The failure of legal innovation

Okay, I admit: that was a pure linkbait headline. Not quite as bad as 17 Heartwarming Photos That Will Restore Your Faith In Humanity, but still, I couldn’t pass up the opportunity to draw in people who might be thinking (hoping?) that I’d given up on innovation in the legal market.

But the headline isn’t a complete fraud. In fact, you could consider this post as a necessary companion to An incomplete inventory of NewLaw, which generated a great deal of interest and enthusiasm last week. Scores of new law firms, businesses, and technologies are emerging in this dynamic market, generating justifiable excitement. Ron Friedmann led a discussion this week on Twitter that estimated the percentage of the corporate legal market that NewLaw is carving off — it may be quite small, but it still translates into a whole lot of money in a very short period of time.

Nonetheless, it’s precisely now, when legal innovation seems to be really taking off, that we need to remind ourselves how fragile and fraught the startup environment really is. A thousand flowers may well be planted in the legal marketplace; but hundreds will never bloom.

An excellent illustration of this idea can be found in a recent James Suroweicki column in The New Yorker. “Epic Fails of the Startup World” is a sober pail of cold water dumped onto the frenzied fires of innovation. “We live in the age of the startup,” Suroweicki writes, but this Cambrian explosion of innovative new businesses is occurring contemporaneously with a mass extinction: failed startups overwhelmingly outnumber successful ones.

The reasons behind these astonishingly high failure rates should give legal entrepreneurs pause: it appears that most startups suffer from a massive overabundance of misplaced confidence, made worse by a startup culture that has come to lionize failure as the noble condition precedent to success. There’s no question that failure is indeed a condition precedent to success in the startup world. But far more frequently, failure is just a condition precedent to more and bigger failures. Serial entrepreneurs, according to a German study, are actually more failure-prone than first-time innovators.  [do_widget id=”text-7″ title=false]

The upside of this phenomenon is that the extremely few successes that emerge from the startup world deliver disproportionate benefits in economic and social terms: one LinkedIn or Uber is worth many Pets.coms. “We’ve built a whole system on unrealistic expectations,” says Suroweicki. “Because we don’t know how to identify good companies in advance, investors end up funding lots of them in the hope that a few will hit it big. … In the delusions of entrepreneurs are the seeds of technological progress.”

Remember that line you were given on your first day of law school? “Look to your left, look to your right, only one of you will be here in five years”? Imagine you’re in an auditorium with 100 other students and the speaker says, “Only one of you in this room will make it.” That’s a decent approximation of the odds facing startups. It’s only the bullheaded optimism of the entrepreneurial spirit, as well as the outsized rewards awaiting the rare winners, that keeps the system going, to everyone’s benefit.

We should expect the same thing to happen to NewLaw. In fact, it’s already happening. England & Wales has been described as the world’s legal laboratory; well, some of that lab’s experiments have already fizzled out. Conveyancing ABS In-Deed Online gave up the ghost last summer, sold for a mere one pound after arguably hitting the markets too early. Stobarts Barristers went the way of all flesh last month, perhaps confirming that a trucking company might not have been the best platform upon which to launch a law firm. And Co-Op Legal Services, the early heavyweight contender of consumer law ABS (and my personal rooting favourite) might not be dead, but there’s reason to worry that it might simply be nailed to its perch.

More failures and disappointments will follow. Some innovations will fail because they were based on a bad idea, some will fail because of bad execution, and some will fail because of bad luck; but they’ll all come to the same end. This is not a jab against NewLaw and legal startups, or a red flag on any specific entity; it’s simply the natural outcome of a marketplace law. There are nearly 100 entries on my NewLaw list, and probably scores of others I haven’t yet come across; they can’t all be lucky exceptions to the rule against startups.

If anything, the recent tsunami of cash investments in NewLaw might be just as much a sign of concern as of confidence. Josh Kubicki, the clear thought leader in the legal startup world, reported $458 million invested in legal tech startups in 2013, adding that 2014 is ahead of last year’s pace. Funding round announcements in the tens of millions of dollars aren’t routine quite yet, but we’re getting there. Is this a sign of the tremendous promise and potential of legal startups? Almost certainly. But it might also be a sign of vast amounts of money burning holes in the pockets of angel investors and searching for the next shiny thing. It might be, in the famous words of Alan Greenspan, a certain degree of irrational exuberance.

I wanted to note these ideas for a couple of reasons. One is to slightly temper the commendable enthusiasm inside and around the legal startup world, to remind participants in this genuinely exciting market that the risks rival or outnumber the rewards — it’s a narrow path to glory, and the drop on either side is steep. But the other reason, and I think the more important one, is to counter the inevitable arguments of the skeptics and cynics that will issue, in a few months’ or a few years’ time, standing over the corpse of some high-profile NewLaw entity and proclaiming that there was never anything here but hype and snake oil. That’s simply not the case.

Failure is built into innovation. It’s a feature, not a bug. You can choose, if you like, to glorify failure as a critical rite of passage on the path of enlightenment; like any heady drink, that’s fine in moderation, though it’s fatal in stronger doses. But you can also choose to revile failure, to loathe it and shun it and attach shame to those who experience it. This is the lawyer’s approach to failure, and it’s a leading reason why so little change has occurred in the traditional business model. We’re not just risk-averse as lawyers, we’re embarrassment-averse: we fear the self-inflicted humiliation of falling short. That’s why the schadenfreude felt by many lawyers when a legal innovation fails is palpable: we believe the innovator’s fall confirms the wisdom of our own reticence.

Rather than glorifying or reviling failure, however, I suggest we simply accept it as a perfectly natural part of doing business in a turbulent market. As the legal profession is pulled deeper into that turbulence, failures will mount, and they’ll be far more common among those who tried than among those who shied away. But the rewards will also be much larger and more numerous among the innovators than among the laggards. You don’t have to love failure. But I do recommend you get a lot more comfortable around it.

Jordan Furlong is a lawyer, consultant, and legal industry analyst who forecasts the impact of the changing legal market on lawyers, clients, and legal organizations. He has delivered dozens of addresses to law firms, state bars, law societies, law schools, judges, and many others throughout the United States and Canada on the evolution of the legal services marketplace.

An incomplete inventory of NewLaw

So I was asked to give a presentation about “NewLaw.” No problem at all — aside from the minor, niggling detail of figuring out what “NewLaw” is supposed to be.

Like other terms in vogue within the legal profession (cf. “non-lawyer”), we seem to understand better what “NewLaw” isn’t than what it is. George Beaton of Australia, who has written more than anyone else on this subject, describes the NewLaw business model as the antithesis of the BigLaw model, and that’s certainly true. For my purposes, though, I was inclined to cast the net a little more widely — to encompass not just law firm models, but also new legal talent combinations, legal service managers, and technology that both changes how lawyers practice and places the power of legal service provision in clients’ hands. So I decided to use “NewLaw” to describe any model, process, or tool that represents a significantly different approach to the creation or provision of legal services than what the legal profession traditionally has employed.

With that definition and goal in mind, I set out to catalogue the genus “NewLaw” as best I could. What I wound up with was two broad categories, six sub-groups, and a whole bunch of exceptions. I thought I’d share the lot with you, partly because I thought you might be interested, and partly because I’d welcome your suggestions for supplementing the list with new entries, transferring an entry into a different category, expanding upon the disclaimers, and generally broadening and deepening the conversation. This is not meant to be a definitive inventory of “NewLaw.” It’s merely my attempt to understand the term better and identify at least some of its manifestations in the market.

First, the exceptions and disclaimers.

1. Several innovative legal companies and technologies aren’t on the list, but only because I think their primary focus is the marketing or management of law practices, rather than the creation and delivery of legal services. So I set aside the growing number of practice management support companies like ClioCaseTrek, Curo Legal and Rocket Matter, as well as marketing, management, and business development services like Avvo, DirectLawLawDingo, LawGives, FlatLawLegati Law and UpCounsel, although they’re certainly in the NewLaw neighbourhood (and if you think they should be in the NewLaw community itself, let me know why in the Comments). [do_widget id=”text-7″ title=false]

2. I also decided not to include e-discovery providers, but mostly because I’d have been here all week cataloguing all the players in this market. Also, while there’s no question it’s had a serious impact on how litigators do their job and sell their time, I might argue that e-discovery is increasingly accepted as part of litigation and isn’t all that “New” anymore. Similarly, predictive coding (or more accurately, binary classification) is a warp-drive engine for e-discovery and many other emerging legal functionalities; the whole area of legal machine learning promises to be extraordinarily disruptive. But aside from a few firms that made the list, I was hard-pressed to think of many clear leaders in this area. Again, I’d welcome your recommendations.

3. I really wasn’t sure where to put LegalZoom and Rocket Lawyer in this list. They’re clearly “NewLaw” leaders and must be included, even if they’re frequently (and wrongly) described by lawyers as legal technology companies. They provide a sort of hybrid combination of legal documents available online and networks of affiliated law firms that supplement the documents with higher-value services (Jacoby & Meyers, which is listed below, could also fit within this category). Given that LegalZoom is frequently challenged by state bars and that Rocket Lawyer presumably also gets dirty looks from legal regulators, we might also refer to these enterprises as the NewLaw strike force.

4. Also not making the cut: BigLaw online legal services (Ron Friedmann’s list is essential, but I’m not sure how many of these entries are game-changers), law school-based entities (Reinvent Law, LawSync, and Law Without Walls are still all worth your attention, though), and some true category killers that just haven’t reached a critical mass yet (say hello to accountants practicing law).

5. I repeat: this list neither pretends nor aspires to be exhaustive. You may have a fascinating legal startup that I’ve never heard of, or that (to my mind) hasn’t gained enough traction yet to merit inclusion here. But if you belong to a small or midsize firm that’s pricing everything with fixed fees or selling through online delivery, or if you’ve launched a legal technology offering that’s changing the way legal services are produced or obtained, by all means identify yourselves in the Comments section.

6. A final note to startups: in no way does this post mean I can give you useful feedback on your product or service, because I very likely can’t. I was a liberal arts major for a reason. This really is just an attempt at a “NewLaw” catalogue, not a stealth advertisement for consulting services.

