Results, not résumés

Professor William Henderson, who teaches at the University of Indiana Faculty of Law and blogs at Empirical Legal Studies, has written a watershed treatise on how large law firms recruit and use associates. The ELS blog summarizes it, the ABA Journal reports on it, and Bruce MacEwen and Gerry Riskin have already flagged it as an extremely significant contribution to the ongoing evolution of the traditional law firm business model. With apologies for a brevity that glosses over some important points, here’s a summary of Are We Selling Results or Résumés?: The Underexplored Linkage between Human Resource Strategies and Firm-Specific Capital, and some ideas that flow from it.

Large US law firms are deeply tied to the “Cravath system” of hiring new lawyers, generally defined as recruiting the most outstanding law students from the top law schools and giving them the best training. This was a great idea when Cravath Swaine & Moore first developed it early last century, because it was a branding strategy: Cravath deserves your business because we hire only the best of the best. But because the firm became so successful — for a variety of reasons — other firms copied its hiring strategy, and the Cravath method, once an innovation, became narrow-minded standard operating procedure.

Today, demand for corporate legal work has skyrocketed, exhausting the talent pool to which firms — because of their adherence to the Cravath method — have restricted themselves when recruiting the associates who do this work. Accordingly, with rising demand overwhelming a fixed talent supply, the cost of new lawyers has risen as high as $160,000 a year, well above the value of the services they provide.

This has numerous negative effects. Firms either pass on these cost increases to increasingly incensed clients, or absorb them in lower partnership profits, leading elite partners to decamp for more lucrative firms. Worse, top clients order firms not to place these overpaid associates on their files, meaning young lawyers are trapped in the most dead-end work from the least interesting clients, hurting morale, exacerbating attrition and damaging the firm’s future leadership development.

The most obvious solution for the firms — increase supply by hiring outside the “elite” group — is verboten, because these firms fear a loss of prestige associated with hiring “second-rate” graduates from “second-rate” schools. (Firms have already conceded ground by digging deeper into the graduating classes of elite schools for new recruits). A recruit’s “pedigree” now holds entirely disproportionate importance in law firms’ hiring decisions, and no major firm seems prepared to risk breaking ranks to try something different.

Henderson proposes something different, a new approach premised on a groundbreaking productivity study at Bell Laboratories in the early 1990s. In a nutshell, the study found that knowledge workers’ productivity was not tied to traditional measures of excellence such as IQ and self-confidence, but to a series of work strategies such as taking initiative, sharing knowledge, and managing work commitments, most of which are trainable. Continue Reading

The innovation arms race

Head over to the College of Law Practice Management’s blog at your earliest opportunity and check out the rolling list of entrants for this year’s Innovaction Awards now being posted. As is the case every year, law firms around the world (and for the first time, an in-house law department) have submitted accounts of their innovations in client service, knowledge management, value billing, legal technology, pro bono, talent management and a host of other critical aspects of legal services crying out for improvement. The decision of the judging panel, of which I’m a member, will be announced soon.

There’s a longstanding belief that lawyers can’t or won’t innovate when it comes to how they manage their businesses, deliver their services, and relate to their clients. And it’s true that law firm culture has historically been inimical to innovation in legal services delivery. Law has been almost the only industry where a challenge to the standard operating procedure was considered bad for business, not just by rival firms, but also within your own organization. The status quo might leave your client dissatisfied and you unhappy, but the way we’ve always done things has kept us in business (and a lot of us in Mercedes), so don’t mess with it.

But what I’ve seen and heard in this profession the last few years has convinced me that this belief is wrong, on two points. First, lawyers themselves, given encouragement and room to experiment, can be really innovative in process, delivery and relationship. Innovation is, after all, the outcome of creativity and competitiveness — two of lawyers’ natural strengths — harnessed towards engineering a better process, accomplishing a more valuable result, and achieving the sheer thrill of being better at something than anyone else. As Bruce MacEwen reminds us, innovation is about never being satisfied with how we did it last time.

Secondly, the defensive circle around the status quo is weakening in law firms — badly, in some. The complacency that helps form the foundation of typical law firm culture, and works to block lawyers’ inclination to innovate, is being eroded by massive shifts in the legal marketplace. “Staying the course” just isn’t posting the kinds of gains it used to — it’s a thin portfolio with little to support it beyond successful results from a far less demanding era than this one. Today, it’s a foolish investment, and lawyers are finally starting to openly acknowledge that.

