What disruption really means

You keep using that word,” said Inigo Montoya. “I don’t think it means what you think it means.”

“That word,” in the current legal marketplace, is “disruption,” a terrific word that’s instrumental in understanding what this market is going through, but one whose overuse is generating a growing backlash. The tipping point might have been the ReInvent Law Silicon Valley conference, or it might have been the wave of updates from ABA TECHSHOW that seemed to feature “disruption” every few tweets. Any buzzword, if adopted too widely and too quickly, risks burning out its meaning simply because people get tired of hearing it all the time, and “disruption” is at risk of that outcome right now. Sam Glover at Lawyerist put the sentiment best in a post last week:

Here’s the thing: disruptive innovation is not coming to the law. At least, not quickly. …

LegalZoom and Rocket Lawyer are not disruptive innovation, either. They are basically just selling forms and pre-paid legal services, which have been around forever, in one form or another. People who think this is disrupting the legal industry do not have a very good grasp of the legal industry. Customers of LegalZoom and Rocket Lawyer were never your potential clients. They may have been Office Max’s, or Hyatt Legal‘s, but they were never yours.

So far, the only disruption to the practice of law has happened around the edges. Sure, Rocket Lawyer and LegalZoom may have siphoned off a few clients. And predictive coding will put some contract lawyers out of their jobs (although doc review is only “legal work” due to a technicality), but can anyone point to an imminent threat of disruption to the legal market? I don’t think so.

So who is actually threatening the legal market for lawyers representing clients? I’m not sure. In fact, I’m not sure anything is going to.

I’m in qualified agreement with Sam on this, as I responded in a comment on his post that I’m expanding upon here. What I really want to do is help establish some specific parameters around the use of “disruption” in the context of the current legal market. I summoned Inigo Montoya to this discussion because I don’t think “disruption” is the empty vessel its critics believe it to be. Disruption is real, and it’s a contributing factor to change and upheaval in the legal market; but not every change or upheaval is an example of “disruption.”

When we talk about disruptive innovation, then we’re squarely in Clayton Christensen’s territory, because he gave us the idea of “sustaining technology” vs. “disruptive technology” in The Innovator’s Dilemma. Sustaining innovations (we can safely substitute “innovation” for present purposes) provide improved delivery or performance of an established product or service, “along the dimensions of performance that mainstream customers in major markets have historically valued,” in Christensen’s words.

Most innovations are sustaining, and while incumbents might struggle with them a little at first, they can and usually do handle and implement them. Sustaining innovations in law firms include email (a more efficient communication medium than letters or faxes) and time-and-billing software (a more efficient docketing methodology than making hand-written entries on timesheets).

Under this definition, LegalZoom and Rocket Lawyer are actually sustaining innovations: they are providing a more efficient and accessible method of acquiring legal documentation. Any law firm in the world could do what these companies are doing right now — offering legal documents over the internet — without having to completely re-engineer their operations. (That they’re not bothering to do so says more about lawyer intransigence and biases about “low-value” products than about these companies’ offerings). Incumbents eventually find an answer to sustaining innovations: they can adjust to them without tearing apart their basic structure in the process.

Disruptive innovations are different: in Christensen’s words, “they bring to the market a very different value proposition than had been available previously.” Disruptive innovations normally offer worse, not better, performance or quality than the incumbents when they first arrive. But they arrive at a time when the market is ready for something smaller, cheaper, easier, or more convenient than what’s already out there. They almost always start out at the lowest level of the market, or even tap into markets that have previously been invisible. Most importantly, they offer something that the incumbents can’t replicate, even if they wanted to, because the attempt to replicate would require such a radical reconfiguration of the incumbent’s business and production model as to cause it to be fundamentally undermined.

Neota Logic, to take an example, is disruptive technology: it guides users through an automated process of data gathering and analysis, based on a powerful legal KM engine, and produces an answer to a legal, regulatory or compliance question. Neota cannot replace a lawyer — yet. But it is going to displace lawyers, to start taking on some of what lawyers now do. What Neota wants to do is provide a way in which legal questions can be answered more efficiently and cost-effectively than the standard law firm model allows. It is being picked up first at the market’s edges — law students, in this case, in Georgetown Law’s Iron Lawyer competition, are using Neota to create apps that can address legal needs for people who don’t want to or can’t use lawyers. Disruptive innovations never start at the top. They start at the bottom and work their way up.

Here’s what’s important: The vast majority of law firms cannot replicate this type of innovation, because it would essentially destroy their businesses. This is because law firms are not in the business of solving legal problems; they are in the business of billing hours devoted to solving legal problems. That’s a key distinction. Law firms don’t really sell legal solutions — if they did, they’d price everything on a flat fee or as a percentage of the value of the solution. They sell hours, and if you’re in any doubt about this, pick up a law firm invoice and see what’s actually being charged out. Neota, however, is in the business of solving problems, quickly and efficiently. These are two quite different production models.

A law firm that integrated this kind of disruptive program into its operations, and contributed to the ongoing expansion of its capabilities, would soon find itself cutting loose many of its associates, because they would no longer be necessary: the computer would be performing tasks they previously undertook. In most business models, this would create greater efficiency and drive profits up; but in law firms, reliant upon leverage for profit, creating greater efficiency drives profits down. If you make money by selling inventory, and if your inventory is billed hours, reducing your inventory is going to kill your revenue stream.

This returns us to the original question: can law firms employ disruptive innovation? If we use the strict definition we discussed above, then the answer is no. Disruptive innovations start at the bottom of the market and introduce offerings that are inferior in quality, but that engage the market on new criteria such as price, portability or accessibility. Law firms, by their nature as incumbents, are bound to be the high-quality disruptees, not the low-quality disruptors. They’re destined to be the ones from whom market share will be taken, as the disruptors get traction in the new market and move steadily up the food chain.

If we’re true to Christensen’s definitions, in fact, then almost the only true disruptors among law firms are the likes of Berwin Leighton Paisner’s Lawyers On Demand and Pinsent Mason’s Vario, contract lawyer agencies that run parallel to the incumbent firms and essentially compete with them for the attention and affection of clients. Christensen taught that companies seeking to “disrupt themselves” cannot do it within the incumbent enterprise: the cultural inertia will be impossible to overcome. The disruptive forces must be housed in a separate location and allowed to chart their own course. Extremely few law firms have the intestinal fortitude to take those steps, not least because of the possibility that the parallel disruptor might actually succeed.

All that said, I do think it’s possible for law firms to introduce changes and innovations within their own operations that qualify as at least quasi-disruptive to their status quo. For an excellent example, consider the two winners of last year’s InnovAction Awards, handed out by the College of Law Practice Management: Littler Mendelson’s CaseSmart knowledge management system and the firm-wide implementation of Lean Six Sigma at Seyfarth Shaw.

In both cases, these firms ripped out their internal machinery, rewired and re-engineered the way they did things, and ended up with better procedures and more efficient systems that delivered improved results for clients and increased revenue for the firm. It wasn’t easy and it wasn’t overnight, but these firms recognized an opportunity to work differently in ways that mattered to clients. They no longer work the same way they did before, and that’s as close to pure disruption as you can ask from market leaders in a conservative industry like law. We should welcome and encourage these innovations, while recognizing that they don’t quite strictly qualify as “disruptive innovations” for the legal market as a whole.

The thing about truly disruptive innovations is that you can’t forecast them. Show me any futurologist who, when we were all making millennial predictions back in 1999, predicted the smartphone. All you can do is watch the market and identify the disruptors when they appear. If you want to know what they look like, ask yourself:

  • Does this innovation deliver a decrease in quality, rather than an improvement?
  • Does it interact with the bottom or periphery of the market, rather than the top?
  • And if a law firm tried this, would it drive itself to the brink of breakdown, having to partly or even completely reconfigure its financial, procedural and cultural infrastructure?

If the answers to these three questions are yes, then what you’ve got there is a disruption. If not, then, as Inigo advises, it might be best to stop using that word.

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 MCLE question no one wants to ask

Here’s a conversation I sometimes like to imagine, between an elected official in the government and a representative of a state bar or law society.

“So, I understand that law is a self-governing profession, and that you’re the governors.”

“That’s right.”

“I assume you know that self-regulation is a privilege, and that the government allows you to oversee various matters that would otherwise fall within our jurisdiction.”

“Of course. Lawyers’ independence from government is critical for us, so we’re zealous about regulating ourselves, in the public interest, to maintain it.”

“How does that work in practical terms, though? For instance, how do you make sure lawyers are competent enough to serve their clients?”

“We’ve instituted mandatory continuing legal education, or MCLE. Lawyers must complete a certain amount of post-call education every year.”

“Do you mandate specific courses lawyers must take or skills they must learn?”

“No, we generally allow lawyers to choose courses based on their own interests.”

“I see. Do you test them on what they’ve learned in these courses?”

“Well, no. But they always receive binders of materials that they can bring back to their offices.”

“Uh-huh. How do you know they’ve even attended these courses?”

“Well, they report it in their annual filings. But they wouldn’t lie about that. They would risk serious discipline if they were found out.”

“Okay, let me ask you this: Let’s assume every lawyer in your jurisdiction completes the full amount of CLE you prescribe every year. Does it work?”

“Does what work?”

“Does mandatory CLE work? Does it ensure that your lawyers are competent? Are there studies establishing that MCLE verifiably improves the quality of legal service by lawyers?”

“Uh, none that I’m aware of.”

“No? Do you mean in this jurisdiction only, or in any jurisdiction?”

“Er, any jurisdiction, really.”

“Alright, let’s back up. How about ordinary CLE, the non-mandatory kind: are there any studies proving that taking CLE is directly and causally related to maintaining or improving lawyers’ competence?”

“[long pause]….”

You see my point. There might be jurisdictions where the MCLE requirements are stronger and more specific than what I’ve hypothetically described above, but if so, there aren’t many. The foregoing conversation is quite plausible — frighteningly so, if you’re a regulator.

Mandatory CLE is the rule in 44 of 50 US states and in eight Canadian provinces, although curricular and reporting requirements vary across jurisdictions. In every state and province, however, the original impetus for mandating CLE was the same: we need to ensure lawyers are up to date on the law in their areas of practice, thereby maintaining lawyers’ competence and fulfilling our self-regulatory requirements. At least, that’s what I assume: I’ve not been able to find a really fine statement of MCLE’s purposes on the website of any legal regulator that imposes it.