With all that out of the way, we can move to the actual lists. I ended up putting all the NewLaw entities I could find into two broad categories and six sub-groups:

1. Aligning Human Talent with Legal Tasks

  • New-Model Law Firms 
  • Project/Flex/Dispersed Legal Talent Providers
  • Managed Legal Support Services

2. Applying Technology to the Performance of Legal Tasks

  • Tools To Help Lawyers Do Legal Work Differently
  • Tools To Help Clients Resolve Disputes Directly
  • Tools to Help Clients Conduct Their Own Legal Matters

Of  course, many of the tools and enterprises listed below overlap to some degree with other sub-groups and categories. There are very few NewLaw human enterprises that don’t make use of technology and very few NewLaw technologies that don’t involve human application; I tried to position each entry under the heading that made the most sense. (The one-line descriptions are taken from the entities’ own websites or materials; the parenthesised jurisdiction is where the entity is headquartered.)

1. Aligning Human Talent with Legal Tasks

A. New-Model Law Firms 

  • Brilliant Law – “Legal advice and expertise you can trust, at prices your business can afford – the fixed price legal services solution for you and your business.” (UK)
  • Clearspire – “We offer a complete, value-driven solution for outsourcing complex legal matters … a radically new and efficient law firm for the 21st century.” (US)
  • Cloudigy Law – “A cloud-based intellectual property & technology law firm.” (US)
  • Co-Op Legal Services – “Our legal team provides confidential help, exactly the level of advice and support you need with fixed fee pricing for most services.” (UK)
  • Gunner Cooke – “A boutique corporate law firm with one, clear vision: to challenge, improve and evolve the way legal services are provided.” (UK)
  • HiveLegal – “Law firm which improves the experience for our clients, our team and our network.” (Australia)
  • Hunoval Law – “A premier law firm for default servicing clients. Our dynamic leadership leverages cutting-edge proprietary technologies and Six Sigma process analysis.” (US)
  • Jacoby & Meyers – “It’s our goal to make the legal system more accessible and more affordable for everyone, and we’ll evaluate your case or legal matter for free.” (US)
  • Justice Cafe – “We are striving to bridge the justice gap by dishing up affordable legal help in our communities.” (US)
  • Keystone Law – “A dispersed business model, with senior solicitors working from satellite offices, supported by a central London office.” (UK)
  • LegalForce – “A modern progressive law firm based in Silicon Valley with over 23,000 clients worldwide.” (US)
  • Marque Lawyers – “We started our firm with the desire to practise law in a new and better manner, and in particular to do away with the business of charging for legal services on the basis of the time spent doing it.” (Australia)
  • Potomac Law – “We are able to offer clients exactly what they are seeking: sophisticated legal advice from knowledgeable attorneys at attractive rates.” (US)
  • Quality Solicitors – “A group of modern, progressive law firms spread across the UK, each one chosen because their clients tell us that they deliver great customer service.” (UK)
  • Riverview Law – “We deliver fixed-fee legal advice for businesses of all sizes. We are changing the way businesses use, measure and buy legal services.” (UK)
  • Salvos Legal – “We provide quality commercial and property law advice on a paid basis. However, all of our fees fund our ‘legal aid’ sister firm. Both are wholly owned by The Salvation Army.” (Australia)
  • Seyfarth Lean – “A distinctive client service model that provides a different way of thinking about and delivering legal services.” (US)
  • Slater & Gordon – “A leading consumer law firm in Australia with a growing presence in the UK consumer law market. We employ 1,200 people in 70 locations across Australia and 1,300 people in 18 locations in the UK. ” (Australia)
  • VLP Law Group – “We provide sophisticated legal advice in a wide range of practice areas, but our overhead is low, our staffing lean, our fees flexible and value-driven.” (US)
  • Winn Solicitors – “We are national road traffic accident specialists. With Winns, you have no excess to pay.” (UK)

B. Project/Flex/Dispersed Legal Talent Providers

  • Advent Balance – “A firm that combines the expertise of outside counsel with the best qualities of a sophisticated in-house team.” (Australia)
  • Avokka Virtual GC – “Virtual counsel. Real results. Shift your thinking about legal counsel. Change the way you do business.” (Canada)
  • Axiom – “A 1,000-person firm, serving nearly half the F100 through 12 offices and 4 centers of excellence globally.” (US)
  • Bespoke Law – “A network of experienced lawyers who are available to provide clients with tailored support without watching the clock.” (Australia)
  • Cognition – “A team of highly experienced and skilled lawyers offering first-class business legal counsel either on-site or off-site, on a flexible, as-needed basis.” (Canada)
  • Conduit – “We pride ourselves on providing knowledgeable and effective legal counsel to address your needs as they emerge within your business.” (Canada)
  • Custom Counsel – “We are a nationwide collective of over 100 experienced attorneys who provide project-based legal services to other attorneys.” (US)
  • Daily General Counsel – “We come to your place of business for a full day and help you to solve your most pressing legal-related business problems.” (US)
  • Delegatus – “We have reinvented the law firm business model for you.” (Canada)
  • Eversheds Agile – “We meet a demand by clients for temporary, high-quality legal professionals that provide peace of mind and a link to an international law firm.” (UK)
  • Fondia – “A strategy that breaks with traditional law firm culture to transform the experience of clients and staff.” (Finland)
  • Halebury Law – “Your external in-house lawyers – offering clients senior ex in-house lawyers on a flexible basis.” (UK)
  • Intermix Legal – “Experienced freelance attorneys providing project-based legal support services to law firms & solo practitioners.”
  • Lawyers On Demand – “You can flex the size and capability of your team just when you need to.” (UK)
  • Paragon – “We provide embedded attorneys on a project basis to assist with overflow work, hiring gaps, interim backfills and special projects.” (US)
  • Pinsent Masons Vario – “We are a hub of freelance legal professionals who are not just technically skilled, but have the personality and drive to ‘fit right in’, to add value from day one.” (UK)
  • The Posse List – “We post document reviews, paralegal positions, forensics positions, litigation support positions, project management positions, compliance positions, general counsel/assistant general counsel positions – pretty much everything across the legal employment field.” (US)
  • Project Counsel – “We post European, Asia Pacific and Persian Gulf based document reviews, paralegal positions, forensics positions, litigation support positions, project management positions, compliance positions, law firm associate positions, and general counsel positions.” (Belgium)
  • Proximity Legal – “A leading provider of onsite legal, procurement and work health and safety services to the government sector.” (Australia)
  • VistaLaw – “A global team of former in-house attorneys with broad experience in providing legal support and advice to international companies.” (UK)

C. Managed Legal Support Services

  • Elevate Legal Services – “A global legal service provider helping law firms and corporate legal departments operate more effectively.” (US)
  • LeClair Ryan Legal Solutions – “We provide a wide range of support services and incorporate best-in-class technology and quality control processes which will be uniquely integrated into the law firm’s litigation and transactional practice areas.” (US)
  • MiamiLex – “A revolutionary alliance of the School of Law at the University of Miami and UnitedLex, a leading global provider of legal support and technology services.” (US)
  • Novus Law – “We provide legal document management, review and analysis services for lawyers that are measurably more accurate, faster and less expensive.” (US)
  • Obelisk Legal Support  – “We provide flexible, affordable and quality support for in-house legal teams and law firms.” (UK)
  • OnRamp Apprentice – “We hire recent law grads to work on large scale ‘contract genome mapping’ projects.” (US)
  • Pangea3 – “The global leader in legal outsourcing. Our LPO provides comprehensive legal services to corporate lawyers and law firms.” (US)
  • Radiant Law – “Outsourcing, IT, commercial contracts from negotiations to disputes. We bring together legal judgement, process and technology. ” (UK)
  • United Lex – “The global leader in legal services outsourcing, provides litigation, contracts and IP services to corporations and law firms.” (US)

2. Applying Technology to the Performance of Legal Tasks

A. Tools To Help Lawyers Do Legal Work Differently

  • AAA ClauseBuilder – “‘Designed to assist individuals and organizations develop clear and effective arbitration and mediation agreements.” (US)
  • BrightLeaf – “A technology-driven service that automates the entire process of abstracting information from all your contracts for upload to your CMS or for use with our abstraction analysis tool.” (US)
  • CaseText – “Judicial opinions and statutes are annotated with analysis by prominent law professors and attorneys at leading firms, giving you unique insight. And everything is 100% free.” (US)
  • DealStage: “Enables attorneys and transactional professionals to better manage the deal process lifecycle from drafting to closing.” (US)
  • ClearAccess IP – “Serving the patent marketplace by lowering transactions and streamlining data management at the prosecution level.” (US)
  • Diligence Engine – “Technology-enhanced contract review: faster and more accurate.” (Canada)
  • Judicata – “Mapping the legal genome to help you better understand the law.” (US)
  • Jurify – “We harness the collective genius of legal titans to deliver a complete set of resources on legal topics in one quick search.” (US)
  • KM Standards – “Our patented software allows you to build model forms from your own agreements, audit entire contract sets, and quickly review incoming contracts.” (US)
  • Koncision Contract Automation – “A subscription-based service providing lawyers with document-assembly templates for business contracts.” (US)
  • Legal Systematics – “We deliver automated document drafting programs and other advanced knowledge tools for making legal work more efficient.” (US)
  • Lex Machina – “We provide legal analytics to companies and law firms, enabling them to craft successful strategies, win cases, and close business.” (US)
  • Littler CaseSmart – “A case management solution that combines a Littler-developed proprietary technology platform with rigorous quality assurance measures.” (US)
  • Mootus – “We help law students and lawyers build skills, reputation and knowledge for free through open, online legal argument.” (US)
  • Neota Logic – “We transform expertise into answers and action.” (US)
  • Ravel Law – “Data-driven legal research and analytics.” (US)
  • Sky Analytics – “Helps reduce legal spend, control legal costs and benchmark legal spend.” (US)
  • TyMetrix – “The leader in bringing advanced technologies to critical dimensions of legal transactions and analytics.” (US)

