The real risk of offshoring

This article from The Recorder about in-house counsel who send legal work offshore includes a line that goes straight on to my list of favourite quotes. Scott Rickman, associate general counsel at Del Monte Foods, has this to say regarding law firms’ standard warnings about offshoring:

“In these articles, there’s always a quote from a partner at a large law firm about the risk of sending work to India. Yes, there’s a risk — there’s a risk to law firm profits.”

Yeah, you got served!*

Obviously there are risks involved with offshoring work to India, but the risk is pretty much the same as it would be when beginning a new relationship with any legal service provider, whether in Mumbai or Montreal. Law firms are the ones with more at stake here — as a consultant in the article puts it, it’s not just about falling profits, it’s also about the law firms’ loss of control. And there’s more of that to come.

Read the comments made in the article by the in-house counsel. Even the most enthusiastic proponents of offshoring aren’t sending bet-the-company work overseas. But they’re not worried about the quality of offshore work per se; they’re concerned that they don’t have longstanding relationships of trust and confidence with these offshore firms, and that Indian firms don’t have the expertise to do higher-end work. Mona Sabet of Cadence, explaining why she doesn’t offshore IP work, says:

“As with any complex activity, it takes years before an organization can develop the depth of proficiency necessary to compete with others who have been in the industry for decades.”

The key element here is time, and the key word is “yet” — this is an industry still in its infancy. If you really believe that an Indian legal service provider won’t establish both excellent working relationships with clients and top-grade expertise in key areas for another 25 or 30 years, or ever, then I think you’ll be uncomfortably surprised, and soon. The North American legal marketplace is extremely vulnerable to hungry competitors, and in India, they’ve only just started the appetizers.

* I apologize for the sorry attempt at hipness. As the saying goes, I wouldn’t be street if you covered me in asphalt.

Something’s actually happening

There’s a lot of buzz building about an article in today’s New York Times with the rather odd title “Who’s Cuddly Now? Law Firms.” It summarizes a recent rash of new business models in American law firms, from flextime for lawyers to flat-fee bills for clients to alternative billable-hour schemes and more. It’s the second article the Times has run recently about lawyers seeking satisfaction, and it prompted its rivals at the WSJ’s Law Blog to ask: is there really something happening here?

The WSJ blog’s readers are providing their usual snarky responses: “This new ‘movement’ will dovetail nicely into the massive layoffs that will be coming in the coming months,” says one. “So, you want more time with your family or to pursue your passion for flamenco guitar? Here is 3 months severance.” Nice. So, here’s my answer to the blog’s question: yes. As Judith shouted at Reg in The Life of Brian, “Something’s actually happening!”

I can refer to you any number of articles and links about law firms that are making changes to the way they manage their employees and their work — see the Financial Times‘ law firm innovation report and the Innovaction Awards, for starters. In addition to the firms identified in the Times article, there are others making changes to how they operate in terms of compensation, of partnership, of billable hours, of women in law firms, and even of the entire firm itself. And these are just a few of the ones we hear about — other changes are occurring, quietly and beneath the radar, in areas such as recruitment, retention, training, parental leave, and evaluation.

Law firms are under pressure. They’ve gotten used to a comfortable world where they could set the tone and pace of operations. That comfort zone is evaporating from two directions: externally from clients and internally from lawyers. Clients really are more sophisticated and more demanding, and they’re looking for more than their firms have traditionally been willing to give them. And lawyers really are more inclined to walk away from (or try to change) work conditions that don’t satisfy a wide range of personal needs.

But even that’s not really new — both clients and lawyers are longstanding complainers, and pressure has been brought before, which law firms have ignored. And keep in mind that many, many law firms are continuing to ignore these pressures. What’s really new this time, I think, is not just that law firms are changing the way they do business, but why. I think they’re doing it, voluntarily, to gain a competitive advantage. Continue Reading

Legal secretaries 2.0

With an assist to Ron Friedmann‘s Strategic Legal Technology blog for locating the story, here’s another neat law firm innovation that qualifies as a “why didn’t we think of that?” moment. A Buffalo law firm, Rupp Baase Pfalzgraf Cunningham & Coppola LLC (I’m sure glad I don’t answer the phones there), is giving each of its legal secretaries a specialty for which she’s responsible and to which she can devote her attention and training, rather than assigning her to work for a specific lawyer. Here’s the managing partner, Tony Rupp, with the details:

“We have secretaries specializing in different fields,” Rupp said. “We have someone who’s filing, someone who’s calendaring, someone who’s filing motions and several typists who are concentrating on transcribing the dictation and producing the documents.”