Generally, the reasoning in support of MCLE seems to be implicit: CLE makes you a more knowledgeable lawyer, which makes you a better lawyer, and we want to mandate better lawyers. QED. It’s a great idea, obviously. But is it true? Does requiring lawyers to take a minimum amount of CLE every year make them better at what they do? Intuitively, one supposes that it does, but intuition is not evidence in any court. Can it be proved? Has it been proven?

I’ve spoken with some of the smartest minds in lawyer professional development and asked them if they’ve ever seen a study showing conclusively that MCLE is causally connected (or even strongly correlated) with lawyer competence. None of them has. Nobody, as far as I can tell, has published a study proving that even ordinary, voluntary CLE produces better lawyers. The benefits of CLE can be reasonably assumed, but apparently that’s all they are: an assumption. And mandatory CLE is an assumption squared.

If you want an excellent example of how messed up the legal profession has become over MCLE, read this report of the Supreme Court of New Jersey that led to the state becoming the 44th to approve MCLE in 2007 (HT to Michael Williams). Here’s how the report dispensed with the threshold questions of MCLE’s necessity and effectiveness: “[W]hat reasons, other than the absence of empirical data, mitigate against making CLE mandatory? We have found few, if any.” I’d love to see the reaction of a New Jersey Supreme Court judge to a factum that included this line of reasoning in its arguments: “We have no empirical data to support our position. But there is very little, if any, evidence against it, so we ask this court to rule in our favour.”

I can think of three significant reasons why no one has successfully demonstrated a causal link between MCLE and lawyer competence.

1. It’s very difficult to measure competence. And even more difficult, for that reason, to measure increases or decreases therein. I’ve written before that competence testing in the law tends to be forensic: we find out which lawyers are incompetent only after they wreck a client’s case or their own careers. But defining “competence” for a lawyer is extremely tricky: what standards do you use? Should those standards vary according to practice area, year of call, degree of oversight or autonomy, geographic location, sophistication of clients? How do you test for competence? Who pays for the process? None of these questions has an easy answer. But they are all good questions, and the public whom lawyers serve has a right to know that they’re at least being asked, if not answered. As far as I can tell, the legal profession is not even asking.

2. It’s in nobody’s interest to question MCLE. Continuing legal education is big business, and some of the most heavily invested players in the market are regulatory bodies. The people who decide that lawyers must take CLE are often the very same people who sell CLE to lawyers, which by any standard is a glaring conflict of interest. Many voluntary bar associations are kept afloat in part by CLE revenue, and they view MCLE as manna from heaven. And frankly, lawyers themselves, even though they might not love MCLE, have learned to live with it by gaming the system: sitting in the back of the room checking emails during a lecture, or logging in to an online CLE session and doing billable work with the sound off. It’s a reasonably cozy arrangement.

3. There isn’t any causal link between MCLE and lawyer competence. We might as well get that out there.

None of this may be new, although I’ve seen very few people talk about it openly. But the problem remains: what could a regulator say if a legislator started asking the questions at the start of this post? Should CLE be mandatory? If so, why? How should it be structured, and how should its effectiveness be measured? Here are my suggestions for dealing with this issue:

1. Attend to the absolute basics. A regulator should ask itself:  “What must we ensure that lawyers know, and can do, in order to maintain baseline professional competence that satisfies the standards of self-governance?” Regulators can answer that question, I think, by looking at where lawyers make the most mistakes, and start there. Every regulator and/or professional insurer keeps close track of the nature and cause of complaints and malpractice claims against lawyers. It is well-known that “knowledge of the law,” the subject of 90% of all CLE programming, is nowhere near the top of the list. Generally speaking, here’s where lawyers are getting in trouble:

  •  Failing to establish clear expectations at the start of the client relationship.
  •  Failing to keep clients informed on a timely basis.
  •  Failing to respond to client inquiries in a timely manner.
  •  Failing to identify and avoid conflicts of interest.
  •  Failing to maintain lawyer-client confidentiality.
  •  Failing to ensure security of client information.

Your mileage may vary according to your jurisdiction, but these are the basics that recur state to state, province to province, year after year. Yet I’m not aware of a single jurisdiction that specifically mandates education in these areas, and I’m aware of some that won’t even accredit business- or professionalism-related courses that would cover these topics. Lawyers need to know how to operate a law practice in a viable, ethical and professional manner. If they did, they would commit fewer basic errors and incur fewer penalties. So figure out how many hours would be required to deliver this information, add it up, and there’s your minimum MCLE requirement.

2. Make the knowledge tangible. How do you test this knowledge? Provide lawyers with checklists, templates, protocols and step-by-step processes they can follow to check for conflicts, issue comprehensive retainers, and keep clients continuously informed. Then have them draw up a sample retainer, list the steps involved in checking for conflicts, and describe what they do to keep in touch with clients. Throw in a few other ethics or professional responsibility questions, if you like — every lawyer should be able to answer one or two of those. These are the fundamentals of lawyer professionalism: lawyers can learn them, and their learning can be tested.

3. Monitor the signals of competence. How do you know this is working? Track the number of complaints reduced and malpractice claims reduced year over year. That might not be direct proof of causation, but if the trend lines are strong enough, it would be pretty persuasive correlation. And a really good study would back up the quantitative results with qualitative data derived from focus groups, lawyer interviews, insurance experiences, and so on. Ask yourself: what would the government look at in order to measure improved levels of lawyer competence? They’d probably look here.

There’s a lot more I could talk about in this area — the wisdom and feasibility of mandating substantive-law CLE, the relative merits of online delivery, the best way to teach skills (as opposed to knowledge), the role of private-sector CLE, and perhaps most importantly, rethinking the entire traditional methodology of post-call lawyer learning. But this is where regulators can start, at least, to redefine and reconfigure the profession’s approach to mandatory CLE.

The question nobody in the profession wants to ask about MCLE is, “Does it work?”, because the implications of a negative answer are deeply problematic. I understand that. But we still need to ask the question, and there are ways to answer it that would satisfy any outside inquiry. So let’s ask it already.

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 right things

Warning: Lengthy Moral Philosophy Discussion Ahead. Worse luck for you, it’s from an English major who took exactly two Philosophy courses in undergrad and was entirely unsuccessful in trying to penetrate Kant’s Critique of Pure Reason, so govern yourselves accordingly. But it’ll take us a few paragraphs before we get there. First, we talk technology.

In Silicon Valley earlier this month, there transpired a conference that crystallized many of the current trends and topics regarding the rapid re-engineering of the legal marketplace. Reinvent Law is a laboratory based at the Michigan State School of Law and sponsored by the Kaufmann Foundation that seeks to combine innovations in law, technology, design and delivery to create a new and better legal system. The primary Reinventors are MSU law professors Daniel Martin Katz and Renee Knake, and if you’re not following them on Twitter, you should be.

ReInvent conferences had already been held in Dubai and London (the latter under the Law Tech Camp banner), but the Silicon Valley meeting was a breakout event that deeply connected with many people in the legal market and is still generating conversations. Here’s a roundup of commentary on the event: I especially recommend Ron Friedmann’s live-blog posts for your review, while the report by The American Lawyer’s Aric Press demonstrates that the issues #reinventlaw is exploring are of interest to some of the largest legal enterprises in the world.

I was seriously sorry to miss ReInvent Silicon Valley, and I hope to make it to a future iteration of the event closer to home. I’m a fan of what ReInvent Law is aiming to do and the methods by which it’s doing it (Dan Katz’s work with data and the law is particularly noteworthy). Technology offers us tremendous potential to improve the quality, delivery and accessibility of legal services, partly because technological disruptions are being applied from the bottom up and from the outside in (rather than top-down from within the legal profession, as previous reform efforts have been), and because the application of internet-based technology can provide benefits well beyond its costs.

This is not a unanimous view, of course, and Reinvent Silicon Valley had its share of critics, including Scott Greenfield of Simple Justice. Scott’s post on the subject expresses a deep skepticism about the conference’s focus on technology, especially as it relates to the criminal justice system. Scott’s take on these issues will be familiar to readers of his blog, but I’d like to single out one part of his post for further consideration:

The fear is that much of what is being promoted as the future of law will actually come to pass. We will have those paperless offices where we sell virtual legal services unbundled like the widgets they can be. And the prisons will still be filled with people whose computer programs told them they should be free.

It’s not that the people involved in all of this aren’t smart. Indeed, these are some very smart, very dedicated people, but they don’t see the law. Dreams of technological change may be very exciting, but to what end?

That last question is an interesting one, and it will do all of us in the legal marketplace reform movement some good to think it over for a while. What are we aiming to achieve with the growing integration of technology into the legal system? I think Scott may underestimate both the purpose and the impact of these new legal technologies: to reduce costly inefficiencies and improve effectiveness throughout the legal service process; to provide more avenues for people to access legal services; to break the monopolistic tendencies of the legal profession that have served the market so poorly.

But when Scott talks about “making the law actually work better for the sake of human beings, rather than make it point and click,” he reminds us that the end, rather than the means, is what we need to focus on here. And although I don’t think this is a mistake that the ReInvent people are making, nonetheless we are vulnerable to the risk that our newest tools — and some of them promise to be very powerful indeed — may cause us to value the tool more than the task. Automation is meant to serve a purpose, not to be a purpose in and of itself.

This brings me to the central issue I want to examine, and to the philosophical part of our program. Peter Thiel recently delivered a guest lecture at Stanford Law School’s Legal Technology course. You might know Thiel as the co-founder of PayPal, the first outside investor in Facebook, and a generally brilliant fellow worth roughly $1.5 billion. Blake Masters took notes on Thiel’s lecture and the Q-and-A that followed, resulting in an extremely thought-provoking and (for me) unsettling read, because Thiel essentially advocates a greater role for automation and technology in the justice system.

You should read the whole article, but it’s quite long, so here are some key excerpts for present purposes.

Computerizing the legal system could make it much less arbitrary while still avoiding totalitarianism. There is no reason to think that automization is inherently draconian. 

