The dying cult of the corner partner

Let’s start with an odd fact: the self-interest of a law firm is fundamentally opposed to the self-interest of its most powerful partners.

Here’s how I see it. The more influence a lawyer wields over a given client, the more stature, leverage and tactical advantage that lawyer gains within his or her firm; these benefits grow in proportion to the size of the client and its strategic importance to the firm. This partner’s influence naturally tends to undermine the firm’s security: the partner could bolt at any time, depriving the firm not only of a key client but also of the partner’s substantial contribution to the firm’s average PPP, which in this environment might actually be the greater threat. This creates a dysfunction in the relationship between a firm and its best lawyers: the more the lawyer succeeds, the less control the law firm has over its own destiny.

The firm recognizes this fact, of course, and it takes steps to mitigate the inherent risks of a powerful partner. It invests heavily in firm-wide marketing and “brand,” to ensure that its individual stars don’t shine more brightly than their corporate constellation. More importantly, it strives to create teams for critical clients, to attach multiple lawyers to these clients and to increase the “stickiness” of the relationships. I’ve written elsewhere that if you have an irreplaceable employee, your goal as a manager is to make that employee replaceable.

The partner, no fool either, recognizes these attempts and does everything possible to undermine them, most notably by hoarding the most significant work and key client interactions and by keeping more junior partners at a safe distance (tactics that dovetail nicely with lawyers’ natural proclivities anyway). This power struggle takes place every day in almost every sizable firm, often with neither side consciously realizing what it’s doing and why.

That struggle, however, usually leads to a long-foregone conclusion: the partner wins. And that’s mostly because of one of the legal industry’s most durable and reliable mantras: “Clients hire the lawyer, not the firm.”

The lawyer and the firm are always fighting over who gets to take the client to the dance; but in the end, the client invariably chooses the lawyer for its date. It’s not an entirely irrational choice. As I’ve catalogued before, law firms traditionally have been unable to guarantee the consistency of their service delivery, the reliability of their systems, or even the quality of their lawyers. And powerful partners are very good at creating industrial-strength personal bonds with clients. But there’s something else, something more pernicious, at work here: there’s the cult of the corner partner.

There is no more powerful person in a law firm (arguably, in the legal market itself) than the corner partner. You know the one I mean: extraordinary skills, extensive connections, huge book of business, intimidating presence, and (to put it politely) an outsized personality. Corner partners don’t have to occupy actual corner offices, of course: what distinguishes them is not their dual window views, but their status (real or perceived) as the sine qua non of the firm’s profitability and prestige.

No major firm decisions are taken without the input or acquiescence of corner partners; no new initiatives proceed without their approval and no member of the firm, up to and including the managing partner, survives a serious conflict with them. We sometimes call them “rainmakers,” but that sells them short: they’re more like the patriarchal (or matriarchal) overlords of the firm. Some are benevolent overlords, using their influence to ensure the long-term prosperity of the firm and its members; I don’t think it’s overly cynical to call such partners the exceptions rather than the rule.

Everyone buys into the cult of the corner partner, and this is nowhere more evident than in law firms’ single-minded preoccupation with, and frenzied pursuit of, lateral partner hires. Subscribing fully to the “Clients hire the lawyer” mantra, law firms clamber over one another in the mad scramble to poach partners with big books of business in key practices or industries, invariably with escalating promises of more and more money.

If its efforts are successful, the law firm trumpets its poaching expedition in a flurry of statements and press releases (in which the new corner partner can be expected to speak glowingly about the advantages of the new firm’s “larger platform”). This has been the primary growth strategy for hundreds of midsize and large law firms through North America for several years now. The resulting free-agent culture of the BigLaw bar, as well as the increasingly yawning spread between the annual incomes of a firm’s highest- and lowest-paid “partners,” are hardly surprising results.

But should this state of affairs change in any meaningful way — should the power of the corner partner begin to wane, should the cult lose some of its fervour — then the implications for law firms and the legal market would be immense. This week, Ron Friedmann gave us a thought-provoking post that quotes extensively from an analysis by Steve Nelson, managing principal of The McCormick Group, who believes that this very change might be upon us.:

There is a widening gap between the prospective portable billings that incoming laterals vouch for and the actual results that occur months after the laterals arrive. While some of this can be attributed to overly optimistic predictions by the laterals themselves, we believe that other factors are more significant. In particular, the old adage about “we don’t hire law firms, we hire lawyers,” often no longer applies. Instead, in an era where increased pressure is on corporate counsel to reduce outside legal spending, there has been an increased emphasis to consolidate legal providers who both know the client’s business and can offer increased efficiencies. So the ability of one partner (or sometimes even a group) to hold onto a significant amount of a client’s business in a particular discipline is diminishing each year.

It’s difficult to overstate how significant this development would be on the corporate legal market. Both lawyers’ personal career trajectories and law firms’ strategic growth plans have long revolved around the idea that the partner is king and the corner partner is emperor. But there’s growing evidence that the emperor is perhaps not actually as fully dressed as we had thought.