B. Tools To Help Clients Resolve Disputes Directly

  • CleanSplit – “An easy-to-use tool that allows divorcing couples to divide their property without confrontation while saving time and legal fees.” (US)
  • Fair Outcomes – “Provides parties involved in disputes or difficult negotiations with access to newly developed proprietary systems that allow fair and equitable outcomes to be achieved with remarkable efficiency.” (US)
  • Fixed – “The easiest way to fix a parking ticket.” (US)
  • Modria – “The world’s leading Online Dispute Resolution platform.” (US)
  • Picture It Settled – “Using neural networks to examine the behaviour of negotiators in thousands of cases, we can predict what an opponent will do, thereby saving time and money while optimizing settlements.” (US)
  • Rechtwijzer – “Rechtwijzer 1.0 was … an appropriate, trustable legal helping hand that would assist people throughout their conflicts. [Rechtwijzer 2.0] enhances its services from diagnosing and referral into dispute-solving.” (The Netherlands)
  • Resolve Your Dispute – “A self-help online tool for consumers to settle disputes with a business.” (Canada)
  • Road Traffic Representation – “We provide you free expert advice to help you with your motor offence, from speeding fines to driving without insurance.” (UK)
  • WeVorce – “Divorce is more than a legal problem. … You’ll come out with the necessary legal documents as well as a lifetime of tools, knowledge and agreements as you begin again.” (US)

C. Tools to Help Clients Conduct Their Own Legal Matters

  • A2J Author – “A software tool that delivers greater access to justice for self-represented litigants by enabling non-technical authors from the courts, clerk’s offices, legal services programs, and website editors to rapidly build and implement customer friendly web-based interfaces for document assembly.” (US)
  • Docracy – “The web’s only open collection of legal contracts and the best way to negotiate and sign documents online.” (US)
  • EverPlans – “We provide guides, resources and a platform to help you create a plan that contains everything your loved ones will need if something happens to you.” (US)
  • Fair Document – “You get all your necessary estate planning documents completed quickly, and our streamlined process of working with an attorney affords peace of mind.” (US)
  • Iron Tech Lawyer – “A competition held at Georgetown Law, where student teams show off apps built in our Technology Innovation and Law Practice practicum.” (US)
  • Law Help Interactive – “Helps you fill out legal forms. Answer a series of questions and print your legal form. The forms are free and have been created by nonprofit legal aid programs and courts.” (US)
  • Lexspot – “Our online platform … makes the convoluted and expensive immigration process easy and affordable. ” (US)
  • Peppercorn – “Create legal agreements, in multiple languages, in just minutes.” (Italy)
  • Probate Wizard – “Probate is daunting. We make it simple. … the most advanced DIY probate system in the UK.” (UK)
  • Shake – “We strive to combine the simplicity, convenience, and collaborative spirit of a handshake with the protection of a legal agreement.” (US)
  • Smart Legal Forms – “Designed for US consumers and small business who want to resolve their legal problems at the lowest possible cost.” (US)

Some closing observations:

1. A disproportionate number of new legal talent arrangements are found outside the US (especially in England & Wales), while a disproportionate number (nearly all of them, in fact) of technology solutions are found inside the US. I attribute the former to more liberal regulatory regimes in other jurisdictions and the latter to the enormous amounts of venture capital available within the United States. (Conceivably, the restrictions on American law firm ownership help drive more resources towards tech solutions.)

2. When I started this inventory, I expected the tech entries to outnumber the talent entries, and I was surprised to see the opposite result. That might be purely a function of what I found, rather than what’s actually there. But I do take it as evidence that many more lawyers have seen and responded to the changes in how clients are buying legal services and engaging legal professionals than we generally credit. If anyone within your organization wants to reject change on the basis that ” no one else is doing it,” show them this post.

3. A lot of these companies and products might want to reconsider the fad in branding that creates a name by joining two related terms together to make one word. (Says the guy with a blog called “Law21.”)

So there you have it: my incomplete inventory of this indeterminate thing called “NewLaw.” It’s good enough for my presentation; hopefully, with your contributions and observations, you can make it even better.

Jordan Furlong is a lawyer, consultant, and legal industry analyst who forecasts the impact of the changing legal market on lawyers, clients, and legal organizations. He has delivered dozens of addresses to law firms, state bars, law societies, law schools, judges, and many others throughout the United States and Canada on the evolution of the legal services marketplace.

The incidental lawyer

The South Carolina Supreme Court ruled this week that LegalZoom’s services do not constitute the unauthorized practice of law. As reported by Greg Lambert at 3 Geeks, LegalZoom’s press release celebrates the news, while also taking pains to note that the company’s documents have been reviewed by the state Supreme Court and that it frequently refers its customers to licensed lawyers for more complex work.

What interests me more than the outcome of the case, however, is that a lawyer (and he’s not the only one) felt compelled to spend time and money challenging LegalZoom in the first place. Think about the practical results that would have followed had this lawsuit succeeded.

A source of legal materials that, by most accounts, is at least adequate for the needs of its customers would disappear from the state, leaving those customers once again with the prospect of hiring a lawyer they know they can’t afford or seeking a lesser alternative (along with a chilling effect on any other business inclined to try the same thing). Would lawyers have reduced their fees in response, to become more affordable to the low-income market segment that LegalZoom serves? If so, it would have been history’s first recorded instance of a supplier lowering, not raising, its prices in response to reduced competition. If there’s a net social benefit here, I’m not seeing it.

What, exactly, are efforts like this designed to achieve? “The protection of the public interest” is the standard justification — even though the public has an equal if not overriding interest in having tools and processes with which to exercise its legal rights, is already protected by the right to sue an incompetent or fraudulent provider in court, and is comprised of adults who presumably can make informed decisions about their own lives with their own money. There’s a subtle but importance difference between “protecting the public interest” and “serving the public interest,” and we’re supposed to be pursuing the latter more than the former.

The likelier explanation, of course, is that these efforts are really trying to protect the interests of lawyers. But I think they’re actually achieving the opposite. Whenever we reflexively oppose “non-lawyer” legal service providers, we’re saying: “There is no place for anyone in this market except lawyers.” But that sentiment is not based in reality. If you believe it, then you ought to take a step back and consider just how incidental lawyers already are in in this market — how far we’ve drifted from the centre of the legal system and towards its periphery. And every time we try asserting our indispensability in the face of reality, we just accelerate that drift.

The American Bar Association, the Canadian Bar Association, the UK’s Legal Services Board, the World Justice ProjectStanford Law School, the Canadian Department of Justice, and the Canadian Action Committee on Access to Justice in Civil and Family Matters are among the groups that have released studies over the past several years demonstrating what a small and shrinking segment of the legal market is actually served by lawyers. A good example is the Department of Justice study from 2007, which asked thousands of Canadians if they’d had a “justiciable problem” over the past three years, and if so, what they did about it:

  • Slightly less than half dealt with it themselves.
  • About a fifth did nothing.
  • About another fifth got non-legal help (e.g., unions, government, friends or family).
  • Less than 12% got legal help.

Given that this survey was published a year before the financial crisis, I don’t see how that 12% figure has improved since then. And it’s not an outlier: the UK survey found a similar result, as only about 16% of small businesses with legal issues turned to a lawyer to help them. According to the ABA, courts across the United States report between 60% and 90% of family law matters involve at least one self-represented litigant. The legal market, viewed in its entirety, is like an iceberg, 85% hidden below the surface. Lawyers have concerned themselves only with the small fraction above water. Everyone else is down there on their own, holding their breath.

We normally use facts like these to illustrate the “access to justice” crisis, and we convene panels in which we sternly lecture the profession and the courts about our moral failure: “Your access to justice is bad and you should feel bad.” And that’s fine. But what these facts should also illustrate is something that we ought to take just as seriously: the “lawyer irrelevance” crisis.

With a few exceptions (principally criminal defence work), lawyers are simply not relevant to 80% to 85% of all individuals and businesses with legal issues. We’re off the table: we’re briefly considered and quickly dismissed. We need to recognize and absorb the fact that a huge amount of legal activity already takes place entirely without our involvement.

And that was the situation before the market began bringing forth new options for legal solutions. We were already peripheral before barriers to non-lawyer entry began falling, before legal technology began making such impressive strides, before LegalZoom was bringing in $200 million a year, before the legal startup sector received $458 million in outside funding last year. One startup I spoke with last month was just the latest to tell me that that its product was designed to “take lawyers out of the equation.” When you consider how few equations we’re already in, this ought to bring us to immediate attention.

Consider what’s going on in the market right now:

  • Australia approved “non-lawyer” law firm ownership a decade ago, England & Wales has issued 300 Alternative Business Structures licences since 2012, and Ontario will soon become the first North American jurisdiction to grapple with this option (aside from Washington State, which has already approved limited-license legal technicians).
  • Computers can now do the following things: draft commercial contracts, review contract provisions, assess electronic evidence for relevance, answer legal and regulatory questions interactively, predict the outcome of negotiations, and partition marital assets in a divorce. What will they be able to do in another five years, or ten?
  • Self-represented litigants are receiving growing levels of institutional support: courthouse kiosks provide them with guidance, lawyers unbundle services to support them through limited-scope retainers, and startups create systems and programs that maximize their ability to get the results they want. Self-representation is becoming normalized.

So let’s say that lawyers serve about 15% of the total potential market, and make a decent living doing so. As a lawyer, you might be satisfied with that: let the other 85% take care of itself, or use one of these alternatives. You’ll continue to serve the highest-level, most lucrative market segment, the small chunk of the iceberg above the water. So what if lawyers are peripheral to the entire market? We’re central to the richest part of the market, the one you care about, right?

Right. But what happens when all these “non-lawyers,” all this technology, all these self-represented litigants and their supporters, get better at what they do? What happens when, in addition to being cheaper than lawyers and faster than lawyers, they start to become almost as good as lawyers? Do you really think they’re not going to look up through the water at the tip of the iceberg and think, “I’d like a piece of that?”

This is what I mean when I talk about lawyers becoming increasingly incidental. A huge amount of legal activity already takes place without us — and what the foregoing should make clear is that that amount is growing. The ability of the legal market to function adequately and competently without the involvement of lawyers is increasing. Deprived of access to the best and most valuable asset available to assist them — lawyers — people have started to look for substitute assets, and where they can’t find such assets, to create them. Those substitutes are now here, and filing UPL lawsuits against them isn’t going to stop the process that spawned their development.

Because too often, that’s how we’ve been responding to what the market is telling us: with hostility, or with arrogance. I’ve lost count of the number of lawyers who’ve chuckled at warnings about “non-lawyer” providers, saying (sometimes literally), “Ka-ching! Every time a client tries to use one of these companies, it just means more business for me when they come looking for help to straighten out the mess they made.” What a selfish, unprofessional attitude we’ve developed: comfortably serving our 15% of the market, blocking the other 85% from accessing whatever help they can get, and smugly feasting off the problems of those for whom even these efforts went wrong. And we wonder why people are looking for alternatives?