This is a great idea, and it highlights an area in which law firms have been extremely slow to innovate: workflow. The traditional alignment of one lawyer -> one secretary still makes sense in a solo practice, but in a firm with multiple lawyers and a large volume and range of tasks to perform, keeping that alignment just encourages redundancy and inefficiency.

Allowing secretaries to focus on and develop expertise in one particular area creates clear channels through with assignments can flow much more easily and efficiently. Lawyers have specialties; why shouldn’t their secretaries have them too? More importantly, logistics is revolutionizing commerce worldwide, and while a study of law firm logistics (or rather, the near-complete lack thereof) would be a major undertaking, it’s still encouraging to see even one example of a firm willing to rethink how it accomplishes its daily work.

Now, that said, what disappoints me about this effort is that the secretaries’ specialties are still largely clerical and administrative. Continue Reading

Virtually legal

I’ve just assigned a feature article for the April/May 2008 issue of National that aims to explore the future of the sole practitioner. As I noted in a previous post, I’m worried about the near-term prospects for solos, especially in smaller centers, but I’m bullish on their chances down the road, so long as they’re willing to rethink their business models and invest in technology and innovation. Two recent articles make me think that the brighter future for smaller practices might arrive sooner than anticipated.

Stephanie Kimbro is a North Carolina solo who operates a virtual law office. In a guest post at Susan Cartier Liebel’s Build A Solo Practice LLC blog, Kimbro describes her wholly web-based practice: no physical office quarters, secure personal home pages for clients, and a state-wide client base that can access its files 24/7. She provides unbundled services, bills and collects over the Internet, and competes with big firms using just the merest fraction of their overhead costs. Best of all, she’s in control of her own time and her own life. She’s already heard from other solos who want to license her homegrown software application and launch similar VLOs.

Further north in Pittsburgh, we find the Delta Law Group, two lawyers who have created, if possible, an even more innovative virtual firm. New clients are met by a partner who videotapes the detailed first consultation and then outsources the file to one of several local solos and specialists. Like Kimbro’s firm, Delta provides its clients with a secure extranet to follow the progress of their matters and conducts its administrative tasks online. Delta profits from an extremely low overhead as well as from access to a range of talented lawyers in whatever field of expertise is required.

These virtual firms obviously have their limitations — for example, they can’t take on huge or complex matters — but today’s small practices have the same strictures, serve the same kinds of clients and take on the same typical matters. The difference is that these firms liberate their lawyers from the burden of overhead, empower their clients with access and choice, acquire clients hundreds of miles away, and hire talented lawyers only for the duration of a single file. Oh, and they can afford to charge very reasonable rates. None of it would be possible without the Internet, or without an openness by these lawyers to innovation.

Small, flexible, accessible, affordable, and turn-on-a-dimeable — that’s what tomorrow’s solo and small firms will look like. It seems that, in some quarters at least, tomorrow has arrived early.

Out of law school, into a recession

Everyone’s talking about it, so we might as well tackle it, too. It seems immaterial at this point whether the US economy is approaching, entering or currently experiencing a recession — it’s clear that the economy is slowing down and, more importantly, that people are getting worried and even scared about it. Some of this can be attributed to the mainstream media doing its usual frenzy-whipping, but there is genuine cause for concern out there. This is the first time the US economy has tanked in the globalization era, and that’s going to have some nasty results (such as, US consumer spending power will drop but oil prices won’t, because for the first time, it’s Chinese, not American, consumption that’s pushing oil demand).