I’ve heard of multiple law firms expressing disappointment over the failure of ballyhooed lateral acquisitions to deliver the promised injections of business and profit. Often, the new partner’s expenses (including paying for the entourage that accompanied him or her from the old firm) cancel out the new revenue streams; the partner is a zero-sum acquisition. More problematically (but quite predictably), the new corner partners don’t cross-sell to, or grow the business books of, their new partners: they guard their client relationships just as jealously here as they did there. And it need hardly be added that new corner partners are an unstable resource: just as the best predictor of divorce is having been divorced before, the best predictor of a partner leaving a firm is that partner having bailed on a previous one.

But there’s more to it than just profit churn and instability: there’s also a growing loss of faith in the lateral acquisition model itself. The tipping point here might prove to be the failure of Dewey & LeBoeuf, a mega-firm built on a stack of lateral partners the way Yertle’s kingdom was built on a stack of turtles. We’ve only begun to see the damage Dewey’s fall will wreak on the traditional BigLaw model, but I suspect one of the first victims will be the cult of the corner partner. Lawyers and law firms are remarkably susceptible to fashions in strategy and management; but as soon as one of these trends becomes unfashionable, it can’t be abandoned fast enough. Law firms everywhere are now waking to a sudden thought: not only does corner partner poaching not accomplish much, it can be incredibly destabilizing. Once that thought crystallizes, look out.

What’s really interesting, though, is that this isn’t just about the fall of the corner partner; it’s also about the rise of the law firm.

A funny thing happened following the financial crisis: law firms realized they needed to get better at what they did if they wanted to survive and prosper. What’s more, they actually began following through on that realization. One of corner partners’ strongest advantages over their firms has always been that most firms were haphazardly structured and amateurishly managed, never more than the sum of their parts: the best partners always looked better by comparison. That is now changing.

  • Professionally trained managers now occupy more positions of influence in law firms.
  • Practice and industry groups operate with more precision and panache.
  • Associate training and partner competence has received more attention and resources.
  • Knowledge management has developed real engines of expertise circulation.
  • Legal project management has brought order and discipline to the legal production process.

Law firms, after many years and many false starts, are finally starting to get their act together. Not all of them, by any means, and mostly in fits and starts. But there is unmistakeably a change in the air. Law firms are taking themselves more seriously as corporate entities, and clients are taking notice. We are seeing the start of a shift in the balance of power between law firms and their most accomplished lawyers.

Obviously, it’s very early days for this phenomenon, and as always, anything could happen. The history of both lawyer behaviour and law firm management provides ample evidence for pessimism. And even if diminished and brought to heel, corner partners remain extremely formidable forces within their firms and the larger legal market; there will always be outstanding lawyers and they will always command more than their share of the sunshine.

But I do think the days of law firms dancing attendance on, and throwing borrowed money at, the latest free-agent power broker are drawing to a close. The focused, streamlined and systematized law firm is, gradually but inevitably, on the rise. The cult of the corner partner is in slow but irreversible decline, and much of our conventional wisdom about the legal market is going down with it.

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.

Too many partners

Law firms, facing a formidable array of external trends and pressures, are simultaneously experiencing a series of internal shocks and shakeups. The most prominent of these is an ongoing reconsideration of the role played by each member of the firm — a process of asking, “What function do you play in this enterprise, and could that function be performed differently?”

This process, which has been underway for a couple of years now, is behind the move of back-office and middle-office jobs to outsourcing companies (both offshore and onshore) and the transfer of associates’ jobs to LPOs, free-agent project lawyers, and innovative offerings like Axiom and Lawyers On Demand. (Some of these functions are also being replaced by technology, at a rate that will steadily increase in the next few years.)

The impact of these efforts is already clear, ranging from the emergence of new “capitals of law” outside the major financial centers to the steady decline in the partner-associate ratio (leverage is now just below 1-to-1 in the AmLaw 200). There’s nothing sinister about this: it’s the natural market-driven process by which labour shifts and reconstitutes itself to its most efficient and effective use.

But I suspect that the partners driving this process forward haven’t thought about where it’s inevitably going to wind up. When you’ve finished asking, “What’s the point of an IT department?” and “What’s the point of all these associates?” there’s really only one question left: “What is the point of a partner?”

Asking that question — and every firm is either asking it now or will have to ask it shortly — raises some uncomfortable issues. We know what function the payroll clerk performs, and we know her job can be done in Wheeling or Belfast. Ditto the paralegal, whose job can be outsourced to someone working from home in a small town in California. We know what the associate is for: either to be groomed for future partnership and leadership or (far more likely) to do highly leveraged work and generate partner profit until eliminated, voluntarily or otherwise.

Positions like these, whose role in the overall  scheme of things is clear, can be understood and moved around as needed. But what about partners? What are they for? I can think of three possibilities.