But here’s the thing: I don’t believe that lawyers are doomed to the periphery of the market — after all, we used to be central to it. There was a time when we were intrinsic to the enforcement of legal rights and the execution of legal procedures, essential to a functioning market in legal services. But over time, we allowed ourselves to become optional, to become something close to a luxury good — content to serve the most well-heeled clients with the most interesting cases in the most convenient manner. We’re meant to be stewards of the entire legal system, but we’ve confined ourselves to our small gated grounds and let the rest of the property manage itself.

But that is not irreversible. I’ve met too many concerned, creative and compassionate lawyers, and I’ve seen too many praiseworthy change efforts already within the legal profession, for me to give up on lawyers as a universal legal solution. I believe that lawyers can and should serve more than 15% of the market. I believe we can because the tools and the procedures are now available to enable us to offer high-quality legal services more efficiently, effectively, and affordably. And I believe we should because we are still (for the moment) the most valuable and effective resource available for the resolution of legal problems, and it’s wrong for those resources to benefit only a select few.

Maybe not everyone needs the skills and expertise of a lawyer. But everyone deserves the opportunity to find out if they do. Let’s stop fighting the needs of the 85% and start figuring out how we can serve them instead.

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.  

Me again

So I thought you might be interested in reading about what I’ve been up to lately outside of Law21 (seeing as how I sure haven’t been up to much here). I have a couple of new posts percolating for this month and next, and by mid-summer, I hope to announce what I think will be a very interesting new project I’ve been working on. Please consider this roundup of recent writings and appearances to be a down payment until then.

1. Writing

Back in February, at the request of the very good people at Lawyers On Demand in the UK, I published The New World of Legal Work, a white paper that explores the changing nature of law firm operations and legal talent demands (brief summary here). The report generated a great deal of interest, as well as media coverage in the Law Society Gazette, The Global Legal Post, Law Times, Legal Futures, and many lawyer blogs worldwide. As a companion piece to “The New World of Legal Work,” I also penned my first entry for the ABA Journal‘s Legal Rebels column, “The Rise of the Agile Lawyer.”

I’ve also been writing at Stem Legal’s Law Firm Web Strategy blog. Early in the year, I wrote about law firm brands in an online legal market, advising lawyers that your “brand” is very simply who you are, what you do, how you do it, who you do it for, and what you’re like to deal with; your online presence is supposed to clarify, amplify, and support that brand. Later on, I talked about how lawyers can break down the most common barriers to blogging, suggesting five tactics that can remove the obstacles blocking lawyers from contributing content on a regular basis.

Other writing projects included contributing a chapter to Attorney At Work’s newest publication, New Math, New Money: A Lawyer’s Guide to the Changing Business of Law. My section was titled “Three Ways to Compete in the Coming Legal Market“: Owning the very narrow band of high-value lawyer-exclusive work, streamlining all your systems to compete for wide-access work, or creating new opportunities altogether. I also wrote a couple of articles for the Edge International Communique: “What ‘overcapacity’ really means” (it’s a self-deluding buzzword) and “Why would your best clients fire you?” (What are your most dangerous vulnerabilities with your top clients?)

 2. Interviews

I spoke with The Globe And Mail about the landmark interim report of the Law Society of Upper Canada’s ABS Task Force, which I think brings Ontario astonishingly close to approval of non-lawyer ownership of law firms within the next couple of years. I also talked with Law Times about the remarkable inroads that the Big 4 accounting firms are starting to make (evidently to little fanfare) in the Canadian legal market. I spoke at length with Lexpert magazine about how in-house counsel are and aren’t using social media. And just this week, I was interviewed by Law360 about how law firms can do a better job recruiting and retraining their non-lawyer staff (I suggested that not using the terms “non-lawyer” and “staff” would be a nice start).

And if you have lots of time and an unusual amount of interest in my views on the legal market of today and tomorrow, as well as an interest in my winding career path to date, you could read this extensive interview I conducted with Los Angeles law blogger Amy Wan.  

 3. Videos

At the tail end of last year, I sat down with my friends at the Canadian Bar Association’s National magazine for a lengthy interview about the Canadian legal marketplace, what happened to it in 2013 and what 2014 should bring. More recently, following a presentation to the Chief Marketng Officer Summit at the annual conference of the Legal Marketing Association, I spoke with Colin O’Keefe of the LexBlog Network about what’s facing law firms right now and what firms need in order to respond to these challenges. (Mark Beese of Leadership For Lawyers in Denver attended that LMA CMO presentation, among others, and filed a report for Attorney At Work.)

4. Presentations

I taught my first-ever law school class back in January, a one-week intersession course at Suffolk University Law School in Boston titled “21st-Century Lawyering.” (My chief takeaway: law students are a lot readier for the new legal market than most lawyers are.) In February, I delivered two presentations in Seattle: one to the Seattle Legal Technology and Innovation Meetup (highlights in the @LegaltechSEA Twitter feed) and one to the Puget Sound Chapter of the Association of Legal Administrators. And in March, I teamed up with Susan Hackett of Legal Executive Leadership to co-deliver a presentation about the legal marketplace to the OnRamp Fellowship, a non-profit organization helping women lawyers reintegrate into law firms after a period of time away. (See the sidebar on the home page for a list of my upcoming appearances.)

That’s all I’ve got for now — more posts to come as soon as I can manage them.

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.  

You say you want a revolution?

If you’ve been reading my blog for a while, you’ll know that I’m convinced of a couple of things: (1) Fundamental shifts in the legal services environment will spawn a  diverse population of new providers that will expand access to those services while destroying lawyers’ market exclusivity; and, (2) This is, on balance, a good thing. I’ve never been more certain than I am today, at the close of 2013, about the first — but I’ve never been less certain about the second.

I’ve contributed a few thoughts recently about the state of the legal market to Lexis-Nexis, JD Supra, and the CBA’s National magazine, among others. My basic message is the same throughout: we’re no longer predicting a new legal future, we’re living in a new legal present.

And yet I still see people in this industry asking, “Where’s the revolution? When is the change going to come?” Folks, the change is here. We’re living it. Cast your mind back five years, when Richard Susskind had just published The End Of Lawyers?, and ask if you thought this much upheaval and advancement and innovation was possible in such a short period. Cast it back 10 years, when the blawgosphere barely existed, and ask the same. The legal market is becoming more diverse and more accessible every year; legal services are more affordable and more predictably priced every year.

Most importantly, the pace of that change is accelerating. More new things happened in this market in 2013 than in 2012. More happened in 2012 than in 2011, in 2011 than in 2010, and so on. Alternatives to the traditional — in terms of service providers, business models, workflow systems, delivery vehicles, pricing strategies, and so on — are becoming normalized; that is, they’re spoken of less frequently as “alternative” and more frequently as simply another option. We don’t even talk about the “new normal” as much — it’s all becoming normal. These are not the signs of change in retreat; these are the signs of change becoming mainstream — ceasing to be “change” and starting to become “the way things are.”

The normalization of alternatives comes at a steep price to the incumbents, and I’m aware of that. Lawyers have it tough right now, tougher than most of us have ever experienced, and I’m sorry to say it’s going to get worse before it gets better. I don’t take that lightly. But clients have it better already — better than they’ve had it before, in terms of knowledge and access and choice and affordability, with the prospect of much better yet to come. And at the end of the day, as much as I care about lawyers, I care about clients more, because they’re the reason we’re here: to help them use the law to reach their goals, enhance their dignity, and better their lives.

So what’s the problem? Why am I suddenly also concerned about whether all this change will, in fact, be a good thing? Because while I hope and trust that the traditional legal market will fall away and that a better one will replace it,  I’m increasingly alive to another possibility — that the traditional legal market may fall away, and nothing will replace it.

One of my very few hobbies is geopolitics (yes, I know I need to get out more often). I’m a dabbler in this field at best, but I’ve had an interest for many years, and I still remember what I was thinking on the day the Berlin Wall came down. Certainly those were extraordinary images and wonderful times, a lifetime marker for the generations that helped bring it about or watched it happen. But what was going through my mind, watching the Wall come down and totalitarian governments all over eastern Europe collapse with it, was: This is happening too fast. Corrupt, decrepit regimes were falling over like dead trees in a windstorm, but in many cases, there was nothing — no replacement regime, no legitimate constitution, no rule of law — to step into the breach. Some of these countries, to their great credit, grew reasonably healthy liberal democracies out of the rubble. Many did not.[do_widget id=”text-7″ title=false]

George Friedman has observed, accurately, that the people who start revolutions are often not the people who finish them, and that revolutions do not always end up where their instigators hoped they would. I think it’s fair to say that we’re at the start of a revolution in the legal services market. That should be, and is, exhilarating. But it should also summon us to the barricades to make sure that, if the incumbent regime falls, looting and chaos are not the immediate outcome and the lasting legacy.

If you want an example, take a look at law schools. You’re probably aware that applications to US law schools have been dropping like a stone and that enrolment is now down to its lowest level since 1977. As Bruce MacEwen notes (and as I’ve been saying for some time now), this story has only one ending: many American law schools will close or will become so small as to turn into veritable cottage businesses. There’s no question that there are too many law schools providing too little value to their students and to the clients they’ll someday struggle to serve, and that a major correction is overdue here. There’s also a lot of schadenfreude throughout the profession right now as these schools wriggle on the hook.

We can hope for and work towards a renaissance and reinvention of law school. But what if that fails? What if 80% of US law schools close and are not replaced? Will the profession and the public be well served by a legal education system that features Harvard, Yale, Stanford and a few other clones, and nobody else? Or what if the failed law schools are followed by profiteering private law degree factories that replace the passive academic lecture with cookie-cutter “practical training” packages bereft of jurisprudence and professionalism? I think this is an unlikely outcome. But it is a possible outcome — a possibility that didn’t exist 10 years ago, but does today.