Of course, automating systems has consequences. Perhaps the biggest impact that computer tech and the information revolution have had over last few decades has been increased transparency. More things today are brought to the surface than ever before in history. A fully transparent world is one where everyone gets arrested for the same crimes. As a purely descriptive matter, our trajectory certainly points in that direction. Normatively, there’s always the question of whether this trajectory is good or bad. …

In some sense, computers are inherently transparent. Almost invariably, codifying and automating things makes them more transparent. … Things become more transparent in a deeper, structural sense if and when code determines how they must happen. One considerable benefit of this kind of transparency is that it can bring to light the injustices of existing legal or quasi-legal systems. …. If you’re skeptical, ask yourself which is safer: being a prisoner at Guantanamo or being a suspected cop killer in New York City. Authorities in the latter case are pretty careful not to formalize rules of procedure. …

The overarching, more philosophical question is how well a more transparent legal system would work. Transparency makes some systems work better, but it can also make some systems worse. So which kind of system is the legal system? … [Is it] pretty just already, and perfectible like a market? Or is it more arbitrary and unjust, like a psychosocial phenomenon that breaks down when illuminated? 

The standard view is the former, but the better view is the latter. Our legal system is probably more parts crazed psychosocial phenomenon. The naïve rationalistic view of transparency is the market view; small changes move things toward perfectibility. But transparency can be stronger and more destructive than that. …  Truly understanding our legal system probably has this same effect; once you throw more light on it, you’re able to fully appreciate just how bad things are underneath the surface.

Once you start to suspect that the status quo is quite bad, you can ask all sorts of interesting questions. Are judges and juries rational deliberating bodies? Are they weighing things in a careful, nuanced way? Or are they behaving irrationally, issuing judgments and verdicts that are more or less random? Are judges supernaturally smart people? The voice of the people? The voice of God? Exemplars of perfect justice? Or is the legal system really just a set of crazy processes?

Looking forward, we can speculate about how things will turn out. The trend is toward automization, and things will probably look very different 20, 50, and 1000 years from now. We could end up with a much better or much worse system. But realizing that our baseline may not be as good as we tend to assume it is opens up new avenues for progress.

On the surface, there’s much to like here. It’s difficult to argue that the legal system is not, at least in part, a crazed psychosocial phenomenon, inconsistent and frequently irrational in its operation. There is no shortage of error and bias in the law: Scott Greenfield might point to prosecutorial malfeasance and systemic discrimination, whereas I might point to the rampant inefficiency of law practice, the turf-guarding monopolism of lawyer market regulation, and the fundamental conflicts between the traditional law firm business model and the best interests of clients. Why not introduce into this highly imperfect system the discipline, objectivity and predictability of the algorithm?

And yet … something about Thiel’s narrative bothered me. Just the fact that the word “totalitarianism” came up in this discussion is enough to raise red flags about the possible risks we run here. Humans have a long-held apprehension about developing technologies that will eventually destroy them: I wrote about this in Blawg Review #252 back in 2010, when I tracked science-fiction tropes about technophobia from Frankenstein to The Matrix. Literature abounds with nightmarish future states in which our machines, given the power to execute the law, eventually become the law unto themselves. If we have a generalized dislike of bureaucracy, it’s because we fear the spectre of a faceless, mindless, autonomous system that knows who, what, where, when, and how, without ever knowing or caring why. And history supplies us with good reason to feel that way.

But I was also disturbed by what I felt was a deeper problem: that while this approach was clearly intended as a moral good that would improve fairness and correct injustices, nonetheless there was something vaguely wrong about the whole thing. So I did what anyone would do in these circumstances: I consulted a moral philosopher; in my case, Dr. Richard Matthews of King’s University College at the University of Western Ontario (who also happens to be an old and great high school friend) for his assistance. With his permission, here are excerpts from his illuminating response:

The article is deeply uneasy with human subjectivity. … The discussion of AI and improvements in legal computation suggests the possibility of improving on this, of making the legal system more rational. To be fair, he acknowledges that things could get better or worse with the introduction of AI. But what he does not notice is that the drive is to eliminate human fallibility as such from the process of legal reasoning — to render human judgment irrelevant.

Suppose that the trend towards legal computation is “successful,” whatever that would mean…. The consequence will be reduced human involvement in the most important aspects of the legal system, and thus increasing irrelevance of human beings as subjects in the process. This is, no matter what the ultimate results of the process are, the further objectification of human beings. Humans become the objects of judgments, not subjects.

What are some of the practical implications of this? Well, you have been mapping many of them in your blog already — the elimination of highly skilled and highly trained lawyers and judges from participation in a meaningful human activity; the organization and maintenance of law through mechanization of the kind that this article identifies; and by taking the labour that you cannot be bothered to mechanize and finding the least-well paid and most desperate people to do it. Obviously there are many others, but I find none of them attractive.

This is a mapping and reshaping of human life and its possibilities which has, at its root, the controlling and reshaping of human populations. The controlling will not produce better human beings or increased obedience to law. Instead, it always generates resistance. …

Such technologies also concentrate power in the hands of an increasingly small group of people, since they own and thus control access to the AIs. The issue of transparency is dodgy, in any event. We have to ask: To whom are computers transparent, since 99.9% of the world doesn’t have a clue what a computer is, even as we use them. Also, the computer does not function in a politically neutral environment.  I would be highly surprised to find transparency applied to powerful individuals in the same way that it will be applied to the vulnerable. 

I think Richard has struck several nails on the head here, which is why I’ve gone to such lengths to address this subject: because although the size of the risk that an increasingly automated justice system presents is very small, the potential impact of that risk is not. I’m fond of saying that lawyers were invented to serve the law, not the other way around. Well, the law was developed to serve people, not the other way around, and one of the services it’s meant to deliver is to support and extend the realm of human dignity. Humans aren’t always great at sustaining our own and others’ dignity; but we do try, here in the law, to accomplish that, and sometimes we succeed. Machines aren’t good at it at all.

Rest assured, I remain a strong proponent of improving and expanding the role of systems, processes and technology in the business of law and, to a more limited degree, in the justice system itself. The problem arises when we give in to the temptation to let these systems run loosely supervised, or not supervised at all — and that temptation is real, because every mechanized process is always telling us, “Go on, take a break, leave it to me, I’ve got this handled” — and, hard-pressed for time or money, we often acquiesce. Not everything requires watchful human guidance, but some things do, and the law is one.

The word “autonomy” comes from the Greek autonomos, which means “independent, living by one’s own laws.” (Emphasis added.) The implications of that definition for this discussion are too strong for me to pass up: these are our laws, meant for our good, and Peter Thiel notwithstanding, I recommend that we remain highly vigilant about and directly involved with their application.

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.             

 

Why women leave law firms, and when they’ll return

Visiting my alma mater Queen’s Law School recently, I paused, as I often do, before the framed graduation picture of the Class of 1973. It was startling for this member of the Class of 1993 when I saw it 20 years ago, and it’s downright unbelievable seeing it 40 years on in 2013. Among the Law ’73 grads, you will find exactly one — repeat: one — woman (Mary Jane Mossman, who went on to become an award-winning professor and Associate Dean of Osgoode Hall Law School in Toronto).

By the time I enrolled in law school in 1990, women made up about half of all law school classes and were said to constitute as much as 60% of the incoming classes at some faculties. So the Class of ’73, as shocking as it was, seemed like a relic of a distant past. But it’s worth remembering just how male-dominated the legal profession has always been. Check out these figures compiled by the ABA: as recently as 1980, men outnumbered women in the US legal profession by a staggering 92%-8%. Roughly ten years later, the breakdown was 80%-20%, and ten years after that, 73%-27%. (In 2010, the most recent year available, the split in Canada was 68%-32%.) It seemed like a natural progression was underway towards a more balanced profession.

But by 2005, the US split was still only 70%-30%, and several indicators suggest that’s as good as it’s going to get: women and minority hiring has backtracked at large law firms since the financial crisis, and The Careerist points out that of the ten top-ranked US law schools, only one has more women enrolled than men. The issue is especially acute in the private bar: women enter law firms, but they don’t stay there for long, moving to sole practices, into in-house positions, into the public sector, or out of active legal careers altogether.

One statistic nicely sums up the current state of affairs: women constitute just 15% of equity partners at AmLaw 200 firms. Take a moment to let that one sink in. (For more depressing reading, click the link to get a detailed account of ongoing compensation gaps between women and men at these firms.) The profession, to its credit, has been trying for the last 20+ years to address this problem, creating commissions, task forces and programs of all kinds to support women in private practice. Whatever impact these efforts have had, they have shown little evidence of successfully enabling more equitable status for women in law firms.

I’m now coming to conclude that this is because all these efforts, well-intentioned as they might be, are looking at the situation the wrong way. We’ve been assuming that the lower numbers of women in law firms is a problem that needs rectifying. But what if we stop looking at women’s legal career choices as a failure that needs fixing, a failure to fit the traditional standards of success? What if, instead, we start looking at this trend as evidence of women’s eminently sensible and illuminating response to the state of law practice?

Here’s my theory: women aren’t leaving law firms at an abnormal rate. They’re leaving law firms at a perfectly rational and normal rate. It’s men who are staying in law firms at an abnormal rate. Women aren’t the faulty outliers; men are.

When you look at the situation that way, a lot of things start to make sense. Women who enter law firms quickly and accurately diagnose that these are amateurish organizations that employ archaic workflow systems, inept pricing mechanisms, skewed compensation structures, and largely ineffective management, not to mention a whole lotta personal dysfunction. The typical contemporary law firm is nobody’s idea of a good business model, a satisfying workplace, or a solid bet for long-term future success. It shouldn’t surprise us that women abandon this model in droves. The question we ought to be asking ourselves is, why are men sticking with it in greater numbers than should rationally be expected?

Certainly, there are any number of advantages presented to men by the typical law firm model — we created it in our own image, after all. Head and shoulders above all these benefits is the time- and effort-based pricing and reward system. Men continue to shoulder much less of the burden of family and household care than women do, giving them more time to devote to the firm. And since time is the currency of law firm financial success and the measure of law firm dedication, it’s no wonder that men find the environment attractive and rewarding in that regard. The mystery is why we put up with all the other unpleasant, unresponsive and dehumanizing aspects of the model. Why do we accept and endorse a system that delivers exactly one benefit to us (revenue) at the cost of so many other disadvantages to us, to our erstwhile female colleagues, and especially, to our clients?