That’s really why I think we’re at a watershed time for innovation in the practice of law — it’s finally becoming a serious item on law firms’ agendas. If you doubt it, go read the Innovaction entries. They demonstrate that there’s a whole new arms race taking shape in the law — an innovation race — and that if you’re not at one of these innovative law firms, they’re already ahead of you.

Update 7/22: The winners have been announced! Congratulations to our three 2008 Innovaction Award recipients:

Mallesons Stephen Jaques
Sydney, Australia,
Innovation:  PeopleFinder

PeopleFinder is an internally developed web 2.0 application that introduces reliable, accurate and rich presence to the firm’s intranet directory and BlackBerries.  It has resulted each month in over 10,000 more calls into the firm being answered by a person rather than voice mail.

Novus Law LLC
Chicago, IL
Innovation:  Documenting the E-discovery process from collection to production

Novus Law created a system that documents the 864 step e-discovery process from collection to distribution.  Utilizing a globally recognized quality management method, the system captures and documents in order to measure and improve quality; manage and predict schedules and significantly reduce costs.

Pillsbury Winthrop Shaw Pittman LLP
Washington, DC
Innovation:  ValueChain

ValueChain is a novel method of visually displaying clients’ objectives, capabilities, opportunities and risks, so that clients can better understand what impact outsourcing various critical business functions may have on the company as a whole and how best the outsourcing operations and agreements should be designed and structured.

Hacking the legal marketplace

I missed this story when it first came out in May, so I’m now belatedly noting a new talent recruitment company called Bohire. Its business model is simple: every time you successfully suggest a person who lands a job with a company, the company will pay you a reward in the hundreds or the thousands of dollars. The more important and high-paying the job, the greater the reward you earn. Companies already look to their own people for recommendations of lateral hires; Bohire has basically turned that personal reference system into a Web 2.0 application.

Read this report and that one for more details, including the fact that some of Bohire’s clients are law firms: one of the big national outfits here in Canada, along with some smaller Toronto boutiques. At the moment, these firms are using Bohire to recruit legal assistants and law clerks. But if these hires work out — and so far, they seem to be — how much longer do you figure it’ll be before the firm starts hiring lawyers this way? And how do you think that will go over with legal recruiters, many of whom currently charge 20% or 30% or more of the position’s annual salary for a successful placement?

I wrote earlier this week about a “process revolution” underway in the delivery of legal services, but it’s more widespread than that: it’s affecting the whole law industry. Legal publishers are under siege by bloggers; legal research providers are being challenged by cheap or free case law sites; legal recruiters are having to cope with Bohire and its soon-to-come competitors. One of these days, the open-source movement is going to get around to the legal software industry, and that’s going to do to established software makers approximately what Google is doing to Microsoft.

And really, I used the wrong word. It’s not a revolution; it’s a hackfest. The legal industry is being hacked, just like the recording industry before it and the movie industry right about now. If you’ve ever visited Lifehacker, you know what I mean by hacks: shortcuts, productivity tricks, efficiency and convenience improvements that straighten and smooth out unnecessary obstacles. Third parties are hacking their way into the law’s traditional seller-buyer relationships to set up new efficiency shortcuts, perspective windows and alternative resources. Crowdsourced legal recruitment is just the latest example.

The traditional constructs of the legal industry — many of the products and services offered by and to lawyers —  are being deconstructed and rebuilt along 21st-century lines. Pay close attention to any tremors in the ground on which you’re standing.

You can’t charge for that anymore

There’s a process revolution underway in the legal marketplace, and yesterday brought two more reports of cannon fire. The ABA Journal published a primer (HT to Legal Blog Watch) by Boston lawyer Jay Shepherd on how to establish a flat-fee billing system. It’s not an airy, wouldn’t-it-be-nice piece; it’s a practical guide borne of his firm’s successful experience with abandoning hourly rates. The key step: reviewing eight years’ worth of bills to figure out exactly how much it costs the firm to complete various client tasks.

Meanwhile, Larry Bodine linked to a Forbes magazine story about FastCase, a Washington, D.C.-based company that provides access to an online, digital, searchable collection of U.S. case law at much lower costs than those charged by traditional publishing powerhouses West and Lexis. The article describes similar ventures launched by other organizations, without even getting into the Legal Information Institute collection and its offspring around the world.