Or take a much bigger and broader example: the legal profession itself. This blog contains six years’ worth of mounting criticism of lawyers and warnings of dire consequences should opportunities for reform be ignored too long. But it also contains staunch defences of the inherent value of lawyers as expert counsellors to troubled clients and defenders of the rule of law. Lawyers are both desirable and necessary. But we’ve exploited our protected and prestigious position in this market for so long that an over-correction is now possible — not lawyer reform, but outright lawyer rejection. Alternatives to lawyers, as I’ve detailed above, are here and are flourishing, and we’ve encouraged them to develop by our failure to fully serve the market. These alternatives should complement us, not replace us. But it might not work out that way.

Let me be clear: I’m not backtracking, not one inch, on my belief that this market needs serious, structural reform, that access to legal services must be expanded and improved, and that lawyers should be playing different (but still important) roles in this market than we do today. Don’t mistake the foregoing for the kind of fear-mongering employed by protectionists and lawyer exceptionalists to beat back change in their own interest. Instead, this is a call for the legal profession to recognize that change is really happening — and that we now need to throw our efforts into trying to manage, to the extent possible, the enormously strong forces coming into play.

How can we avoid the worse- and even worst-case scenarios? How do we manage the effects of revolutionary forces? This has to be a collective effort — everyone in the legal profession and its associated institutions has to play a part. Here are my recommendations.

1. Regulators must lead the way by recognizing these trends and staying well ahead of them. Every regulatory activity and initiative must clearly enhance either access to legal services or lawyers’ professional standards. Every barrier to “non-lawyer” entry to the marketplace must be immediately examined and, unless objectively justifiable in the public interest, set aside. The self-governance of lawyers in the public interest must be protected and prioritized. Regulators that spend their time on trivia, such as declaring lawyer blogs to be improper advertising, are running enormous risks in a market environment this volatile.

2. Bar Associations must promote the value and professionalism of lawyers in a crowded market. Forget about any efforts to keep “non-lawyers” off our turf; that battle is over, and we lost. Now is the time to create “image campaigns” that tell clients, not why we want to law school, but why a lawyer’s ethics, professionalism, expertise, reliability and integrity are worth the premium that we inevitably will cost. These are marketing campaigns that communicate the extraordinary value that a lawyer brings — while recognizing and readily conceding that not every situation requires a lawyer’s services.

3. Law Schools must preserve and promote the importance of professional values in legal education. Those schools that survive the coming purge will be under enormous pressure to provide “practical,” “real world” training and clinical opportunities, and so they should. But they must also recognize and embrace their role as the incubator of ethics and professionalism, because the competitors that will emerge in the education and training space likely will not care about these facets of the future market as much as law schools do or ought. Law schools will provide lawyer training simply to survive in this market; they must also provide the primary foundations of ethical lawyer behaviour.

4. Courts must recognize that their traditional role as the arbiter of private legal disputes is in mortal danger. Ninety-eight percent of disputes never see the inside of a courtroom, and 90% of all disputes never even enter the process. Courts are utterly agonizing to many of the people who use them and utterly irrelevant to all those who cannot; this is a short road to disaster. Train staff to help self-represented litigants, because they will shortly and permanently outnumber lawyers; deputize senior lawyers to resolve conflicts locally; institute ODR services affiliated with courts’ enforcement powers. Above all, rip off the blinders and recognize how close you are to the edge of the chasm.

5. Lawyers must accept and act upon a single new reality: we cannot continue to make a living in the law the way we used to. Full stop. We must create sustainable cost advantages through adoption of technologies and processes. We must cede to new competitors work that we cannot do as efficiently, effectively and profitably as they can, forming partnerships where appropriate to integrate services in a complementary fashion. We must learn to price rationally, fairly, and predictably. We must remember and pursue the true purpose of law. Above all, we must resist every temptation, no matter how small or how great, to compromise our ethics and professional stature for any business reason. These will soon be our sole competitive advantages.

Revolutions are powerful, frightening, and unpredictable things. Once they’re really underway, they can’t be controlled or directed. Market revolutions are less violent and bloody than political ones, but they can be just as destructive. In times of revolution, you figure out very quickly just what it is you need to really safeguard. I believe we need to safeguard the rule of law, the independence of the profession, and the fundamental values to which lawyers have always sworn oaths. Everything else is replaceable or negotiable; these are not.

In 2014, the revolution in the legal market will continue to foment, to bubble away, to push in from the edges and from underneath. One of these days, it will break out in full, and it will be a wonder and a terror to behold. I truly don’t know when that’s going to happen. But I do know that if we want there to be a viable legal profession afterwards, we need to act now — to lock down and preserve the critical few things that we really, truly can’t afford to lose.

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.   

Advice to associates about law firm efficiency

I recently delivered a webinar to a group of associates at one of my law firm clients, as part of the firm’s internal CPD and training program. (I referred them to my recent posts about associates, which probably didn’t make them very cheerful.) Among the advice I gave the associates was to start looking for opportunities to streamline their work, increase their efficiency, and reduce their own “cost of doing business,” in order to make themselves and their practice groups more competitive and effective.

This led one associate to send along a follow-up question, which I’ll paraphrase thus: “Is this my responsibility? What role should I realistically be expected to play in finding enhanced efficiencies in my practice? Do I wait to be directed by the partners, or by the IT staff?” It’s a good question, with an important subtext: “Come on. You seriously expect me to make my practice more efficient, billing fewer hours, without the direct approval of the partner who controls my career?” Here’s my reply:

My advice about efficiencies is primarily addressed to associates in your role as future law firm owners. Whether that’s as partners with this firm or in a different capacity (maybe running your own sole practice someday), you need to look for efficiencies and process improvements to begin reducing your own cost footprint, in order to maximize the profit derived from your revenue.

Now, if you’re running a business on a cost-plus pricing model (i.e., you multiply rate X hours, trying to maximize both in every situation, and bill the result), then efficiency is the enemy of revenue and therefore of profitability, and you should try to avoid it. This would be a sensible strategy if the year were 1993. But since it’s not, I don’t recommend it. By the time you become an experienced law firm owner (regardless of the firm), you’ll be confronted with a market that rejects cost-plus pricing for all but the most specialized, demanding, high-stakes work (and with all respect, the odds simply do not favour the idea that such work will constitute the bulk of your practice).

So I believe you should start, today, even as associates, thinking about and looking for ways in which you can reduce the cost-generating friction of inefficient work practices. If you can produce a flowchart or checklist that will allow you (and your colleagues) to carry out routine and repetitive matters more rapidly (and, by the way, likely at higher quality), you should do so. If you can identify free legal research resources (such as CanLII) rather than paying Lexis or Westlaw to look up cases, you should do so. If you can build and contribute to even a modest knowledge management database so that wheels don’t need to be reinvented every day, you should do so.  [do_widget id=”text-8″ title=false]

Fundamentally, associates should develop the habit of asking themselves, before embarking on any measure to carry out a legal task: “What if this were my money being spent? Would I consider it wisely and justifiably spent? Would I be asking about alternatives?” Thinking like a client is an invaluable skill to develop, and the best way to start honing it is to think about the client, all the time.

Now, this all comes with a giant caveat, and that is: you’re not yet the owners of a law firm. You’re employees, and your bosses are the owners who decide how work is done at the law firm and how it’s priced. Associates can’t independently give themselves the authority to decide how the law firm’s work should be carried out. That’s the law firm’s call, not yours.

Nonetheless, I also believe that you owe it to your employers, to your clients, and to yourselves to investigate efficiencies and process improvements at ground level that could reduce costs and/or improve quality — and having investigated and identified such steps, to bring them to the attention either of your immediate reporting partner or the firm’s managing partner.

That’s a formidable challenge for any associate, especially in this environment. So in order to relieve you of the burden of deciding when and where to report — as well as the intimidation factor of potentially bringing efficiencies to the attention of a partner who has no interest in them — I think the managing partner should require you to identify such steps and bring them to his or her attention on a quarterly basis. This places the responsibility for potentially disruptive discussions with the MP, not with highly vulnerable associates.

The firm must also do two other things:

  1. Take into account the process improvements identified by associates in assessing their productivity and contribution to the firm’s value — if these improvements reduce their billable hours and therefore their compensation, that obviously would be a perverse result.
  2. Provide the associates with complete protection from any political consequences that might flow from introducing potentially disruptive changes to the firm’s workflow practices — ideally, in fact, associates should be directly rewarded for helping to bring about such enhancements.

The upside of adopting this practice is that you learn, as associates, to start identifying improvements in how you do your work, enhancing your own ability to someday be a profitable law firm owner, without potentially incurring the wrath of traditional partners, because the option to not look for and report such improvements has been taken out of your hands.

Everyone would benefit from this. The associates improve their productivity, build their confidence, increase their profitability, and become easier to retain. The firm, if it implements these innovations, can lower its prices in a tough marketplace while remaining profitable, make its prices more predictable in a market whose demands for fixed prices become louder every day, and differentiate itself from its competitors. Clients get lower prices, more predictable prices, or higher quality, and maybe even all three.

And all of this starts with one simple proposition: associates should be empowered to increase the efficiency, effectiveness, and productivity of the firm. In most of the firms I’ve seen, it’s the new lawyers who are most enthusiastic about working differently and better; older partners tend to be more concerned with holding on to what they’ve got with both hands. Which of these two groups has the firm’s best long-term interests in mind? Which should be encouraged to act and be supported when they do?

You bet I expect associates to assert themselves, and to seek and receive the firm’s support in doing so, when it comes to improving efficiency and effectiveness. Neither the associates nor the firm will have much of a future in this new legal market unless they do.

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.  

ABS in Canada? Closer than you might think

This post was originally published as two articles in the October 25 and November 1, 2013 issues of Canada’s The Lawyers Weekly newspaper. Reproduced here with thanks.

Unless you’ve been making a special effort not to notice them, you’re probably aware of Alternative Business Structures (ABS), the most radical of several developments introduced in England & Wales by the Legal Services Act 2007. An ABS license permits ownership of a law firm, or of any enterprise delivering legal services, by people who are not lawyers. It’s exactly as paradigm-shifting as it sounds.