These contentions underlie my larger thesis: in the medium- to long-term, women will flood into law firms and into the private practice of law generally, but not because the profession or firms themselves have made various “accommodations” (a dangerous and ultimately demeaning word) to the standard model for women. It will be because that model itself will sink entirely beneath the waves of change, replaced by new approaches that more closely resemble modern business practices. My impression is that women are already a growing and increasingly potent force in modern solo practices, where they can make their own rules. The “solo” ethic will, as time goes on, start to spread to larger legal enterprises.

Inevitably, and especially with the advent of “non-lawyer” participation in the market, law firms will lose their 19th-century trappings of time-based pricing and harshly individualistic compensation systems. They will cease to be clubs of privilege and start to be engines of value and productivity. And very shortly afterwards, not by coincidence, they will start to benefit from an influx of the amazing female talent they have been rejecting for decades. Five years ago, I wrote about a “Moneyball” approach to building law firms that recognized and capitalized on the legal market’s ridiculous undervaluation of women: our destination is a market in which that undervaluation comes to an end.

This will not happen overnight; but the current law firm model is inarguably unsustainable, and when it finally falls away, real shifts in the law firm gender mix should be one of the primary unlooked-for benefits. We can best prepare ourselves for that outcome by hastening the fall of the old model — and by considering the distinct possibility that women, far from constituting a “problem” to be “fixed,” have actually been pointing the profession in the right direction all this time.

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

Are you old enough to remember when the only way you could send a letter or a package to someone in another city was through the Post Office? Do you remember what it was like to deal with the employees and policies of a company that had a complete monopoly on a vital service? Remember how much you enjoyed that?

Are you also old enough to remember when the only way you could phone someone in another area code was through long-distance services provided by your local telephone monopoly or duopoly? And how you had to wait and call after 6 pm to get a discounted rate, or after midnight for an even steeper discount? How did that work for you?

It’s easy to forget how much technology and globalization have changed and improved our everyday experiences in the last few decades. Today, we take companies like Fedex and Skype for granted. We have trouble picturing a world — a very recent world — in which there was no Ikea, no Amazon, no Samsung, no Starbucks, no SouthWest. You don’t have to use these companies or like their products to recognize that their arrivals changed the markets they entered, created more choice, forced the incumbents to lower their prices or raise their games or change their offerings or all three. And I can presume that you wouldn’t go back to those old, narrow, barren markets unless forced at gunpoint.

Now, take that frustrating, constraining, 1970s-malaise feeling you recall from the old days, and apply it to legal services. Because that’s the way many people and businesses still experience the legal market: one type of provider, one set of rules and procedures, one definition of adequate service. But that’s all about to change:  our cozy little market is opening up, and new players are entering.

These new players, like the Ikeas and Southwests that entered other markets before them, will undermine clients’ existing assumptions about how legal products and services should be created, priced and delivered, and they will find many willing customers desperate for a breath of fresh air. This isn’t really negotiable or reversible. All that’s left for us to decide, as lawyers, is whether we want to wind up as the future equivalent of the Post Office in a FedEx world.

Now, here’s the better news for lawyers: there’s a growing chance that we could experience the same kinds of consumer benefits arising from the opening and expansion of another dusty, moribund market: legal education.

As you know, for all practical purposes, there is one and only one route into the legal profession: a law school degree and a Bar-administered admission process. The degree goes by different names (e.g., Bachelor of Laws, Juris Doctor) and so does the admission process (e.g., articling, Bar exam, solicitor training, Bar admission course). But the basic structure is universal and hasn’t changed for decades: three years of law school followed by a competence assessment that, in most (but not all) cases, is not especially difficult to pass.

The practicing Bar’s unhappiness with the legal education system has been thoroughly documented. But the Bar also has no one to blame but itself. By allowing a law degree to stand as the exclusive means of legal education credentialing, the legal profession has also created a monopoly that works against its own interests. If you want to become a lawyer, you must first go to law school. Legal educators, gifted with sole possession of an extremely lucrative and perennially increasing market, have responded exactly as you would expect any monopolist to respond: jacking up prices, fending off change, and ensuring their own nests are comfortably lined. (Before you start feeling too resentful about that, go back and read the fourth paragraph again.)

Law schools, of course, are currently in the process of watching their pleasure domes start to crack and crumble. Thanks in large part to recessionary forces and changes to the way law firms hire and use associates, US lawyer employment has imploded, and law schools are paying the price. You could argue — I won’t, at least not strenuously — that this is unfair to the schools: they didn’t cause the changes to the market, and if anything, they’re doing a slightly better job preparing students for practice today than they did 10 and 20 years ago. Not that that will help them now — there’s an old saying that when you sow the wind, you reap the tornado.

Anyway, the most recent US law school data is remarkably grim: as you’ve probably read, applications to ABA-accredited law schools are down 20% from 2012 and are on track to nosedive 38% since 2010. If you go back to 2004, the drop is an astonishing 50%. This has hit the legal academy like a hand grenade tossed through a window: Paul Campos has been tracking the resulting panic and shrapnel for several months now.

The problem has become large and serious enough to have caught the attention of the mainstream press: The New York Times, The Atlantic, Forbes and The Daily Beast have all picked up the story, coverage that is just going to accelerate the race away from law school enrolment. I issued a “sell” advisory on law schools 20 months ago, and nothing that’s happened since has changed my mind. (Smart schools still interested in saving themselves should read Bill Henderson’s Blueprint, today.)

That, obviously, is the bad news. The good news is that this market disruption, like every other, can create opportunities for new players and new models. Here are a couple that you should note and encourage.

In England & Wales, now widely recognized as the world’s legal laboratory, apprenticeship is poised to make a comeback in the professions. “At the moment, to become qualified as a solicitor, accountant or in insurance, the typical route involves three years at university, then on-the-job training and professional qualifications,” wrote Skills Minister Matthew Hancock in the Telegraph. “But university is not for everyone. There is no reason why you can’t attain the same qualifications, without the degree, starting on-the-job training in an apprenticeship from day one. So I want apprenticeships spanning craft, technical and professional jobs that open up work-based routes to the top.” The minister cited approvingly an apprenticeship program under development at BPP Law School, which has close ties to the profession.

Now, if you’ve been reading my work for a while, you’ll know that I think highly of apprenticeship, and that I wrote a few years ago about some promising apprenticeship programs at a handful of US law firms. (Here’s the paper I submitted to a Georgetown Law symposium on the subject.)  I imagined and hoped that this was a trend that would take off in a recessionary climate; it did not. But that was apprenticeship as a training method for new lawyers; we’re now talking about apprenticeship as a non-school route into the profession.

Hardly anyone takes that path anymore; but if it could be revived, ideally complemented with a mini-degree that provided grounding in the essentials of jurisprudence and legal theory, then law schools would have more on their hands than just a PR nightmare and a shrinking inventory: they would have competition. And unlike those first two factors, which will spawn only destructive outcomes, competition can and should be constructive for schools. Competing models that threaten to siphon off the best applicants would spur schools to make real changes in their approach to the market — it would give them a target to focus on and a framework within which to reconfigure and rebuild.

Nobody wants law schools to disappear; we want law schools to thrive — but on their merits. Putting a viable alternative up against law schools would motivate them to reconsider their own models, defend their own visions of lawyer preparation, or adapt their approaches to more closely resemble what the successful options offer. Complaining about law schools didn’t work; trying to regulate them won’t work; and putting them out of business is pointless. So give them competition: unleash alternatives that can give them a run for their money, and let them fight their way out of this mess.

A similar sort of innovation may be unfolding here in Canada, which it seems fair to say is not widely recognized as the world’s legal laboratory. But the Law Society of Upper Canada in Ontario has recently done something which could be just as bold, in its own way, as the UK’s move towards apprenticeship.

Law graduates cannot be admitted to the Bar in Canada until they’ve completed a year of articling — itself a form of apprenticeship with a practicing lawyer or law firm. More than a few US commentators have envied this approach and suggested its adoption in the US (or the British solicitor trainee program or German Referendarzeit). But articling in Canada is itself the subject of ongoing controversy, and in Ontario, articling placement — which used to be all but automatic — is now down to about 85%. That’s a problem that the US bar, facing a 55% new-lawyer law-related employment rate, would love to have.

In Ontario, however, concern about the articling crisis led to heated debates and finally, late last year, to the approval of a pilot-project Law Practice Program that would run parallel to articling and provide an avenue to those who cannot land articling positions. The program is not, shall we say, universally popular, and at this extremely early stage, it’s almost entirely speculative anyway. But I think it’s tremendously important nonetheless, for much the same reason as I think the possibility of apprenticeship is important: it creates competition for new lawyer training.

Up until now, articling in Canada has, in a sense, enjoyed a monopoly, in much the same way that law schools and lawyers have. There is only one “apprenticeship” method, one training route, for Canadian bar admission, and that’s the articling process. Knowing this, many Canadian law firms have felt free to offer articling positions without having to worry very much, if at all, about the quality of those positions. All they really had to concern themselves with was the provision of a competitive salary; it was accepted wisdom among lawyers and law graduates alike that the articling experience itself would always be uneven, and that whether you really learned much about being a lawyer would be partly a matter of your own efforts and partly the luck of the draw.

Now, introduce the Law Practice Program into this mix. Suddenly, articling programs can’t afford to be complacent, because now there’s another training option. Providers of the Law Practice Program (it’s envisioned that there would be several) can pitch themselves to the law student market thus: “Law firms won’t really train you to be lawyers, you know. They’ll have you photocopying and doing grunt work and picking up drycleaning. But we will train you, through competitive work placements and practical role-play sessions and other cutting-edge methods for inculcating business skills. We will give you the tools to be employable upon graduation.”

These providers will have to offer and deliver these kinds of benefits, because that’s the only way they’ll be able to make money. In order to attract candidates — and, much more importantly, to produce graduates attractive to employers — they will need to build a training program superior to articling (and based on some reported articling experiences, that might not be terribly difficult). They will have to do more than just be a consolation pathway for students who couldn’t find articles — they’ll have to persuade law graduates of all stripes that their programs are as good as or better than articling and are worth the investment.