Things ought not to be as bad in Canada, but it’s still no fun graduating from law school, carrying a huge debt load, to find a mediocre or poor job market waiting for you. If you entered law school within the past five years, you paid boom prices for a law degree and you might end up in a bust marketplace. It’s not fair — but it happens. You won’t be the first new lawyer to experience it, but if you’re a Millennial, you’ve also never seen one of these things before, and they can be more than a little disconcerting.

There are lessons to be drawn, however, from those of us who landed in similarly soft job markets in previous downturns. Here are a few thoughts on what to do if you’re taking a new LL.B. or J.D. into a recession. Continue Reading

Beyond work/life balance

Seth Godin, whom you’ll see linked fairly often in this space, writes about the new workaholic, the person who’s motivated not by fear but by passion: “The passionate worker doesn’t show up because she’s afraid of getting in trouble, she shows up because it’s a hobby that pays. …[T]he new face of work, at least for some people, opens up the possibility that work is the thing (much of the time) that you’d most like to do.”

I read that and thought of the survey of law firm associates that Hildebrandt issued a little while ago. Its findings caused something of a stir by flouting the conventional wisdom that associates, especially in large firms, were overworked, stressed and deeply unhappy. I won’t go into the nuts and bolts here, but among the findings was that satisfaction was much higher than expected and that there was no correlation between long hours and unhappiness — rather the opposite, in fact. I think these two items say something about today’s new lawyers that law firms need to understand.

I continue to be amazed by senior lawyers who complain long and loud about the current generation entering their firms: “no commitment,” “not willing to pay their dues,” “a sense of entitlement,” and occasionally, even “lazy” are among the apparent sins of the young. The people saying these things are very smart, very capable, often leaders of their firms, but I don’t think they’re grasping a critical point: by and large, today’s new lawyers have no qualms whatsoever about working long and hard. What they have serious qualms about is working long and hard on rote tasks, unfulfilling assignments, due diligence and similar kinds of docket-filler, with few opportunities for serious client contact, independent undertakings, or crunch-time appearances in dealrooms and courtrooms. Continue Reading

Pro bono without borders

A press release came my way today from McCarthy Tétrault, announcing that the firm is the first Canadian “Partner Without Borders” of the Quebec division of Avocats Sans Frontieres. [Edit] ASF is an international NGO devoted to providing legal assistance and representation to vulnerable individuals and groups in developing countries or those in crisis. The organization is active in 30 countries, working with local groups on a completely pro bono basis. ASF Quebec has a number of law firm sponsors already, but McCarthys is the first to become un partenaire. Good for them.

Any law firm worth its charter has always been active in its community, of course, but in this age of megafirms with global reach, we’re starting to see super-national firms display a truly remarkable degree of involvement in issues and organizations that transcend the usual local undertakings. Check out DLA Piper, whose New Perimeter project is an incredible piece of work: a worldwide pro bono initiative that has seen 13,000 lawyer hours contributed to, inter alia, drafting new judicial laws in Kosovo, restructuring a micro-lending project, developing a worldwide food bank system and creating a human rights center in southern Africa. This is work on the scale of the CBA’s sterling International Development Committee, but supported by a for-profit firm rather than a non-profit association.

It would be naive to overlook the obvious marketing and recruitment benefits of McCarthy’s move here: the press release highlights the firm’s other pro bono efforts, including its support of Pro Bono Students Canada. This obviously invests the firm with some cachet among law students and new lawyers, many of whom take overseas development work very seriously. McCarthys, of course, will have to back up this commitment with active participation in Avocats Sans Frontieres (and now I have Peter Gabriel’s Games Without Frontiers stuck in my head), because students can also tell real commitments from mere gestures. But I prefer to think McCarthys means what it says here about its pro bono commitment, and that what we’re seeing really is the white-hot trend of globalization applied to the age-old tradition of lawyers’ community service.