In the 18 months since ABS status has been made available, more than 200 ABS licenses have been issued in Great Britain by regulatory bodies such as the Solicitors Regulation Authority and the Council for Licensed Conveyancers. Most of these licenses went to existing law firms or into enterprises in the personal injury and road accident sectors, but not all. Here are a few ABS highlights worth considering:

  • Slater & Gordon is the Australian personal injury firm that became the world’s first publicly traded law firm more than a decade ago. S&G has gone on an acquisition spree since gaining its ABS license last August, most recently with its acquisition of Manchester-based Pannone, The firm now counts 460 staff in 12 locations throughout the U.K., and its CEO has confirmed that the firm is eyeing the broader consumer law market.
  • Riverview Law is a corporate law firm that charges fixed fees for all its services. While its original focus was small and medium-sized enterprises, it has drawn interest from large companies as well. Riverview is owned by holding company LawVest, which has applied to become an ABS and is itself owned in part by global giant law firm DLA Piper. Riverview already counts 100 lawyers and plans to double in size over the next several months.
  • The Co-Operative is a nationwide consumer goods and services company that sells groceries, financial services, insurance, travel and funeral services, among other things. Last year, the Co-Op obtained an ABS to convert its existing Co-Op Legal Services division into a full-fledged legal services provider in the areas of family law, real estate, wills, personal injury, and employment law. Its website offers a toll-free number to phone for locations in the caller’s area.

Among the other entities that have received, have applied for, or are known to have interest in an ABS license are legal expenses insurer ULR Additions, venture capitalists Smedvig Capital, the Direct Line Insurance Group, private equity firm Duke Street, legal textbook company Jordans, logistics company Stobarts, outsourcing giant Capita plc, and a couple of accounting firms you may have heard of: KPMG and Ernst & Young.

Many of the new ABS providers have gotten off to strong starts. But not all of them have, and there’ve already been some high-profile stumbles and even failures. Conveyancing ABS In-Deed Online closed down in June just two years after its debut, its demise perhaps spurred in part by an overly hasty stock-market listing after it premiered.

For its part, Co-Op Legal Services reported a £3.4m loss in the first half of 2013 after breaking even in 2012, part of an overall terrible year to date for the parent company. (In fairness, Co-Op Legal did record an increase in revenue over that period, and it plans to stay the course.) And although it’s not an ABS, small-firm franchise provider Quality Solicitors is backing away from its plan to operate legal information kiosks in WH Smith bookstores around Britain. [do_widget id=”text-8″ title=false]

So far, then, the ABS market is playing out much as you’d expect in a startup industry: many diverse players, several early successes, a few notable shortfalls. The important thing, to my mind, is that the early predictions of disaster — non-lawyer shareholders driving unscrupulous behaviour, senior law firm partners selling out their equity shares to private investors, the collapse of professionalism — have not come to pass. Nor do they appear to be on the horizon.

Now, this may be all very interesting to a Canadian reader, but surely, it’s also academic? Whatever the merits of England & Wales’s great experiment in legal services delivery, Canadian lawyers can rest assured that nothing this radical will jump the pond and land in the colonies anytime soon. Right?

Well, maybe not. Four separate provinces are looking closely at potential reform of their legal services regulatory regimes, reviews that include consideration of alternative business structures and the delivery of legal services by entities other than lawyers. Many Canadian lawyers are at least aware of the changes taking place in Great Britain; fewer are aware that we may be closer to similar developments here in Canada than they realize.

Ontario is at the vanguard of this process, of course, having become in 2007 the first jurisdiction anywhere in North America to recognize and regulate non-lawyer providers of legal services (independent paralegals). There are now more than 5,000 paralegals licensed to provide legal services in Ontario.

In the fall of 2012, the Law Society of Upper Canada set up an Alternative Business Structures Working Group, whose mandate includes studying new developments in alternative legal service delivery worldwide, developing criteria to assess these developments, and identifying any legal service delivery models and regulatory changes that the law society should be considering. The ABS Working Group has already heard from many people with an interest in these matters (including yours truly), and it published an interim report in June 2013.

That report recommended continuing study of the issue and engagement with the professions on the subject of (a) limited non-licensee ownership of law firms and (b) a review of existing rules regarding business structures (including the absolute ban on fee-sharing and referral fees with non-licensees). Any recommendations made by the Working Group would be subject to Convocation’s approval. The Group’s final report is slated for spring 2014. (Read this Storify collection of tweets from last month’s LSUC ABS conference, too.)

In British Columbia, the law society has already investigated ABSs, publishing its own report in October 2011, shortly before ABS licenses became available in England & Wales. That report stated that although there was much talk about the promise of innovation and access to justice arising from ABSs, it was too early to tell whether other jurisdictions should follow Britain’s lead in radically liberalizing their legal services regulatory regimes.

But the report did not close the door on ABSs, recommending further study as more evidence came to light. Indeed, this past June, the Law Society of British Columbia’s annual Bencher Retreat was devoted to the topic: “The business of law in the 21st century: Do we risk losing (or can we maintain) our professional values?” Guest speakers (including yours truly again) and benchers spoke at length about emerging issues such as ABSs, access to justice, and the impact of technology on legal service delivery.

In Nova Scotia, at its most recent annual meeting in July, the Barristers’ Society Council approved a project plan called “Transforming regulation and governance in the public interest” (PDF), and began discussing goals relating to another strategic priority, “Enhancing access to legal services and the justice system for all Nova Scotians.” An executive summary of the latter report (PDF) stated that “[n]ew and innovative models for the delivery of legal services would be an essential component of any access to justice strategy.”  This article describes Nova Scotia’s plans in more detail. [do_widget id=”text-7″ title=false]

And in Manitoba, the Law Society has established a committee of local innovators (both those who are lawyers and those who are not) with an intriguing mandate: assume there is no law society, and design a structure and system to regulate legal services. For instance: Should lawyers have a monopoly on legal services, or should they be simply one competitor among many? The innovators will also examine ABSs, law firm regulation, and the controversial issue of recertification (requiring lawyers to demonstrate competence every several years). This committee will report in March 2014, with implementation of its recommendations planned for that fall.

(Separately, it should be noted, Manitoba is also collaborating with Saskatchewan, Alberta and B.C. about a common approach to ABSs.)

As you can see, the issues that these four law societies are investigating go beyond the relatively narrow topic of ABSs. They’re really looking into whether and to what extent legal services regulation in this country requires a serious reconsideration, and maybe even a major overhaul. These concerns, in turn, are prompted by the very real crisis in access to legal services in Canada, and by a sense that we may need to fundamentally rethink how we define “the best interests of the public” in the 21st century.

Having had the opportunity to address Benchers in Ontario and B.C. on these issues, I’m encouraged by what I’ve seen and heard. Each of these four law societies (and, I’m sure, others across Canada) recognize that we’re entering a crucial period in the evolution of the legal market, and that traditional models of legal services regulation cannot and will not pass through this period unchanged. Our law societies are asking the right questions, and I’m optimistic that they’ll come up with good answers.

So this would be the worst possible time for lawyers to again circle the wagons, as we’ve done so often in the past, demanding the continued ring-fencing of our traditional protected territory. Forces far beyond the control of lawyers are now driving this market. I would like to see us work with these forces, not strive pointlessly against them, towards the twin goals of improving access to legal services and enhancing lawyers’ professional values.

Will we see alternative business structures approved in at least one Canadian jurisdiction within the next five years? I’d rate that as a strong possibility. But for us to even get close to that point, we’ll have to engage in an thorough and overdue reconsideration of the purpose lawyers serve in Canada’s legal market.

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.  

Reinventing the associate

Last week’s post, “The decline of the associate and the rise of the law firm employee,” wasn’t just my longest Law21 title on record. It also triggered a detailed response from Toby Brown of 3 Geeks, to which I left a lengthy comment and which in turn inspired a further comment from Susan Hackett of Legal Executive Leadership. Toby converted both of these comments to posts, and I’d invite you to read all three consecutively to get the full exchange of views.

My plan this week is to follow up my original post with two more: one (today’s) that will explore more deeply the past and future role of the “law firm associate,” and the other that will study the whole issue of “lawyer training.”

I don’t really have strong feelings one way or another about Greenberg Traurig’s new “residency” program, largely because (as I noted in my original post) we don’t have nearly enough data about what the program actually involves. If it manages to strike a healthy balance among the needs of the firm, the interests of clients, and the well-being of lawyer employees, then I’m all for it. We’ll have to wait to see how it unfolds in practice. For the moment, I’m  more interested in the implications of introducing another new employment category (“residents”) for novice lawyers in law firms. It raises the whole question of what we mean by “associates,” and why they exist.

For most of law firm history, lawyers who were not equity-owning partners had only one title (“associate”). Associate status represented two things: full-time salaried employment and potential future admission to equity partnership. In theory, associates are lawyers who are learning their craft and honing their skills for the chance someday to become partners — and that does still accurately describe a small percentage of each firm’s associate class. In practice, however, most associates are short-term, leveraged assets whose purpose is to bill hours that fuel the firm’s profits, and who will leave the firm (voluntarily or otherwise) well before the brass ring of partnership comes into view. [do_widget id=”text-7″ title=false]

Many firms have begun to explicitly acknowledge this reality and to call this larger group of associates “staff lawyers” or something similar to indicate their status. Greenberg introduced the title of “practice group attorney” at the same time as it announced its “residency” program. Other firms refer to such lawyers with the unwieldy term “non-partner-track associates.” More senior members of this group, over the past several years, have been classified as “non-equity partners,” highly experienced associates whose time for partnership consideration has come, but about whom there are doubts (on one side or the other) that admission to partnership is a good idea. And now we have the “resident,” a short-term position for newly admitted lawyers that pays less, bills less, and gets “trained” more than a normal associate role.

So, for those keeping score at home, here are some of the ways in which law firms are now describing lawyers who aren’t partners:

  • Associate
  • Resident
  • Staff Lawyer
  • Practice Group Attorney
  • Non-Partner-Track Associate
  • Non-Equity Partner

That’s a whole lot of terms meant to express one basic idea: “You’re not an equity partner.” And for every title on that list other than the first one, there’s an additional component: ”…and you’re not going to become one, either.”

Toby argues that this is no bad thing: all of a law firm’s associates should not presumptively be considered its future partners, not least because few lawyers are truly cut out for the demands and responsibilities of ownership. I think that is certainly correct. But as I mentioned above, the title of “associate” has always carried with it the potential of ascendancy to partnership. Not every associate will become a partner someday; but any associate could become one. That’s the promise and the allure that gives “associate” an extra shine. And it’s exactly this shine, I think, that law firms are trying to remove these days.

