders as unacceptable and should galvanize them into doing something to correct it.

Let me be clear that this is not a call to impinge on law schools’ academic freedom or to take over the schools’ operation. I spent three years in law school, and running one is just about the last thing I’d want to do — they’re complex institutions whose management can be a challenging and thankless task. But they are not designed to be lawyer training facilities, and they are not practice-friendly. I still remember the law prof who told our class, “A students become professors, B students become judges, and C students become very rich lawyers.” I think he meant it to reassure us not to worry so much about grades. But it expressed perfectly the irrelevance of academic distinction to professional success, the self-perpetuating nature of law school achievement, and the remarkably arrogant belief that the highest form of legal accomplishment is the teaching of law.

The bar’s role is not to run law schools — lawyer-run institutions don’t tend to inspire confidence either. The bar’s role is to ensure that its members receive the best training available, in order to ensure the durability of professionalism and high-quality service to clients. I think that obliges the bar to look long and hard at the law degree and decide whether a three-year program over which the bar has no control is an appropriate prerequisite for practice. If the answer is yes, then the profession should quit complaining about what law school does and doesn’t do — lawyers don’t run law schools, and if they don’t care to create an alternative, they have nothing more to say on the subject. But if the answer is no, then the profession is obliged to come up with a prerequisite that it believes does provide appropriate preparation for admission to the bar, over which it does exercise an appropriate degree of control, and for which it bears complete responsibility (at considerable expense, I might add).

Should that come to pass, law schools will suddenly face competition in the lawyer training marketplace. And they’ll face a choice themselves: to maintain their current focus and perhaps risk a massive decline in enrollment and tuition, or to re-engineer themselves and compete directly with lawyer-operated training centers. That’s not a happy choice, and I don’t wish it on the schools gladly. But if and when the bar decides that it can no longer responsibly delegate the first three years of legal training to completely independent third parties, then that choice will arrive. This is a difficult but necessary process we can’t put off any longer.

Lawyers, journalists and trust

My first post at Stem’s Law Firm Web Strategy Blog is up and running. The title is “Lawyers, journalists and trust,” and talks about the yawning trust gap between lawyers and the media and how to bridge it. My dozen years in legal journalism demonstrated to me how instinctively guarded lawyers can be even with prestigious legal trade publications; when it’s the local tabloid or talk radio show on the phone, lawyers can seize up altogether. The post offers a few tips toward minimizing that mistrust.

This is the first of what will be fairly regular posts at the Law Firm Web Strategy Blog, usually focused on the media, communications and branding, in my capacity as a Senior Consultant with Stem focusing on media and communications issues for law firms and legal organizations. If there’s a topic you’d like to see explored under these themes, drop me a line at jordan@stemlegal.com anytime.

On the road

If you happen to be in Winnipeg or Toronto over the next few days, look me up. On Friday morning, I’ll be delivering the keynote address at the 2009 Isaac Pitblado Lectures, sponsored by the Law Society of Manitoba. The theme of the conference is the future of law; I’ll be sketching out the likely landscape of the legal services marketplace in the 2020s and identifying five emerging catalysts taking us there. It’ll be a terrific event — the Saturday morning keynote will be delivered by Richard Susskind, while other panellists and speakers include Karen Mackay, Dan Pinnington, and Don Douglas. If you can make it, I highly recommend it.

I won’t be speaking at the Canadian Bar Association’s annual Law Firm Leadership conference in Toronto, which starts Monday, but I’m absolutely going to attend. The theme is change management, and the roster of speakers is remarkable: Richard Susskind again, Bruce MacEwen, Paul Lippe, David Allgood, Les Viner, David Corbett, Dale Ponder, Patrick J. Lamb, and many others. You won’t need to be a managing partner to derive value from this event — the trends and best practices under discussion will benefit anyone who wants to know about transformative law practice in the decade to come. If you’re in the neighbourhood during these events, please drop me a line.

Targeting the variable fee

For as long as most lawyers can remember, the billable hour has defined, powered, and shaped their law firms. It determines how lawyers work, how they sell their work, how much they earn, and how they assess and reward their employees. It breeds inefficient, overworked lawyers and frustrated, resentful clients; but it has also proved almost impossible to kill. I’ve come to believe that we haven’t been able to kill it because we’ve been hunting for the wrong beast. We’ve been calling our target the billable hour, whereas we ought to have been describing it, more accurately, as the variable fee.