So for those of you keeping score at home, here are two more things you won’t be able to build into your legal bill the way you used to:

–> the standard lawyer fuzziness around just how much it’s going to cost to do something the firm has done before; and

–> most commercial online legal research services, because the cheap or free alternatives are proliferating.

These two entries join a growing list of items law firms can no longer charge out at pricey associate rates, if they can charge them out at all: Continue Reading

Be your own platform

This morning, the Supreme Court of Canada released its long-anticipated decision in Keays v. Honda, a wrongful dismissal case that concerned the extent to which punitive damages should be awarded under Canadian employment law. The plaintiff, who had scored an unprecedented $500,000 in extra damages at trial, saw his notice period cut from 24 to 15 months and his aggravated and punitive damages wiped out altogether. It’s a powerful signal from the country’s highest court that punitive damages are to be reserved for the most outrageous instances of conduct, which the 7-2 majority felt were not present. But that’s not why we’re here.

In the last 24 hours, I’ve received three e-mails and one phone call from lawyers advising me that the SCC decision was imminent and offering to write an article or be interviewed for a piece in National on the judgment. Among other things, these requests are a compliment to our magazine: they demonstrate that lawyers consider National a leading publication with which they would like to be associated — that our brand carries sufficient weight within the profession such that it would be beneficial to their reputations to appear therein. I’m certainly happy about that.

Now, here’s the thing: we’re the wrong publishing vehicle for them to pursue. In practical terms, National publishes just eight times a year, and the issue currently in the editorial process won’t be circulated until mid-August — and even then, this edition’s lineup is already set; the next issue with any degree of lineup flexibility arrives on lawyers’ desks in late September. By the time we publish anything on Keays, months will have passed since the decision was released and it will be the oldest of old news.

Moreover, National covers a wide range of issues, as befits the periodical of a nationwide lawyers’ association, and employment law is not our focus. Employment lawyers seeking to raise their profile should be looking at periodicals specific to this field, especially those to which corporate clients subscribe — that’s the audience these lawyers ought to be trying to reach.

But there’s something more fundamental at work here. Continue Reading

Law schools join the talent war

Northwestern University School of Law garnered a lot of attention last week by announcing a series of curriculum changes, most prominently the creation of an accelerated JD program that would allow students to graduate with a law degree in 24 months, rather than the traditional 36. While Dayton and Southwestern law schools have gone this route before, NU is the first “elite” faculty (ninth in the irrationally important US News & World Report rankings) to go this route.

Most of the reaction to Northwestern’s announcement centered on the new two-year law degree, which some observers (including many commenters at the Wall Street Journal Law Blog) misread as a decision to “drop the third year” of law school. NU Law isn’t reducing its courseload by a third; it’s squeezing the traditional three-year degree into two calendar years, by means of a summer semester, extra courses each semester, and mini-courses between semesters. It’s a far more intense and challenging experience, not the easier one that eliminating the final year of school would suggest.

Predictably, the traditional three-year degree has staunch defenders, including those at NU’s crosstown rivals, who call the new plan an irresponsible compression that will produce inferior lawyers. Others worry that the law school experience is already sufficiently intense, and that cramming it into two years will damage students. But Dayton Law’s Dean of Students Lori Shaw sees no evidence that her program’s two-year enrolees missed out on the full law school experience: “It’s fascinating to see how much they can do.”

Now, in reality, accelerating a law degree by administering it in two years isn’t that big a deal — it’s certainly nothing like the major innovations undertaken at Washington & Lee Law School, which made its third year entirely experiential as part of a massive program overhaul. What really caught my attention — and that of Douglas Berman at Law School Innovation — were other aspects of Northwestern’s announcement that generated much less fanfare. From the Inside HigherEd article:

Northwestern is adding three new required courses (to the nine currently required, largely following a traditional law curriculum), starting with the two-year program and eventually being required of everyone. The new requirements are:

  • Quantitative analysis (accounting, finance and statistics).
  • Dynamics of legal behavior (teamwork, leadership and project management).
  • Strategic decision making.

These topic areas were grouped by faculty members based on the focus groups of what legal employers need….