Law firms are developing an allergy to equity partners. “Under-performing” partners are being removed from firm mastheads in every jurisdiction, while partner tracks grow longer and “non-equity partner” holding pens become more crowded. Altman Weil’s “Law Firms in Transition” survey explicitly advises law firms: “Make equity partnership very difficult to achieve.” The reason is simple: the revenue pie is shrinking, and the slices are becoming thinner than many partners want. The easiest short-term solution is to remove as many place settings as possible, adding new seats only for lateral recruits who can bring more pie of their own.

So it’s very much in law firms’ interests to lower the expectations of their associate lawyers about their chances of partnership. What many firms would prefer now is new classes of lawyer employees who don’t have all the baggage of “associateship.” These firms want salaried lawyers who work competently and bill profitably, but who neither desire nor expect equity partnership offers. All the rejigging and reclassifying of lawyers who used to be called “associates,” but who increasingly are called anything but that, is in service of this outcome.

The timing for this effort is excellent, because the traditional law firm associate model no longer works very well anyway.

  • New associates cannot be paid handsomely to be trained on clients’ dime as they once were, but firms don’t want to absorb the costs of training on top of the salaries they’re paying, and they’re afraid of cutting salaries because of the potential hit to their reputations in the market.
  • Experienced associates do good work and can still be billed at high rates, but the work they would normally be doing has been grabbed by partners desperate for billings, and the opportunities to gain experience early in an associate’s career are drying up anyway.
  • Senior associates have successfully run the gauntlet and “won the tournament”, but even these few winners increasingly outnumber the available internal routes to equity ownership, leaving them in a restless state of non-equity limbo.

In short, both a driving need and an unprecedented opportunity to replace or reinvent the law firm associate have arisen — and as it happens, they’ve arisen right in the middle of an historic surplus of unemployed lawyers.

In the result, for the next several years (and maybe longer), law firms figure to employ or engage the services of lawyers on much more advantageous terms than in the past. Whether located within the four walls of the law firm or in an outsourced capacity, most lawyers who work for law firms will do so at lower rates, with less job security, on shorter time frames, with less expectation of long-term equity rewards. The idea of “graduating” from associate to partner, from employee to owner, as part of a natural process of law firm development and advancement will lose its traction in many firms. If you no longer want to develop many partners, then you don’t really need many associates.  [do_widget id=”text-8″ title=false]

Is this good, bad, or indifferent? Insofar as firms are recognizing the growing obsolescence of the traditional associate model and are taking steps to rework it or replace it, I think it’s good: that model worked very well in the 20th century but seems a poor fit for the 21st. Agile, flexible workforces are coming to every industry, and the law will not be an exception. But describing this as a strategic shift may be giving law firms too much credit: in most cases, the driving force behind these moves is to reduce personnel costs and compress the ownership pool in order to increase partner profits on a short-term basis.

And it’s the short-termism that worries me. Law firms are meant to be multi-generational entities that grow through a natural cycle of development. You invest in new lawyers at a cost today because you confidently expect your investment to pay off years down the road; you accept short-term losses in exchange for long-term profits as part of a big-picture view of the firm. Law firms everywhere are currently gripped by a fever that drives the opposite behaviour: you accept long-term losses in exchange for short-term profits, because you won’t be around for the long term and you don’t really care what happens when it arrives. This, unfortunately, describes more senior lawyers in more law firms than I care to count, and it’s positioning these firms for a very dangerous future.

The traditional associate model needs to be replaced by something better. But it can’t be better just for law firm partners, or even just for partners and clients, and just for this year’s financial results. It has to be better for everyone, on a sustainable, sensible, long-term basis. If the associate model is replaced by a system that simply strip-mines our legal talent resources for maximum profit for the balance of this decade, leaving the cleanup and rebuild to the next generation, then as both a business and as a profession, we’re going to be in a lot of trouble. More on that in my next post.

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 decline of the associate and the rise of the law firm employee

Earlier this month, Greenberg Traurig became the latest large US firm to take a new approach to its legal talent. Rather than firing secretaries or de-equitizing partners, however, as is all the rage elsewhere, Greenberg proposed something different and potentially groundbreaking: the introduction of a “residency” program for new associates. Here’s how the Am Law Daily describes it:

Join the firm as an associate, but only if you’re willing to spend a third of your time training rather than churning out billable work. The catch? Those who sign on will be paid considerably less than the typical starting associate, will bill at a much lower hourly rate—and may wind up only sticking with the firm for a year.

The offer is the basis of what Greenberg is billing as a new residency program that is being rolled out across its 29 U.S. offices. Firm leaders envision the program as a way of recruiting talented associates it wouldn’t have hired during the traditional on-campus interview process for one reason or another. It will also allow the firm to assign junior lawyers to client matters without billing their work at the usual cringe-inducing hourly rates.

Greenberg is simultaneously creating a new non-shareholder-track position, practice group attorney, that is akin to similar jobs created by Kilpatrick Townsend & Stockton; Orrick, Herrington & Sutcliffe; and others that have moved beyond the up-or-out structure typically employed by large law firms. …

[C]lients have been eager to use the junior lawyers, who cost less than a typical associate, and have allowed them to sit in on meetings and calls—at no cost to the client—as part of their training. The rest of the training, MacCullough says, comes via online courses with the Practising Law Institute, the professional development courses the firm offers all associates, and extra “hands-on learning” with partners without concern about billing for the time.

This initiative emerged from Greenberg Traurig’s Fort Lauderdale office, where new graduates are offered the chance to be “fellows” who resemble associates, but are paid less, bill less, and spend more time training. This innovation has now spread firm-wide. “Once the initial one-year period ends,” the Am Law Daily reports, “residents will either become a regular-track associate, take on the new practice group attorney title, or leave the firm.” (This reminds me of the old college football coach’s admonition against the passing game: “Only three things can happen when you throw the football, and two of them are bad.”) [do_widget id=”text-7″ title=false]

Response to Greenberg’s program has been generally positive, and I can understand why. Anything that offers even partial employment opportunities to new law graduates these days has to be considered a good thing. The “residency” approach contains echoes of the “apprenticeship” programs that firms like Drinker Biddle, Strasburger, Ford & Harrison, Frost Brown Todd, and Howrey pioneered about 3-4 years ago and that I thought might herald a whole new approach to associate training. (They haven’t.) And Greenberg’s residents bear a close resemblance to Canada’s articling students, whose one-year apprenticeship in a law firm is a widely admired (although increasingly flawed) way to introduce new lawyers to practice.

Yet something still seems off. By crafting the position of “practice group attorney,” Greenberg has joined many firms in creating a class of associates who aren’t going to be partners; by introducing “residents,” Greenberg appears to be creating a class of lawyers who, most likely, aren’t even going to be associates. What’s not clear is why either of these new groups of lawyers are inside the firm at all. If what you’re looking for are low-cost, non-essential generators of legal work, why not talk to Axiom or The Posse List or any LPO with offices in Mumbai, Manila, or Minneapolis? Why introduce and maintain yet another costly group of lawyers who aren’t here for the long term?

One possible reason is that the whole point of the residents is to eventually replace the associates altogether. Lower salaries? Essential for continued partner profitability, and more reflective of actual associate value. Lower billing rates? Clients aren’t paying the higher rates anyway, so you might as well find a rate that they will pay. Lower billing targets? There isn’t enough work available for partners to make their targets, let alone new lawyers. As the article makes clear, these are really the only differences between a “resident” and an “associate.” Which of these two classes do you think the firm will want to sustain?

The law firm associate market is way overdue for a serious compensation correction: $160,000 starting salaries were and are ridiculous, relative to both the availability and value of new associates. New lawyers can’t and shouldn’t be expected to bill 1,900 legitimate hours a year, and a system that required them to do so was impractical and unwise at best, improper and unethical at worst. Something had to replace that system, and this may be the replacement.

Greenberg’s model is obviously still in its formative stages, and there’s not much point in exploring it further with such limited data. But it’s possible that it might be part of the next stage, maybe the final stage, in the decline of the law firm associate and the rise of the lawyer employee.

Go back several decades to the emergence of the Cravath model, which originally viewed a small class of salaried associates as future partners who could nonetheless generate profits through leveraged work along the way. The distortion of that model, over time, led to much larger and more profitable associate classes, of which only a few members would make partner — but all the same, the firm and its clients still treated those associates as professionals with potential long-term value. We’re now on the verge of entire associate classes whose only purpose and value is to generate leveraged work. They are not meant to be future partners: they are temporary employees meant to sustain the practices of current partners for as long as those partners need them. [do_widget id=”text-8″ title=false]

You might object that that’s not a good long-term stratagem. But a lot of law firms these days aren’t being managed for the long term, and there’s nothing more long-term than associate development: the investment of serious time and money in hopes of producing future partners. Many firms are employing fewer new lawyers than ever, and they have little incentive to invest heavily in the long-term development of the ones they do. They don’t need more equity partners — many firms are busily culling their own ranks — and if they do, they’ll get experienced, plug-and-play veterans with books of business via lateral acquisitions in the free-agent market. (Where laterally trained partners will come from in future, if firms no longer commit to investing in new classes of associates today, is not firms’ leading concern at the moment.)

It’s therefore possible that the era of the “law firm associate” — the partner in training — is now coming to an end, as I suggested back in 2009. Replacing it might be the era of the “lawyer employee” — here today, gone tomorrow, with a completely different set of expectations on each side about the nature of the relationship. It’s true that at several firms, the transition I mentioned above has long since taken place: most associates are essentially revenue generators. But the title of “associate” has a lengthy history and carries powerful expectations: “associateship” has been the precursor to “partnership,” just as adolescence has been the precursor to adulthood. Take away the title of “associate” and replace it with something smaller and poorer — “intern,” “resident,” “employee” — and the impact is profound.

This must surely be an attractive route for many law firms eager to reduce salary costs, minimize training expenses, and boost partner profits. But there’s a risk to the law firm that trades associates for employees straight-up, that diverts resources from internal development to external acquisition: it might permanently lose its capacity to develop any lawyers at all.

The ability to onboard a new lawyer, bring her into the firm’s cultural and structural orbit, develop her capacity to produce higher value over the course of time — this is an organizational skill, no different than any other a firm might possess. A firm that ceases to take internal development seriously will see that skill atrophy: it will become a muscle rarely exercised, with predictable results. PD professionals may leave the firm for better environments elsewhere; partners may lose whatever remaining interest they might have had in bringing along new lawyers; potential recruits may regard the firm as a dead end. These outcomes might not matter to the firm today. I guarantee that they’ll matter down the road.

