Transforming the practising bar

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Posted in: Big Firms, Governance, Innovation

If you’d like a glimpse of the legal profession of the near-to-mid-future, look to London. Yesterday, the UK’s Bar Standards Board launched a consultation paper concerning the effect on barristers of the new Legal Services Act, which received Royal Assent last October. (The Solicitors Regulation Authority addressed the LSA’s impact earlier.) Here’s LegalWeek and The Lawyer on the announcement.

The BSB’s 50-page consultation document asks for submissions on how the Board should respond to the LSA, specifically regarding Legal Disciplinary Partnerships (different types of lawyers and a minority of non-lawyers practising together) and Alternative Business Structures (firms that offer both legal and non-legal professional services and that could be owned by non-lawyers, from shareholders to supermarkets). LDPs might not seem like a big deal to North American lawyers accustomed to our fused profession, but we should understand that it represents a whole new way of looking at the Bar in England and Wales, and it won’t be an easy road there.

But it’s the ABS regime that has people on this side of the pond talking, because it authorizes not just multi-disciplinary practices, which the Canadian and American bars wrestled with and ultimately rejected over the past decade, but also non-lawyer ownership of legal service provision, which is anathema to the vast majority of lawyers and their regulatory bodies. ABSs aren’t likely to appear in the UK before 2011 — it takes time to set up an entirely new governance structure for an ancient profession — but they will come. And when they do, it’s only a matter of time before they cross the pond.

There’s been a lot written about the future impact of the LSA on North American lawyers — Bruce MacEwen has been on top of this from the beginning — but it seems to me that if any member of the Magic Circle floats shares, merges with an accountancy, or otherwise takes advantage of the ABS options to greatly enhance its capital and strategic reach, then their New York-based competitors are going to want a level playing field on which to compete. And if that kind of regulatory change occurs in one US jurisdiction, dominoes will start falling all over various states and into Canada. In a globalized economy, any country that refuses to allow its lawyers to play by the same business rules as their foreign competitors will relegate those lawyers to a purely local purview. That’s not in anyone’s interests.

This is not happening overnight — probably we’ll see this whole situation play itself out around the middle of the next decade. But it’s not far away, either: by the time today’s first-year law students are into their third year of practice, this will be the reality on the ground. The challenge for law firms is to start thinking now about what kind of business structure makes the most sense for their practices and clients, because their options should expand dramatically in the near future. The challenge for governing bodies is how to prepare themselves and their members for an entirely new way of organizing the practising bar.

Here’s a parting thought from BSB Chair Ruth Evans, announcing the Board’s consultation paper: “We may not see barristers selling their services in the supermarket aisles quite yet, but we can expect changes in the way some organize their affairs and offer their services.” Emphasis added, and how.

Coping with fewer associates

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Posted in: Big Firms, Compensation, Demographics, Talent

The Ottawa Citizen ran an article over the weekend that caught my eye, thanks in part to this succinct summary of the gigantic demographic challenge facing the North American economy:

Baby boomers are retiring and the number of young adults behind them is on an irreversible slide. Starting in 2011, Canada’s workforce will lose two workers to retirement for every one that enters it. The ratcheting price on youth is a sign of things to come for the rest of the country as an aging population forces provinces to compete for dwindling numbers of young people.

Law firm associates’ salaries are already rising separate and apart from a talent shortage; in time, firms seeking to hire new lawyers are going to find out just what a full-blown seller’s market looks like, and they won’t enjoy it. I can see two long-term trends emerging from this.

First, those organizations and regions in danger of losing talent (i.e., most of them) will continue to look for ways to staunch the flow. Nova Scotia, according to the article, is introducing tax breaks to entice younger Nova Scotians to stay or return. The drawback to that approach is that if you’re trying to compete with Toronto or Calgary (or for that matter, London or Hong Kong) on money, you’re outgunned from the start. It will likely be a stretch just to be in the ballpark of the highest offer, and there’s only so much you can spend to keep up.

Consider instead the lawyer in the Citizen article, who’s returning home to Halifax because it’s a better community for her than Ottawa. Successful lawyer recruitment could in future be less about the firm and more about its environment. Forward-looking law firms could start getting actively involved in their own communities’ efforts to become more attractive to tomorrow’s scarce young worker. They’d join forces with other local organizations and identify potential opportunities and obstacles to young professional recruitment and retention. Continue Reading

Eversheds: how to set new client standards

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Posted in: Big Firms, Globalization, Innovation

I was jazzed a year ago when Eversheds struck a deal with Tyco to become the service and manufacturing multinational’s primary outside counsel, reducing Tyco’s complement of law firms for most legal matters from 250 to 1. Those who doubted the wisdom of the arrangement at the time worried that Tyco would miss out on other firms’ offerings and would suffer from Eversheds’ inevitable sense of complacency, while the firm would be at a greater risk of business-losing conflicts. Even when international gas and engineering giant Linde struck a similar deal shortly afterwards with DLA Piper, there was still uncertainty over this kind of approach.

Well, one year on, says The Lawyer, Tyco is still partnering with Eversheds and singing its praises, especially since the firm must get Tyco to sign off on every legal task it performs on the client’s behalf in order to get paid for it. So how did Eversheds do? Today, it’s now sitting on no fewer than six similar arrangements with other companies, each of which looked at the Tyco deal and were impressed by what they saw. Now other London-based firms are trying to emulate Eversheds’ approach, including Hammonds and Pinsent Masons. So I’d say, on the whole, that this has been a pretty successful undertaking so far.

What really impressed me here, though, is how Tyco’s partnership with Eversheds indirectly helped bring the six other companies on board. When Eversheds first proposed the present arrangement to Tyco, it proffered two cutting-edge software programs: Dealtrack, a budgeting and cost management tool, and Rapid Resolution, a project management application for litigation. But Tyco wanted more: it wanted a way to precisely estimate the total amount it was spending on its legal services company-wide.

Eversheds rose to the challenge and integrated Dealtrack and Rapid Resolution into a more powerful new program called the Global Account Management System (GAMS). “The system breaks down a company’s legal spend by country, jurisdiction or practice area, providing a heat map [of] where money is being either wasted or used efficiently,” says The Lawyer. But there’s more to it than even that. Continue Reading

Something’s actually happening

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Posted in: Big Firms, Billing, Clients, Competition, Innovation, Leadership, Management

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

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

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

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

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

Beyond work/life balance

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Posted in: Big Firms, Generations, New Lawyers, Purpose, Satisfaction

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

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

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

The value proposition for associates

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Posted in: Big Firms, Billing, Compensation

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

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

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

Law firm size: past, present and future

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Posted in: Big Firms, Demographics, Small Centers, Solo & Small Firm

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

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

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

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