And if they succeed — well, then suddenly, we have a race. New lawyer training stops revolving around the tired old question of “Whose responsibility is it?” that we’ve been grappling with for ages. It becomes a question of “Who wants the opportunity?” Which training option is better for new law grads? Which can deliver the best results? Which can draw the best students into their programs and produce the best subsequent employment rates? A market filled with new lawyer training options, competing with each other to attract law graduates into their program, would have many ramifications — the likely end of standard paid training for new lawyers almost certainly among them — but the overall impact on the profession would be highly positive.

That’s why I think the Law Practice Program for the Ontario legal profession has the potential to be a game-changer, and why the suggestion of an apprenticeship route into the British profession is equally significant. Our legal education and admission methods have grown stagnant because they are monopolies, no different from the post office or phone companies of the past. Break up those monopolies — open up these markets and let in some sunshine and fresh air — and you’ll have the first real opportunity for serious reform and improvement in the new lawyer development process.

And if it all breaks right, then just like with mail and long-distance calls, no one will want to go back to the old days again.

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. 

Vulture culture

Tackling this subject, I admit, may simply be an excuse to achieve a long-held goal of using an Alan Parsons Project album as a post title. (Next up: finding a way to smuggle in a Supertramp reference.) But in truth, I was pointed in this direction by a couple of recent developments that revisited the well-worn topic of “law firm culture.”

The first was the most recent Citi/Hildebrandt Client Advisory, which confirmed the increasingly evident fact that for midsize and large law firms, Winter’s Here. Among the report’s contents was this warning:

“Law firms discount or ignore firm culture at their peril … the leaders of a firm whose partners pride themselves on their dedication to public service, a culture of collegiality and tolerance, and a commitment to share profits in a fair and transparent manner should acknowledge the importance of this culture to the firm’s success so far.”

I would be hard-pressed to find a sizeable law firm that demonstrably fits this description in reality, not just in its partners’ imagination. As Steven Harper points out, almost everything about large firms’ strategy and behaviour over the past several years can be described in precisely the opposite terms.

Law firm “culture” isn’t that hard to define, really. Culture is what people at the firm actually do every day. In harsher terms, it’s what people get away with. Culture is what actually happens. A law firm’s culture is the daily manifestation of its performance expectations and behavioural norms — what is encouraged and what is tolerated. So it’s not a matter of law firms “ignoring” culture — every firm has a culture, and most firms’ cultures are remarkably and depressingly similar. It’s a matter of recognizing that the culture that a law firm develops and sustains has an impact on productivity, retention and morale — in many cases, a catastrophic one.

“Collegiality” deserves a closer look, because almost every law firm insists that it maintains a “collegial” atmosphere. Stephen Mayson accurately points out that at most law firms, this is nonsense, driven by a misunderstanding of what “collegial” means:

Typically, partners are confusing collegiality with friendliness and sociability. Collegiate organisations make decisions in the long-term best interests of the firm, they are collaborative, and no individual is more important than the firm. What I hear described, though – most often in firms that claim to be collegiate – is an environment where personal and local interests are usually pursued in preference to the firm’s objectives. Work-hogging, and a refusal to cross-sell, are prevalent, fed by a personal billing and client origination culture. These firms are often low-trust partnerships, where it is not unusual for high billers to hold the firm to ransom or to throw their toys out of the pram when it looks as though they might not get their own way. This is collegiality?

It is not. But it is the culture of the typical law firm — the behaviours that are encouraged or tolerated.

The second development arose from my attendance at the Feeney Lecture at the University of Ottawa Law School, delivered this year by Mitch Kowalski on the subject of the changing legal marketplace. I was struck by the consistent and even predictable reactions from panellists and audience members to Mitch’s portrait of the legal profession’s future, which included a prominent role for “non-lawyer” owners and service providers.

Among the objections was the classic concern that law firms run by “shareholders” or in a “corporate manner” would see their standards and professionalism fatally compromised, and that — wait for it — the “collegial” nature and professional “culture” of law firms would be lost. See the foregoing paragraphs, especially Stephen Mayson’s diagnosis, and tell me precisely what it is that’s at risk here. Tell me how equity partners are any different, for all practical purposes, from non-lawyer equity shareholders. Tell me how the “de-equitization” of “underperforming” partners now being carried out by hundreds of lawyer-owned law firms across North America and Europe is an exemplar of professionalism and collegiality.

I would like to suggest that our positive (if not vibrantly self-admiring) vision of “law firm culture” belongs more to the realm of myth than to reality. There is nothing about an enterprise owned, operated and populated by lawyers that makes it markedly better than any other enterprise, and quite a bit that makes it noticeably worse.  The sooner we shake off our misconceptions in this regard, the sooner we can address, in an honest and grown-up way, what will happen when lawyers are no longer the only (or even the dominant) decision-makers in private legal enterprise. Miguel Pereira and Fergus Payne argue persuasively that law firms possessing an “ABS culture” will be focused primarily on financial performance — a state of affairs that is, in reality, no different than how today’s lawyer-owned law firms approach things. We’d be well-advised to remove the plank from our own eye before hunting for specks in anyone else’s.

Culture is important to law firms, but not in the way lawyers think. We cite “culture” as a bulwark against the unprofessional and uncollegial forces of the corporate, non-lawyer world, as a filter that differentiates us from the crowd. In reality, it seems to me, the tendencies we think we’re locking out with “culture” are often the very things we’re actually locking in.

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 lawyer vs. the law firm

So I’ve been thinking a lot about law firm mergers lately (especially between large Canadian firms and their much larger international counterparts). That in turn has led me to think about cross-selling, why it’s so important to the success of these newly merged firms (and others), and about the relative failure of firms to make cross-selling work. And these in turn have led me to my final post of the year, in which I usually try to assess the state of the legal market and what we can expect in the coming year.

At the end of 2009, I recommended we get ready for the rise of the client. As 2010 drew to  a close, I talked about the emergence of a truly competitive market for legal services. And as 2011 rattled off this mortal coil, lawyers’ increasingly precarious position in the market left me feeling generally apocalyptic. I don’t have anything quite so Armageddon-esque to suggest this year — Mayans notwithstanding, I feel pretty safe in predicting we’ll all wake up on Dec. 22. But I can forecast that a fundamental conflict at the heart of the private legal market will start to be addressed this year: the core, critical, and maybe irresolvable conflict between a law firm and its lawyers.

Mergers

Let’s arrive at that conclusion by the same route I took to get there, and start with mergers.

Law firm mergers are odd beasts: they rarely have the same causes or produce the same effects as in the corporate world. When businesses merge, the general idea is to combine production facilities and reduce inefficiencies to lower costs while eliminating a competitor from the landscape. When law firms join together, however, they generally don’t conduct layoffs (quite the opposite — they usually boast about their larger workforce), they don’t reduce inefficiencies (more commonly, their inefficiency grows), and the lawyers with whom they’ve merged are encouraged to do more business, not less. Combining two law firms is a little like bringing together two big Lego towers to form a much larger one by adding a few bridging pieces.

So if firms neither seek nor obtain the streamlining benefits of merging, why are they merging in the first place? I posed that question in my article “Why Are You Growing?” in the most recent “Strategic Growth” edition of the Edge International Review, and I couldn’t find a very persuasive answer. I suggested, in fact, that at more than a few firms, merging isn’t so much an outgrowth of strategy as a replacement for it.

I went on to dispute the idea, buried deep among the assumptions inherent in law firm mergers, that when it comes to lawyers, “more is better.” Getting bigger, I observed, isn’t really the point of law firm growth. Becoming more effective, more valuable and more profitable is the point — and when you’re dealing with lawyers, adding more of them could actually interfere with those objectives, because lawyers are hard to manage in any firm and virtually impossible to manage in massive ones.

Cross-Selling

Which brings me to cross-selling (and to some observations borne out of an online conversation with Toby Brown).

One advantage frequently put forward in defence of global law firm mergers is the prospect of more business generated through cross-selling. With more partners in more offices in more key regions, the theory goes, there will be more opportunity for partners to reach out and generate new work from new partners in new offices, and to return the favour in kind.

It’s an excellent theory, undermined only by a larger practical problem: lawyers rarely cross-sell. In any firm “midsize” or larger — and I’ve now come to define that as any firm where you can’t fit all the lawyers into a workable cocktail party — most partners do not successfully cross-sell, and many don’t really try that hard. In most of these law firms, individual lawyers — not the firm itself — control client relationships. Therefore, a client will be referred internally only if his or her lawyer chooses to make that happen. Quite often, the lawyer does not.

Lawyers, as we know, guard their clients jealously, even from colleagues in their own practice groups. They will make no referral, and especially no long-distance referral, if they so much as suspect that the attorney or practice group to whom the client would be referred might fumble the ball, overbill the client, or otherwise make the referring lawyer look bad and potentially threaten the client relationship.

Now, you can certainly blame partner compensation systems in part for this problem, if they fail to appropriately reward cross-selling, although that’s the least of the sins to lay at their feet. Fundamentally, however, lawyers’ reluctance to cross-sell their partners can be traced to the breakdown of internal relationships and internal trust among a firm’s lawyers — or maybe more accurately, the failure of trusting relationships to develop in the first place.

Even in firms of 30 or 40 lawyers, these elements can be found wanting; but in a firm of hundreds or even thousands of lawyers, in multiple cities, on several continents, that challenge can and does graduate from Herculean to Sisyphean. In firms that big, you simply don’t know most of your “partners,” and you likely never will. Absent a high degree of familiarity and trust, the risks vastly outweigh the rewards for the potential cross-seller. (My Edge colleagues Gerry Riskin and Michael White have written articles addressing some of these issues, by the way.)

Unfortunately, however, it’s not as simple as “fixing” trust and relationships within a large or newly merged firm, assuming that you could. The problem goes deeper than that, and it goes back to one of those buried assumptions about law firms. As a rule, the individual lawyer, not the firm, gets to decide whether or not the client can deal with another lawyer; basically, the client gets referred internally if the lawyer who controls the client feels like it.

When you stop and think about it, that’s kind of strange.

The Lawyer vs. The Law Firm

When you walk into a clothing store, the first salesperson who greets you (even if he works on commission) will happily pass you over to a colleague to answer questions, receive advice, or otherwise be part of the transaction. At a car dealership, the first salesperson with whom you deal (and I can guarantee she’s getting a commission) will be willing to do the same. They’re not doing this because they’re warm-hearted communitarians; they’re doing it because they work for the company, and the company considers that you are its customer, not the salesperson’s. And the company is correct to believe this. The salesperson’s individual interests in your time and attention do not trump those of the company.