Once a law firm switches off its lawyer development engine, it’s not easy to rev it back up again — and if you intend for your firm to be operating more than five years from now, it’s an engine you will desperately need to work at some point. That’s the tradeoff, whether they realize it or not, that some law firms now seem poised to make.

There’s another risk to this development, by the way — a threat to the continuing development of the legal profession itself. But that’s for another post.

[Here’s the next instalment in this series: “Reinventing the associate.”]

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.  

Law firm innovation: From idea to implementation

I was honoured to deliver a 20-minute TED-style presentation last week at the 2013 Futures Conference, produced by the College of Law Practice Management and hosted by the University of Chicago-Kent Law School. I was hardly the main attraction — Ann Lee Gibson and Bill Henderson gave tremendous presentations, and people are still talking about Stephen Mayson‘s extraordinary keynote address. If you want to view any or all of these sessions, they’re available online (Stephen’s is especially recommended, despite its length). if you’d like to hear my thoughts and you’re short on time, please feel free to view the video.

But if you’re interested, I also prepared a companion article for the presentation, which I’ve reproduced below. As the title of this post suggests, the object of both my presentation and paper was to get us talking about actual, practical ways to make innovation happen inside a law firm. Please share your thoughts and your own recommendations for achieving this daunting task in the comments below.

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The great actor lay on his deathbed, and his friends gathered close to him. His best friend, holding his hand, leaned in and murmured, “You poor man. Dying is so hard.”

The actor’s eyes shot open and he glared at his friend. “Dying is easy,” he snorted. “Comedy is hard.”

In much the same vein, we can freely admit that the idea of innovation is easy — it’s the work of a moment to imagine any number of ways in which law firm operations could be improved. Implementation — the successful, sustainable execution of the innovation — that’s what’s hard. And the law firm landscape is littered with the remains of many failed innovations that couldn’t cross the bridge from idea to implementation. So how can it be managed?

To my mind, there are five steps in this process — and I’m sorry to report that each step is more difficult and challenging than the previous one. But it seems to me that the successful implementation of a legal innovation requires most if not all of these elements, in roughly this order. This is no small challenge — in fact, as we’ll see at the conclusion of this article, it’s literally an existential challenge for law firms today. But it can be done. And right now, in this environment, it has to get done.

1. Facts. Start with data. Evidence. Verifiable information. Business intelligence. We have a truckload of myths about lawyers and the legal profession, and we have no shortage of opinions and assertions masquerading as law firm strategies. What we need are facts. Specifically, you need facts about your law firm, data about your business. Most law firms know astonishingly little about themselves beyond what they spent, what they billed, and what they made last year. We need to know our firms inside out financially and structurally, both retrospectively and prospectively.[do_widget id=”text-8″ title=false]

Here’s an easy example: “What’s your cost of doing business?” What do you spend, what resources do you consume, to run your business and deliver your services? What did it cost you to serve this particular client or provide this particular service last year? What will it cost next year? We are barreling towards a legal services market where fixed prices for products and services will dominate. But without precise knowledge of your costs, and without a workflow process that ensures those costs are sustainable and predictable, you cannot name a fixed price that will generate a profit.

Here’s a harder one: “What do you actually sell?” I don’t mean that in the abstract sense of “value to clients” and so forth, although that’s obviously important. I mean: what, precisely, is your inventory? What do your clients actually give you money to accomplish? What are your deliverables? Not just: “Conducted a merger: $500,000.” What were the specific elements? Who or what did them? How long did they take? How much did they cost? Break down everything you do. No other business with the annual turnover of a law firm is so ignorant of its own inventory.

You need facts in order to properly diagnose your firm, to choose the right activities and make the right decisions for its future. But more importantly, you need them to get the attention of your partners. Show them that you have evidence for what you’re saying and doing. We’ve had more than enough faith-based decision-making in law firms. It’s past time to start making reality-based decisions instead.

2. A Catalyst. You need some sort of outside intervention, something to introduce a sense of urgent change. Law firms are not, shall we say, naturally given to proactive self-improvement. Most are what you might call “steady state”: self-contained environments, sealed off from outside influences. It takes a lot of pressure to break that steady state. Fortunately (for our present purpose only), you can have your pick of high-pressure catalysts right now. Falling revenue. Declining profits. Loss of a key client, partner, or practice group — choose one or more.

If you can’t find a catalyst, consider making one: Invite senior representatives of your five biggest clients, and the relationship partner in charge of each one, to a discussion panel in your office. Ask the clients to talk about the pressures they’re under, or the three things your firm could do that would make them break off the relationship, or three things they would handsomely reward your firm for doing. Bring the crisis home to the partners with the most to lose.

3. A Process: If you hope to actually accomplish something big and disruptive in a law firm, you need to have a clear, detailed process in place. How to do this? I say, start with a basic legal project management (LPM) template. Fire up those Gantt charts and lay out the following: “This is the goal. These are the steps. These are the milestones. This is the timeframe. This is the budget. These are the people. These are the performance expectations. These are when the expectations will be tested. This is the nature of the commitment we’re all making to this project.”

And then follow up, all the way through to the end. You don’t launch an innovative change process in a law firm the same way you launch a ship. You don’t smash the champagne bottle on the hull, call out “Bon Voyage,” and look forward to its arrival on the other side of the ocean. You walk it through, every step of the way, and see it safely through the storms. And that brings us to the next tough step:

4. Leadership. I don’t necessarily mean leadership from the top, the managing partner or CEO, although you certainly do need that. In my experience, though, these are usually the most forward-thinking, change-amenable people in the firm.

I’m talking more about the formal or titular leaders, the practice area heads and industry group chairs, as well as the informal ones, the heavyweights with the biggest books of business. In many firms, those people are not actual managers with leadership skills, and they have the most vested interests in the status quo. When they see change buzzing in from any direction, their first instinct is to grab a very big flyswatter.

What do you do in that situation? If and as possible, get those people out of formal leadership positions any way you can, and replace them with people who possess actual leadership skills and/or are on board with the change process. Buy the incumbents off with a bonus for retiring the leadership position, or give them a fancy title, “Strategic Counsel” or “Chair Emeritus” or some such. Lawyers love titles. I’d like to also suggest inspiring them to join the cause and help lead the change process, but I’m afraid my view of the average law firm partner is too jaded to allow for that.

There’s a larger issue here, however. Projects that ask lawyers to do something new, that require non-billable effort, and that will change the way they do their jobs, have a very high mortality rate in law firms. The reason is simple: non-performance by lawyers of requested or assigned duties is common, and few if any consequences flow from that non-performance. True law firm leadership is evidenced by both a willingness to place oneself at the collision point between what the firm needs and what its individual partners want, and an ability to survive that collision. And that brings us to our final ingredient: [do_widget id=”text-7″ title=false]

5. Courage. Here’s the crucible. If you seriously want to get an innovation from idea to implementation in your law firm — no matter the size of the innovation, no matter the size of the firm — you must have courage. You must be ready and willing to absorb criticism, complaints, threats, and tantrums, and you need to be equipped to deal with them swiftly.

If you want to lead a law firm innovation, I recommend this thought experiment: fast-forward to the day, several months down the road, when the process is starting to really dig in and true change looks like it might actually happen. One of your key rainmakers walks into your office, closes the door, and says, “Let me make something clear. You can have all the fun and games you want. You can introduce as many little innovations as you like. But not in my department. Not in my practice. Try to push me on this, and tomorrow I’ll walk right across the street to our biggest rival, and I’ll take my top five clients with me, and the first you’ll hear about it is when you get their press release announcing the move.”

What do you do? Well, if you’re like most people in that situation, then it’s quite likely that — let’s put this delicately — you’ll cave. “I understand,” you’ll say placatingly. “I know how disruptive this is. We’ll exempt you and your department from this process.”  But I’ll tell you: if that’s going to be your response, you might as well have never even begun the process. You’ll have flushed away huge amounts of time, energy, resources and goodwill, while simultaneously poisoning the well for future innovation efforts, because you’ll have acknowledged openly that around here, innovations apply only to those without the power to evade them.

If you’re serious about innovation, and if you have the leadership and the courage on hand, here’s how I think you should — how you must — reply: “Thank you for coming to me with this. And thank you for all your valued contributions to this firm and its clients. But this is a law firm, and we’re a team. We want you on that team, but if this is how you feel, then you don’t need to wait until tomorrow. You can leave right now.”

I know that this is “unrealistic” and “impossible” and other terms people use to describe something they don’t want to do. The other partners will come screaming in, of course. “You can’t let him go. He’ll take X clients, deprive us of Y money. You’ve got to keep him here.” And you need to respond, “He’s never really been here. If he’s ready to walk out over this today, then he’ll walk out next week over something else, or next month when he gets a better offer, or when he retires next year, having mentored no one and developed no one to take over his practice. He’s going to leave someday; it might as well be on our terms.”

That’s a highly dramatic example, obviously. But implicitly or explicitly, that’s the threat (and the fear) that poses the biggest obstacle to change in many law firms. And it at least serves this purpose: if you have an idea for an innovation in your firm and you really want to see it happen, fast-forward several months after the launch, to the moment when that partner is in your office, issuing his ultimatum. If you don’t think you can stand up to that lawyer — if you or your partners lack the courage and leadership to draw that line — then I would recommend postponing any innovative efforts until you can.

But this is exactly why you need to start with facts, to make clear just what’s at stake; why you need a catalyst to demonstrate that the time is now; why you need a process to get the wheels moving and generate just this sort of crisis point. This is how you gain the commitment of leadership to put the interests of the firm ahead of the interests of its individual partners.

Because really, at this stage of the game, this isn’t just about innovation anymore. This is really about explicitly deciding a long-simmering, implicit debate over whether you’re running a farmer’s market of sole practices under one roof, or whether you’re running an actual law firm. Firms have put off dealing with this painful question for as long as they could, but the pain has only gotten worse the longer they’ve waited. The time has now come to finally deal with it.

Marshal your facts; identify your catalyst; lay out your process; call on your leadership; and summon your courage. That’s how innovations get done. It’s also how law firms survive, or don’t, in this environment.

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.