The fundamental client objection to lawyers’ fees is uncertainty: the client rarely knows the final price before the work is done. Neither, in most cases, does the lawyer — either because the price is truly unpredictable or, far more likely, because the lawyer has neither the means nor the incentives nor the inclination to figure it out beforehand. The fundamental variability of legal fees powers a business model that has proven enormously profitable for lawyers: because the fee varies according to the amount of time and effort devoted to the task, the lawyer has every incentive to maximize that time and effort. Uncertainty creates risk — 100% to the client — and reward — 100% to the lawyer.

The radical change facing law firms today is the end of variable fees as law firms’ financial engine and their replacement with non-variable fees — or, in the parlance of the day, fixed fees. Evidence continues to emerge not only that fixed fees are the immediate future of how lawyers’ services are sold, but also that they’re long-term future of how lawyers’ entire businesses operate.

Fees that vary according to the lawyer production process, rising in tandem with time and effort expended, naturally give rise to inefficient workflow, reinvented wheels, maximized activity and over-accomplished tasks. Conversely, fees that are fixed in advance by the purchaser naturally give rise to proportional efforts, recycled know-how, streamlined processes and hyper-efficient workflow. The first type of law firm business model is starting a steep decline; the second is in sharp ascendancy. In the result, we’re going to witness a sea change in the culture and operations of many law firms. It’s not destiny or professional genetics that makes law firms houses of horror for both the lawyers who sweat to docket the hours and the clients who grimly pay for them — it’s the fever grip of the variable fee. The rise of the fixed-fee-driven law firm is going to demonstrate just how different and better a law firm can be.

Two examples: first, an excellent article at LegalBizDev by Steve Barrett, former CMO of Drinker Biddle, with a title that says it all: “Alternative fees demand improved project management.” It argues that any firm thinking about adopting a fixed-fee approach to sales must be prepared to overhaul its internal systems and business culture. Fixed-fee firms can’t survive massive writeoffs by lawyers who made clients promises about price that they couldn’t keep, or succeed without tracking the progress of past fixed-fee approaches and instituting technological tools to analyze them. And no firm can even contemplate fixed fees without a very clear understanding of the most important aspect of their business: what it has cost them in the past to deliver their services:

Many firms mentioned that a good understanding of cost patterns has never been developed in their firms.  One said (paraphrasing) “We should know how much an ‘XYZ financing transaction’ typically costs, since we do hundreds of them every year.”  Another (again, paraphrasing) said “I can’t believe we don’t know the cost of a typical deposition, since we must do thousands a year.”

As clients ratchet up the pressure on their lawyers to deliver results on a fixed-fee basis, firms will be obliged — forced is probably a better word — to implement these systems and gather and use this data. Just as the variable-fee model discouraged the adoption of these processes and approaches, fixed-fee models will require it.

Second example: firms’ use of associates. Pamela Woldow and James Cotterman of Altman Weil warned law firms in a recent seminar on associate compensation that they need to cut associate salaries much more deeply and accept the fact that clients will never again pay for new associates billed out by the hour. Clients would much rather rely on their own contract lawyers or on offshore professionals than on inexperienced associates; but the opportunity to train associates with this work —  and, much more, the ability to generate revenue off these associates’ billed hours — is key to law firms’ success. The solution to this impasse: fixed fees.

Woldow pointed out that corporate clients are more amenable to using first- and second-years on their matters in fixed-fee arrangements. “So if you really want to use and train your first- and second-years, then up the alternative fee arrangements,” she said.

Endless battalions of associates only make sense in a variable-fee system. When the amount of money you make is tied directly to the number of people working on a file and the amount of time they take to do it, you have every incentive to increase both. In a fixed-fee system, profitability flows in precisely the opposite direction: fewer people hired, fewer hours spent. Law firms that abandon variable-fee structures will shortly find themselves completely rethinking how many associates they hire, how much they pay them, and what tasks those associates are assigned. Under a fixed-fee system, a firm that genuinely wants to train its associates can afford to do so, not least because there’ll be fewer of them — the demand for associates will plummet, along with their cost.

As variable fees give way to fixed fees, we’re seeing a corresponding shift of burdens from the client to the lawyer: the risk of financial shortfall, the maintenance and analysis of relevant data, the obligation to control costs, the necessity of working smarter, the requirement to properly define productivity, and the responsibility to prioritize value. These changes are poised to transform lawyers’ incentives, processes, systems, and attitudes — for the better. Forget the billable hour: the future of law practice is tied to whether lawyers’ fees remain variable — or, put differently, to whether the client or the lawyer decides how much the client will pay. If I were you, I’d bet on the side that’s holding the money.