“But,” you and every lawyer reading this will instantly respond, “law firms are not clothing stores. In a law firm, the partner works for herself, she’s an independent equity owner, and she might well have pulled in the client herself, and she’s the one whose services will be delivered to the client and on whom liability will rest. She should have every right to dictate what happens to the client with whom she deals.”

And that, to my way of thinking, is the problem. Because a law firm in which this is the dominant cultural belief is not a business. It is not a functional commercial enterprise in any sense with which we are familiar. It is, to be blunt, nothing. It’s a warehouse where lawyers share rent, utilities, and a library, but not risks, rewards, or professional aspirations. It’s a farmer’s market; a neighbourhood yard sale; a souk. Some lawyers still feel like debating the old saw, “Is law a profession or a business?” I’ll tell you this: the typical law firm described above is neither a profession nor a business. It’s a cheap knockoff of both that behaves like neither.

And it cannot stand. Not when so many other real, actual, conforming-to-the-laws-of-enterprise companies are entering this marketplace. In real businesses, the interests of individual product makers or service providers are aligned with and subsumed into the greater interests of the company. In real businesses, personal success and market validation are integrated with the success and validation of the company. In real businesses, the salespeople don’t own the customers. 

This is more than a bug or an inconvenience or a profitability hiccup for law firms: it’s an existential challenge. It goes to the heart of why a law firm even exists in the first place — what purpose the firm serves in and for the market. And it’s creating serious stress at some of law firms’ most vulnerable points. The strain is already showing.

The Pressure Points

Look again at cross-selling. Law firms need robust cross-selling, because it’s almost the only source of organic growth that flows from a partnership format (as opposed to a lawyer’s own individual efforts). Without cross-selling, lawyers must develop business alone, on their own initiative — raising the fundamental question of why they’re even in a partnership in the first place. A law firm needs its lawyers to cross-sell, but it can’t force them to do so, and lawyers consider their clients to be part of their personal inventory. When it comes to cross-selling, therefore, a law firm and its lawyers are locked in an ongoing struggle for control of the client relationship — but for the firm, it’s always been a losing battle, because extremely few firms have built anything approaching a collaborative business environment to enable client sharing. There’s no collaboration at a farmer’s market.

Look again at mergers. In Canada, all the talk is about the decisions by Fraser Milner Casgrain and Norton Rose Canada to accept mergers with global firms that have a large US presence. This has never happened before, because most midsize and large Canadian firms receive huge inflows of referral business from multiple US firms, and tying the knot with one US firm means cutting off all those other streams for conflicts reasons. But let’s press that assumption harder: What will happen to a firm that loses all those referrals? The referral work will likely go elsewhere, yes. The lawyers who received that work will likely leave too. The firm will be smaller. But it will also be more focused, more specialized, more globally integrated — and quite possibly, more profitable for the remaining partners. Because, again, being big is not the point. Being effective, valuable and profitable is.

A law firm that pursues a merger which will surely result in a near-term loss of both referral work and lawyers has made a fundamental decision: the collective interests of the enterprise supersede those of some of its individual partners. The firm is saying: “We accept that this course of action will cause conflicts problems for many partners, some of them insurmountable, and that we may lose those partners and their revenue. But we have a core business objective: to serve X clients in Y markets through the provision of Z services, and that can best be achieved through this merger.” That is not only a gauntlet flung in the face of many powerful lawyers: it is a statement of rebellion against the cultural assumption that lawyers control clients. It’s an assertion of institutional identity and independence by the law firm.

Not many law firms have the wherewithal to try this and succeed. But assertions like these will become more common, because they are becoming more necessary. This conflict has always simmered beneath the surface of law firms, submerged from sight, except when the occasional skirmish erupted above the waterline. But now the entire fight is coming out into the open. Legal services has become a dynamic, competitive, global market, and the main reason so many law firms are struggling within this new market is that they cannot respond institutionally. They are held back by their lawyers, hamstrung by their souk culture, unable to muster enough collective gravity and momentum to make critical decisions. But they’re trying, more than they ever have before. Law firms in the future absolutely must become more streamlined, systematized, managed, automated, and centralized in order to compete — but that’s not what many of their lawyers want. So who wins, the firm or its lawyers? That’s the coming battle.

There is no shortage of conventional wisdom with which to object, starting with the old standby that “Clients hire lawyers, not firms.” And that might well have been true, much of the time, for many years. But I’m coming to conclude that clients acted that way primarily, and possibly only, because that’s how lawyers trained them to act. There has only ever been one source of outside legal services: the law firm. Most law firms have only ever been driven by one strategic imperative: the interests of their most powerful partners. Clients choose lawyers in no small part because that’s what lawyers want them to do. But give clients an actual choice of providers that approach business and client relationships differently — which our incoming competitors will deliver, in spades — and you have the opportunity to create a brand new playing field with a potentially whole new set of rules.

The Outcome

The lawyer vs. the law firm is a fight that’s been spoiling for years, and it seems to me that starting in 2013, it’s on. Once that battle is finally joined and completed, I can see only two likely scenarios for law firms that experience it.

1. The full-service law firm partnership will collapse. There will be insufficient reason for a broad array of lawyers to band together in a partnership when that model provides them with very few business benefits. If your “partners” will cross-sell or refer to you only on a whim, why are they your partners? The large, “full-service,” multi-jurisdictional law partnership will shudder and start to break apart; small, local, intensely interlocked practice groups will peel off and become the new basic unit of private legal enterprise. That result is where all the foregoing pressures are leading right now — if firms cannot gather enough internal cohesion to establish a business-first, practitioner-second culture, then the centrifugal forces that have been slowly pulling law firms apart for years will finish the job.

2. The law firm partner will lose his or her position as the driver of internal legal business. As apocalyptic as that first option above might sound, this would be the truly revolutionary outcome. Law firms require generous cross-selling and enlightened referrals; lawyers control both and resist both; ergo, cross-selling and referrals must be taken out of the hands of individual lawyers, because otherwise the continued viability of the firm is threatened. Under this scenario, the firm wins the war and becomes the primary or even sole driving force behind its business decisions; the cost will be high, measured in an outflow of lost work and departing laterals, and the loss of blood might be more than some patients can survive. But in the larger picture, the cult of the corner partner begins to die off, and a new cultural imperative emerges to govern law firm behaviour.

Unsustainable situations can’t be sustained forever. Conflicts at some point have to be resolved, and there is no bigger conflict within law firms than this one. If law firms are not strong enough institutionally to wrest control of client business from individual partners and distribute referral and cross-selling opportunities in a more strategic fashion, then they lose their primary reason for existence. If lawyers are not strong enough to retain primary control over their sources of legal work, then they stop becoming independent legal entrepreneurs and become the functional equivalent of mere employees.

Either the center will hold, or it won’t. That’s the question; in 2013, law firms will start to learn their answer.

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.

How to kill (or save) a law school

Back in August 2010, I wrote a post called “How to kill a law firm” that continues to receive a steady stream of traffic and responses. Recently, John P. Mayer on Twitter suggested it was time for a law school version of that article. I agree.

My interest in applying a legal education focus to this topic was further heightened by the recent publication of two op-ed pieces by law school deans: This one by the dean of Case Western University Law School in The New York Times and this one by the dean of the University of Ottawa Faculty of Law in Canadian Lawyer. You can also read thorough critiques of each article at The Girl’s Guide To Law School and Slaw, respectively. The articles and their responses neatly frame both the enormous challenges facing law schools and the apparent inability of their leadership to appreciate those challenges.

My goal, I should probably make clear, is not to help annihilate law schools across Canada and the United States — I like law schools, and I hope they prosper. Nor is my goal to create a road map for potential competitors to carry out that destruction — believe me, they don’t need any road map sketched out for them. The schools have all but drawn up the blueprints themselves, although they don’t realize it.

What I want to do is encourage law schools to participate in an exercise around creative destruction. I want them to think: if a new competitor for the role of legal education provider were to target us, how would they do it? If they wanted to knock us down and replace us, how would they go about it? What weak spots and vulnerabilities in our model would they attack? What market needs, unmet by us, would they strive to meet? Then, once they’ve identified their strategic exposures, I’d like law schools to exploit those vulnerabilities themselves first, before the upstarts can do so. The world’s most successful companies, from GE to Apple, do this regularly — they set out to destroy their own business before anyone else can. Law schools badly need to do the same.

Finally, it’s worth explaining who I mean by “competitors.” Most law school faculty and administration would probably dismiss outright the idea that they have any competition at all, except for other law schools that operate exactly the same way they do. This tunnel vision itself qualifies as a major vulnerability, but we’ll let that pass. The primary competitors I have in mind are:

  1. low-ranked law schools in danger of closure and therefore with nothing to lose from experimentation (i.e., the “fourth-place network”);
  2. universities or other licensed educational institutes without a law school but seeking to create one clearly differentiated from the current model;
  3. non-academic business training providers already aligned with the “practical skills” demands of both students and law firm recruiting directors; and
  4. the legal profession itself, through governing bodies or bar associations, moving to create competing legal education programs geared to their needs.

There are almost certainly others out there, especially in the rapidly expanding online education sphere (Solo Practice University has been building its lead there for several years now), but we can start with these four because they’re all plausible present-day candidates for disruptive market entry.

So, with all that established, let’s start noting the weaknesses in law schools’ current approach to the market. As you’ll see, there is no shortage.

1. Price. The first and easiest pressure point to identify is the price of a law school education, which at almost every school in North America has risen by multiples of 100% over the past 15-20 years. More affordable tuition would be a legitimate drawing card for good applicants, and it’s a sign of law schools’ cartel-like behaviour that few if any schools have pursued this path.

Is it realistic to expect a challenger to offer a robust legal education at below-market prices? I think it is, because almost all the factors driving up the price of law school are institutional, not curricular — that is, they have everything to do with internal educational politics or arbitrary external forces, and little to do with the quality and substance of the law degree itself. We’ll examine these factors in #4, below.

2. Faculty. The single greatest impediment to law schools’ ability to change is their faculty. Many if not most law school faculty members have held their positions for decades and are fully insulated from outside pressures by virtue of both tenure and age-discrimination laws. They are researchers and publishers first, teachers second or third. Most have never practised law (at numerous schools, more than two years in a law practice disqualifies law professors from tenure) and they have no interest in the Bar. They fight change almost as a matter of course. They are a millstone around the law school’s neck when it comes to innovation.