Eyes wide open

Over at the Wall Street Journal‘s Law Blog, they’ve published a Q-and-A with a young New York law grad named Kirsten Wolf. She graduated from Boston University Law School in 2002 right into the dot-com collapse and couldn’t find work, even though she was a B+ student. She has the courage and grace to admit that she went into law school not really knowing what else to do, and that when it became clear halfway through her degree that there wouldn’t be a job for her, she found she didn’t really have a passion for the law after all. Today, she works at a job she loves for a New York publishing company, but she has $87,000 in debt, which will take her about 30 years to repay.

This is what Ms. Wolf is currently up to:

I’m on a one-woman mission to talk people out of law school. Lots of people go to law school as a default. They don’t know what else to do, like I did. It seems like a good idea. People say a law degree will always be worth something even if you don’t practice. But they don’t consider what that debt is going to look like after law school. It affects my life in every way. And the jobs that you think are going to be there won’t necessarily be there at all. Most people I know that are practicing attorneys don’t make the kind of money they think lawyers make. They’re making $40,000 a year, not $160,000. Plus, you’re going to be struggling to do something you might not even enjoy. A few people have a calling to be a lawyer, but most don’t.

I think she’s exactly right. Continue Reading

The value proposition for associates

From the Recorder comes news of a 220-lawyer firm in San Diego that has decided to abandon lockstep, year-of-call-based compensation for its associates.  Luce, Forward, Hamilton & Scripps has created no fewer than 14 different levels of associate compensation, based on what type of law the associate practises and how good she is at it. Not exactly a mind-blowing approach to remunerating your employees, except in the law, where it’s still pretty radical. Luce Foward’s move follows a similar, much-discussed program at 630-lawyer Howrey LLP, which applies subjective evaluations of performance and experience to determine associate salaries. Bruce MacEwen has written about this at Adam Smith Esq. and in a recent article for National.

One line in the  Recorder article jumped out at me, a criticism of the move by a legal recruiter: “I don’t know if that will sit well in terms of creating a collegial environment…. It’s saying your practice area is worth less than, say, an IP litigator.” Well, that’s kind of the point, isn’t it? Some practice areas do generate more revenue than others, and some lawyers are better at what they do than others, so adjusting your compensation system to reflect that is simply an acceptance of market and human realities. Law firms’ traditional approach to associate compensation assumes that all associates are equally valuable, which, if you stop and think about it for a moment, really is absurd.

I think what we’re seeing here is another indication that lawyers are finally making a serious effort to extract and identify the economic value of their work. Most lawyers know, deep down, that the billable hour is a contrivance designed to make billing and remuneration simple and unconfrontational. I suspect that generally, the larger the firm (and the farther the lawyer is removed from the nuts and bolts of the business), the less the lawyer is acquainted with how much his practice costs, how much his performance and experience are actually worth, and what kind of fee structure should be built around those two points. Solos don’t have the luxury of simply slapping a rate on their invoices — they need to really understand the profitability of their practices, or they’ll go out of business. It looks like that day is arriving for lawyers in larger firms too.

Law firm size: past, present and future

After making an offhand comment in a previous post, that only about 10% of all Canadian lawyers were in large law firms, I began to wonder if that was, you know, accurate. So I checked the statistical breakdowns available at the Federation of Law Societies of Canada website and confirmed that yes, out of 79,147 active law society members at the end of 2006, 7,282 were in law firms with 51 or more lawyers, so the actual figure turns out to be closer to 9.2%.

But then, as often happens when I come too near a demographic breakdown, I became intrigued by a related issue: this time, the relative increase or decrease in large-firm membership over time.

Obviously, in the popular imagination, the last ten years have seen massive big-firm expansion, thanks mostly to steady growth by established players like McCarthys and Gowlings or mergers of smaller regional players into megafirms like BLG or Faskens. That perception has been aided by trade magazines like Lexpert that focused on the biggest firms (and a few high-profile urban boutiques) to the exclusion of other law practices. At the other end of the spectrum, we’ve also heard about the challenges facing sole practitioners and lawyers in smaller centers, the difficulties competing with title insurers and paralegals, and we would tend to expect that the day of the solo is ending.

Well, I ran the numbers and came up with a few charts that might be of interest. First of all, I compared types of private law practices in 1996 and 2006: Continue Reading