These are all key elements of any law practice that intends to succeed in the 21st century. Particularly interesting are the mentions of project management, a skill I’m seeing repeatedly referenced by in-house counsel as a must-have ability that most lawyers simply don’t, and teamwork, an essential ability in the new collaborative lawyer-client relationship. Then there’s Northwestern Law’s renewed emphasis on teaching communications skills: Continue Reading

Victims of their own success

After two weeks away from the blogosphere, my RSS feeder has 756 unread posts for me to look at, not including my daily updates from Dilbert, Slumbering Lungfish, and the Astronomy Picture of the Day. One of those 756 posts appeared at LegalWeek’s Editors’ Blog and concerned UK managing partners’ cluelessness and complacency about the impact of the Legal Services Act, particularly regarding the coming ability of UK law firms to go public.

This theme was picked up by Paul Lippe in a (members-only) post at Legal OnRamp, where he acknowledged that successful law firms don’t have much incentive to explore innovative private equity options. But he argued that other kinds of firms will, such as old run-down name firms needing to overhaul, solid midsize firms looking to break out, and stable firms with contentious partnerships. Paul’s money quote:

Whether any of these firms will ever truly “Go Public” I would question; but certainly they can access the capital markets in ways that create liquidity and competitive advantage. The point is (and some lawyers seem almost congenitally incapable of understanding this) that disruptive innovation never comes from the super-elite, and doesn’t have to. The disruption will come from an outsider, but will quickly impact the elite – think Honda and General Motors over the last 40 years, think JetBlue and United Airlines. If these scenarios sound fanciful, remember they are exactly was has happened in a dozen other industries that have been impacted by a combination of global competition and private equity.

Here, with some amendments and additions, is the response I posted:

True enough; as the saying goes, revolutions don’t normally start inside the castle. But I think this is kind of the problem, because in the legal services marketplace, the castle is huge — it encompasses much of the kingdom, in fact. Most law firms consider themselves to be “successful,” which greatly reduces the number of “unsuccessful” firms that would be naturally motivated to try something innovative. Continue Reading

Innovation requires clients to step up

Bruce MacEwen at Adam Smith Esq. reports on a presentation he attended at Allen & Overy’s New York office titled “Innovation in Legal Service Delivery,” featuring high-profile law firm lawyers, in-house counsel and consultants. The gist of the event and his article is that innovation of this type is still very much wanted and isn’t nearly the hopeless cause many like to believe. As a certified aficionado of legal marketplace innovation, I agree on both counts.

Bruce ends his post by asking a central question: “How shall we continue these discussions? Are they best conducted in law firm-sponsored colloquies such as this? Under the auspices of a legal publication such as The American Lawyer? At dispassionate fora and conferences put together by and hosted at a law school?” I have a couple of thoughts to offer here.

First, the conversation should continue wherever and whenever it can take root and flourish, especially in the blawgosphere, as part of a continuing effort to draw in as many decision-makers, and generate as great a sense of urgency around this subject, as we can. Legal services delivery innovation captures the imagination of lawyers at the grassroots level — at what event speaker Paul Lippe called the “immensely strong pockets of innovation” in law firms. Tapping into those pockets, through online and other vehicles, will multiply and magnify the volume and impact of that conversation.

But secondly, and more importantly, the effort to lionize innovation in the law needs more than law firm colloquia, legal periodical articles or law school efforts, helpful as all these would be. It requires more than the excellent College of Law Practice Management’s Innovaction Awards or the Financial Times’ legal innovation series. Innovation in legal services delivery will not succeed unless clients get seriously and deeply involved in the process. Continue Reading

Enter the Innovaction Awards

I’ve been remiss in not mentioning this before now: the June 2 deadline for the College of Law Practice Management‘s annual Innovaction Awards is approaching fast. These awards recognize valuable and innovative projects undertaken by law firms in marketing, client service, recruitment, retention and other areas of law practice management. Previous winners of this prestigious competition, from firms of all sizes in the US, the UK and Australia, can show clients their dedication to innovative and efficient service and get bragging rights over their rivals to boot.

The application process is straightforward, and the potential benefits, including a chance to address the entire College at the award ceremony to demonstrate your winning initiative, are tremendous. I was honoured to serve as a judge last year, and I’m delighted to have been asked to do so again. Take a moment to tour the site, view the criteria, and then think about an innovative project within your own firm that could qualify. Innovation is going to be a cornerstone to successful law firms from now on — these awards can help you lay the foundation.