It will take at least 5-10 years for attrition to solve this problem at most schools; in that time, new entrants can make their move. Legal education disruptors will identify respected practitioners, retired judges, and even non-lawyer experts to lead their courses. They will train these individuals in 21st-century teaching methods, assign them courses with tightly controlled syllabi, and operate a streamlined and strategically coherent educational system. They will recognize that extensive academic pedigree, admirable and worthwhile as it certainly is, is neither a necessary nor a sufficient qualification to teach the law.

3. Curriculum. Closely related to the obstacle of faculty is the conundrum of curriculum. The first-year courses mandated for students at my alma mater today are the same as when I enrolled 22 years ago and have not changed substantially since the 1950s. The menu of optional courses has expanded significantly, especially those taught by “adjunct” (freelance) faculty, but most are still delivered as lectures and graded by exams, as if everyone involved were still in junior high. But the primary vulnerability is and always has been the paucity of courses that strive to prepare future lawyers in some way for their first few years in the marketplace.

Law professors are fond of saying that it’s the Bar’s responsibility to prepare students for practice, not law schools’. But that is precisely the point they miss — it isn’t a question of responsibility, but opportunity. What courses might a school teach that would differentiate it from other schools and prove more attractive to both students and recruiters? What programs could it create that would bridge the gap between basic legal knowledge and initial professional competence? That’s the opportunity most (but not all) schools continue to miss, and it’s one that new providers will exploit.

4. Status. This is, in some ways, the most important vulnerability, because it goes to the heart of the current legal education system. Defenders of the law school status quo will say that these foregoing points are very nice and all, but they’re also irrelevant: law schools’ ability to innovate is utterly constrained by external factors.

Two factors in particular dominate the conversation, in the United States at least: the ABA accreditation process and the US News & World Report rankings. The former mandates a minimum amount of infrastructure investment to obtain and maintain accreditation; the latter holds so much sway among applicants and recruiters that schools are forced to act foolishly (and sometimes illegally) to squeeze their programs into the rankings’ pre-defined mould. A third factor, receiving increasing attention recently, is the role of the university itself, which counts on the law school as a steady and ever-increasing source of revenue and which places immense pressure on law school administrators to keep the money flowing in.

Combine these external forces with the internal albatrosses of faculty self-interest and institutional inertia, the defenders say, and there’s no blaming law schools for acting the way they do. And perhaps they’re right.

But I can tell you this: that doesn’t matter an iota to the disruptors that are targeting law schools right now. They’re thrilled to see so many arbitrary constraints on legal education incumbents, because they can choose to be entirely free of them. They can ignore ABA accreditation or the US News rankings if they wish. They can refuse to enter a losing game, to accept the same shackles that are paralyzing law schools. Think about it: why would they want to acquire the incumbents’ handicaps?

The biggest advantage that legal education disruptors have today is that they can enter the market unencumbered by the legacy burdens of law schools. They don’t have to be big, important, recognized and expensive — they don’t need “status.” They can be small, modest, flexible and affordable — or at least, they can start off that way. They can align their strategies with the interests of their target market, not those of their teachers or their affiliated academic institutions. They can negotiate directly with Bar admissions officials and satisfy them as to both the academic and practical merits of their degrees. They don’t need to compete for all “the best and the brightest” applicants, whatever that means: they can target the students they want to attract and the employers (law firms, law departments, governments, individual clients) they want to connect those students with.

Innovators don’t duplicate the existing model; they improve it. No new private legal enterprise today would copy the AmLaw 200 partnership model, and no new legal education provider would copy existing law schools. Disruption in legal education is poised to come from innovators that reject the standard assumptions about what a legal education provider looks like, where it’s housed, who it employs, who it recruits, what it teaches and how it’s taught.

That, I think, is how you kill a law school. You come to understand, better than the law school does, exactly what business it’s in, exactly what its inventory is, and exactly who its customers are. And then you figure out where the law school has failed to meet those needs, and you rush to fill the gap.

So, then — how do you save a law school? If you’re in a school today and you find this scenario frighteningly plausible, you’re probably wondering what you can do. Here are my brief closing suggestions about self-destructing a vulnerable model.

1. Make it clear that you’re on the side of the angels. Law schools are weathering one of the most intense instances of continuous negative publicity the legal marketplace has ever seen, although many schools seem blissfully unaware of it. Don’t underestimate the power of publications like Above The Law or the “scam blogs” to create the lens through which your markets perceive you. Right now, many law schools are viewed (with some justification) as either actively antagonistic to students and the profession, or quietly complicit with those that are. As you kick off your efforts to reinvent your school, make sure that your honest, well-meaning efforts are publicized and that you are seen to be on the “reform” side of the ledger.

2. Send differentiating signals to both recruits and recruiters. Law schools get into trouble when they forget what business they’re in: getting paid by students to help them obtain gainful employment in the legal field. (Sorry, but that’s what their business is.) Most law schools have forgotten this, and maybe yours has, too. Those few law schools that have achieved clarity in this regard are carving out new brands that will appeal to these players (Washington & Lee for its practice-based third year, Michigan State for its computational legal studies, University of Miami for LawWithoutWalls, etc.). Create a standout innovative feature — a bridging program, a CPD offering, an Innovation Center, a solo incubator, or something brand new — and join with a private-sector partner to deliver it.

3. Change the weather around your faculty. Intransigent professors, in many cases, may simply have to be waited out for a period of generational change. But there’s no reason you can’t accelerate the attrition process. Encourage changes to the school’s strategy and direction, introduce more practice-related courses, increase dialogue and project partnerships with practitioners and in-house counsel, provide more guest-lecture spots for local sole practitioners, and so on. Basically, change the environment surrounding your faculty — the “tone” of the school — wherever you can. Your faculty members might still consider the law school to be their retirement property, but if the weather clouds over, they may be motivated to move to sunnier climates sooner rather than later.

4. Think hard about blowing off the US News rankings. Most law deans would probably blanch at the thought of dropping out of the US News lists, fearing a catastrophic response from both applicants and recruiters. But I think every school should at least consider it, if for no other reason than to regain some self-respect and control over your destiny. Look closely at the US News criteria and ask yourself: do they align with what we’re trying to do here? Is it fair to our students, our faculty and our mission that we dance to this tune? If the answer is no — and in many cases, it will be — then I think it’s time to leave the dance floor. Build an airtight publicity and communications campaign explaining why you’re ignoring US News from now on, with supportive testimonials from high-profile employers, and test-drive it with major donors. Then go do it.

5. Think equally hard about whether to keep ABA accreditation. This would be far more difficult for most law faculties to justify dropping, and maybe impossible, given various jurisdictional requirements. But the same principles that apply to US News apply here: do the requirements of ABA accreditation line up with the key strategic drivers you feel your law school must feature? If they don’t — if they cause you to spend more than you can afford on things that don’t improve your educational experience — then ask whether the risks of deliberately and strategically withdrawing from (not losing) accreditation outweigh the benefits. The ABA has been talking about switching to output measures in accreditation for years now, and we shouldn’t expect any progress for more years to come. You might not want to wait that long.

These are five places where a law school can begin the process of exploiting its own vulnerabilities and reinventing its own model. Whether and to what extent these are practical for any given law school will depend on its specific circumstances. I can only say this: the traditional law school model simply doesn’t serve the legal market anymore. Whether it’s new entrants or familiar incumbents, someone is going to replace it with something better — and soon.

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.

Why is your law firm merging?

What do you think of when you read the phrase “a large law firm”?

What type of law firm comes into your mind? How many lawyers does it have? In how many jurisdictions is it located? What is its annual turnover? How you answer these questions will vary according to your own market and how that market has shaped your expectations around size.

If, like me, you’re based in Canada, a large law firm generally means an entity with more than 500 lawyers and a substantial presence in four or more major cities. (At least, up until this week it did; but after Fraser Milner Casgrain agreed to join SNR Denton and Norton Rose announced its merger with Fulbright & Jaworski, that definition may be changing — here’s a brief video of my thoughts on those two mergers.) But “a large law firm” will mean something different in India, Australia, the United Kingdom or the United States — and it will vary again as between Delhi and Jaipur, Sydney and Perth, London and Glasgow, New York and Denver.

No matter how you measure size, however, you would probably agree that the world’s biggest firms are behemoths. They employ more than 2,000 lawyers (sometimes many more), they maintain more than 25 offices in numerous countries, and they generate in the neighbourhood of $2 billion in revenue every year. Norton Rose, following the completion of its Fulbright merger next June, will have an astonishing 3,800 lawyers in 55 offices worldwide. These are our profession’s giants, the legal colossi of the globe.

Now, stack the planet’s biggest law firms up against the Big 4 accounting firms. George Beaton of Beaton Consulting in Australia did just that in an article published earlier this fall. Each of these four firms, George pointed out, employs upwards of 100,000 people. The smallest of the four generates $20 billion annually. Each is larger than many of its big clients. If you merged the world’s two largest law firms and gave the new enterprise 5% annual growth, he noted, it would take the new mega-firm 17 years to reach the $10 billion mark. It can be done, and it may very well happen. But it won’t be overnight.

So when we talk about “large law firms,” we need to remember that size is relative. The very last company listed in the most recent Fortune 500 reported annual revenue in the $22 billion range. Our largest law firms are pikers by comparison.

There are plenty of reasons cited to explain why law firms seem to have a natural size limit, most prominently conflicts of interest rules and other ethical or regulatory constraints. Personally, I think that’s an excuse: if we really wanted 50,000-lawyer law firms spanning the globe, we’d have found a way around our self-imposed regulations before now.

The real explanation, to my mind, is that law firms can only grow so large before they transition from “difficult to manage” to “utterly unmanageable.” Law firms of all sizes are unwieldy collections of ferociously independent and self-interested lawyers famously reluctant to place organizational gain above personal advancement. These are character traits, it should go without saying, deeply inimical to building a world-class enterprise.

I once had lunch with a partner in a Big Four accounting firm, and I noticed that he constantly spoke in “we.” He talked first and foremost about the firm’s work and the firm’s objectives, the firm’s future plans, competitive strengths and long-term strategies. His own expertise was important insofar as it contributed to and reinforced what the firm was doing. Contrast that with the way many lawyers usually talk: in the first-person singular. They refer to their law firm not as the strategic core of their work, but as a beneficial platform or vehicle for what they do. The firm’s attributes are important for how they support the lawyer’s personal focus and expertise, rather than the other way around.

That’s why, if you’re looking to build a really huge law firm — whether you go the full merger route or take the Swiss Verein path or choose some other way there — you’re probably going to want to find a way to reduce the importance of lawyers in revenue generation.

Start by asking yourself: why do we want our firm to be bigger? Why do we want to expand? There are plenty of good answers to that question, most of them to do with serving multinational clients, following them around the globe, picking up new business in emerging economies, and so forth. There are also bad answers, including hubris, management ego, and expansion as a substitute for strategy.

But if you’re looking to get bigger so that you can better serve your clients, then maybe, as my Edge colleagues Pam Woldow and Doug Richardson suggest, you should ask your clients what they think about that. Chances are they’ll tell you that they’re not terribly excited by the prospect of their firm getting bigger. Very few people have ever found themselves saying, “Why yes, I’d love to have more lawyers.”

Moreover, as Gerry Riskin and Mike White explain, simply adding lawyers in another city or state or country is no guarantee that a client with business in that jurisdiction will automatically give that business to you. Think about it: if a competitor opened up an office in one of your current locations, would you expect your own clients to instantly decamp to the competition’s new office? Wouldn’t you be shocked and outraged if they did? Then why would you adopt expansion strategies that employ exactly that line of reasoning in the other direction?

Here’s the thing: Growth in a law business is not the same thing as adding more lawyers. Law firms do not exist in order to provide steady employment to the maximum number of lawyers — or, if they ever did, they don’t any longer. Law firms exist to provide legal services to the market in a cost-effective and profitable manner. “Adding more lawyers” is no longer the first and only way to make firms bigger and better.

Technological advances are disrupting many traditional ways in which legal work is done. Automated contract creation, e-discovery packages, data-crunching analysis systems, expert applications that answer regulatory and compliance questions, online dispute systems powered by game theory — all these programs and functionalities are available on the market, right now. They do work that lawyers used to do. Full stop.

Similarly, disruption has come to the legal talent model. If you can get good, solid work from a contract lawyer, or a lawyer in Mumbai or Manila or Belfast, or in an innovative firm like Axiom Law or Keystone Law, or from the lawyer’s own home — and you can — why would you put that lawyer in your expensive offices, on your full-time payroll, with salary and benefits and overhead? What’s so all-fired great about having tons of lawyers on hand?

The answer to that question used to be self-evident: Leverage. Billable hours. Profit generation by the simple expedient of adding bodies to files. Those days, as I’m sure you’ve noticed, are gone. The business rationales that promoted “lawyer growth” as a stand-alone and sufficient profitability strategy are gone.

And lawyers, as I noted above, are often stumbling blocks to growth. Lawyers thrive on being big fish, and the bigger the pond, the smaller and less satisfied they’re going to feel. Lawyers want control over their environments, and as the environment expands, their control lessens. Expansion requires short-term risk for long-term gain, and lawyers tend to dislike both. Lawyers are hard to manage, and thousands of lawyers are thousands of times harder to manage. There’s a pattern emerging here.

“More lawyers in more offices in more locations” is not an end in itself. More revenue, higher efficiency, and greater profit, all delivered courtesy of satisfied clients — that’s the end you have in mind. Mergers and quasi-mergers might well be the perfect vehicle to get you there. But there are other routes, too.

If you want your firm to grow, then you need to clarify exactly, precisely, in show-your-work detail, why that is. And you need to remember that lawyers are no longer the only or best available driver of revenue in law firms. I suggest you take these two thoughts with you into your next law firm strategy meeting.

[This article appears in the Fall 2012 edition of the Edge International Review, a special issue devoted to Swiss Vereins and other innovative growth strategies for law firms.]

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 evolution of the legal services market: Stage 5

In the four previous entries in this series, I’ve sketched out what I see as the decline and subsequent rise of the legal profession over the next 10-15 years as a direct effect of rapid evolution in the legal market.

My fundamental premise throughout these posts has been that the emergence of new competitors and new technology, along with regulatory reform, will deprive lawyers of many of the low- to medium-value tasks they perform today, but that this change will also expand and reconfigure the overall market for legal services in ways that eventually drive a resurgence in lawyer employment and the more valuable applications of our skills. This will be a roller-coaster ride, not just for lawyers but for all the industries, organizations and suppliers that grew up around our profession during its 20th-century heyday.

Today’s final entry is kind of a postscript to Stage 4, and maybe something of a thought experiment too. I’d like the legal profession to start thinking more creatively and laterally about exactly what lawyers could be in the future.

Stage Five: The Multi-Dimensional Market

Lawyers, contrary to popular belief, are highly creative and innovative — but only on behalf of our clients. When we turn the focus on ourselves and our own profession, we seem to lose our creativity and ambition — we narrow our vision, think small, and cling to “what we’ve always done.” Almost all the discussion of lawyers’ economic prospects (and there’s plenty in the news every day) proceeds on the assumption that lawyers only perform a limited number of strictly defined functions, a slim portfolio of roles that has hardly changed at all for decades.

We cast our careers in linear terms, and we only see change of the negative kind — work that we lose to others. We don’t think about work that we could take from others, or work that we could create altogether new. We don’t give ourselves enough credit for what we could be and what we could do.

Recall what happened to accountants when the first wave of technological advancements in the 1970s and 1980s rendered many of their traditional balance-sheet offerings obsolete. They were faced with a stark choice: evolve upwards and outwards, or fade away into history. They chose to evolve, reinventing themselves as business advisors, market analysts and process consultants — tasks for which they were certainly not educated and for which they could claim no special pedigree. They reached for this work because (a) they needed it, (b) nobody else was doing it, and (c) their core skills and competencies qualified them to at least try it. And they succeeded, in no small part because they thought they could.

A simular choice is at hand for lawyers: move up the value ladder, or climb off it altogether. Many lawyers today make a living off the legal equivalent of  accountants’ “balance-sheet” work; that work, as I hope this week’s series has persuasively argued, is going away. What will replace it? Where will we find new engagements of similar or greater value?

Answering those questions is a two-stage process. The first stage is the hardest: it involves screwing up our courage, building up our confidence, and letting our imaginations roam over the possibilities of 21st-century lawyering. It requires lateral thinking and creative brainstorming, anchored by a clear-eyed assessment of both our own strengths as professionals and the evolving needs of a globalized society. Once we’ve done that, once we’ve cleared that enormous (for us) hurdle, then the second stage is not only easy — it’s almost fun. What could we do? What might we be? There’s a vast, uncharted and unclaimed territory out there — what could we build on that new landscape?

Stage 5 of the evolution of the legal market is the only one in which lawyers are the ones bringing the change. In all four previous stages, we’ve either been helpless bystanders or market responders; in this era, we get to make the first moves. This era might very well overlap with Stage 4, and it’s possible we could see some early examples even in Stage 3 — but it’s all up to us.

Stage 5, if and when it happens, is when lawyers reinvent themselves. We evolve beyond our long-standing self-identification as document approvers, transaction facilitators, and dispute resolution shepherds. We saw our traditional inventory taken away by competitors, so we seek out new functions, new social and business purposes.

This process begins when we return to our roots. Lawyers will ask, of themselves and each other: Why do people turn to us?  What do we bring to the table? With which traits and skills are we associated, and for which of these are we most valued? What do we offer that matters in an interconnected, unstable, and hopelessly complicated world? Here are some of the answers we’ll come up with:

  • Accuracy
  • Analysis
  • Authority
  • Calmness
  • Communication
  • Connectivity
  • Creativity
  • Drawing Distinctions
  • Facilitation
  • Fairness
  • Honesty
  • Independence
  • Logical Reasoning
  • Order
  • Pattern Recognition
  • Persuasion
  • Representation
  • Rigour
  • Rules
  • Solutions

When we finish assembling this list and test-driving it with our clients, we then ask: to what new roles and positions could these characteristics and values lend themselves? We know what we used to do in the past; what might we do in the future? Here are some possible answers.

  • “Amazon.Law” Provider: Sharp, focused, legally trained mind sifting through and analyzing clients’ vast storehouses of data to anticipate legal needs they don’t even realize they have.
  • Civics Trainer: Roving instructor retained to inculcate the rule of law, rights and responsibilities, and other fundamental legal principles to students, employees and citizens.
  • Competitive Analyst: Provider of sophisticated business intelligence operations, infused with deep knowledge of laws and regulations and employing rigorous organizational analytics.
  • Freelance Fact-Checker: Trusted independent authority retained by governments, media and organizations to reliably separate fact from fiction in a truth-challenged society.
  • Judicial Subcontractor: Dispute resolution expert deputized by judges to go out and “bring courts to the community,” increasing access to justice and clearing court backlogs.
  • Mobile Arbiter: Conflict resolution facilitator called in to troubleshoot everyday disputes at homes or in the workplace before they become full-blown fights: “preventive ADR” on a moment’s notice.
  • Social Connector: Using deep networks that range across business, government and private individuals, connecting people, organizations, ideas and initiatives that will complement each other, solve problems, and create opportunities.

These seven possible legal careers of the future complement seven that I suggested in a post earlier this year. You can come up with more, if you open your mind to the possibilities on offer.

Where do you start? Go ask your best clients what they think — but don’t ask them about “lawyer of the future” jobs, because they won’t be able to tell you. Henry Ford famously said that if he’d asked his customers what they wanted, they’d have told him “faster horses.” Instead, ask your clients: what do you value about me, and about lawyers generally? What do we have that inspires your confidence and fulfills your hopes? What needs do you have, even subconsciously, that no one has offered to meet? If you had all the time and money and information you needed, what would you set out to create? Help them envision their own future, and then find ways to get them there.

The near-term and mid-term future of the legal profession will be largely dictated by external forces. But throughout that process, and especially as we draw towards the end of that period of upheaval, we will gain growing amounts of control — not just over our own destiny, but also over the future course of the entire legal market and of the whole definition of what we mean by “legal” and “lawyer.” Stage 5 will mark the end of the legal market’s evolution — but for the legal profession’s own evolution, it will be just the beginning.

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.