  • Do they bring in big business? (That is to say, enough business to sustain much more than just their own practice?) A small percentage of partners do, and they’re incredibly valuable. (A friend of mine in a big firm estimates that the best rainmakers are probably underpaid by a factor of 10.)
  • If they don’t bring in big business, are they superb client relationship maintainers? (And I mean superb.) Most great “relationship” partners are rainmakers covered by the first category, but this possibility should still be raised.
  • If they’re not critical to client relationships in either of the two preceding senses, are they tremendous managers? That is to say, are they highly valued and indispensable managers of the organization, its people, or its processes?

To my mind, at least, those three categories cover virtually all the justifications for inviting a lawyer into a law firm partnership. These are the key roles that make a firm profitable and successful — they constitute the essence of what “partner” status is supposed to describe. But by no means do all or most law firm partners today qualify under one of these headings. And if a “partner” doesn’t fall into one of those three categories, then what precisely is he or she doing in the partnership?

I suspect that a lot of “partners” in law firms today are in that position because the firm didn’t know what else to do with them, because the other partners liked them, and because times were good — in short, they were made partners because it pleased the firm to do so. Not a few younger lawyers in law firms have glared upwards at the people above them and groused, “How did they become partners?” And in more than a few cases, they’re right to wonder, because these lawyers aren’t partners so much as they’re superannuated associates who came along at the right time. It’s my belief that, speaking from a labour utilization perspective, these partners are not occupying the correct role, either for them or the firm. They need to be reassigned.

And they are. Earlier this year came a report about increased profits at AmLaw 100 firms achieved at least in part by thinning the ranks: 2% of partners de-equitized over the previous two years. A recent survey reported that fully half the UK’s top 30 law firms are now either de-equitizing partners or considering doing so, a development predicted back in January by Hildebrandt and Citi Private Bank. In addition to steadily reducing the partnership ranks, firms are taking steps to ensure that future cohorts are smaller: Eversheds, for example, has gone so far as to create a brand new position (legal director) as an alternative to becoming partner.

There’s a growing belief among many firms that they invited too many people into the partnership over the past years and decades. Those firms are now starting the process of unwinding those errors. Record low realization rates being reported for some of the biggest US firms, as low as 85%, will only spur that development, because there’s nothing else left to cut and no one else left to reassign.

Nor is it likely that partner ranks will swell again in future, following some highly anticipated but nowhere-in-sight economic recovery. Partnership, as Stephen Mayson argues, is neither an appropriate nor a viable way to manage enterprises of the size and complexity of most law firms. The imminent arrival of Alternative Business Structures in the UK and the outside ownership they’ll bring with them should ensure that the partnership model will henceforth be reserved for smaller firms, as it was originally intended.

Law firms are in the process of reinventing themselves, but the easy work — cutting staff and laying off associates — is long past. Removing lawyers from the partnership is (or should be) an extremely difficult experience for all concerned, but as times continue to be tough and worse, the stronger members of the herd will not hesitate to cull the weaker. But most firms have yet to face up to the hardest part of all — re-engineering the firm’s workflow, delivery, pricing and compensation systems in order to compete in a new marketplace. That’s a bridge, I suspect, that few firms will find themselves willing or able to cross.

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.

Measuring lawyer productivity

Recently, Carolyn Elefant at Legal Blog Watch summarized an interesting debate over a question that many lawyers will soon be asking themselves. Let’s say your law practice succumbs to the logical and inevitable, stops routinely billing by the hour, and institutes other system(s) of pricing and selling your work. Query: do you still need to docket your time? There are two schools of thought: continue to track your time because it allows you to determine your costs and your lawyers’ profitability and because clients might demand an accounting of the time you spent; or, stop tracking your time because it’s entirely irrelevant to your profitability and it’s none of your clients’ business anyway.

I fall into the latter category, for the reasons provided by Allison Shields in a comment on Carolyn’s post…

Why would a client care about time records or how the work gets done as long as it’s done based upon agreed-upon specifications? Clients only really care about time and time records because they perceive that’s what they’re paying for – and lawyers back that up by claiming that what they sell is time, instead of focusing on the value and the services they provide to clients. Lawyers don’t sell time and clients don’t buy time.

…and Jay Shepherd in a separate post at his blog:

Now folks at other law firms will whine that they need to know how profitable an associate’s work is, and how profitable a particular matter or client is. Without tracking and billing for time, they can’t possibly tell.

Nonsense. Take an accounting class. Profit is revenue minus expenses. The question is whether the firm is profitable, not whether an associate or a client is profitable. The relevant question for a client is whether you’re delivering enough value to the client to justify the best price they would pay. The relevant question for an associate is whether he or she does good work for your clients.

The whining continues: But if we don’t track associates’ time, how do we know if they’re working? After your accounting class, take a management class. You know by managing your associates.

But there’s another important point here, voiced by Doug Cornelius in a further Blog Watch comment:

When you go to non-hourly billing, the time sheets are focused on the internal process and business analysis. You can focus on the efficiencies and inefficiencies of your operations. You can use this data to better target your fee and find ways to get it done better, faster and more efficiently. Putting more money in the lawyer’s pocket.

Generally, I agree with this, though I actually don’t think a traditional time sheet by itself would be the best way to track productivity and efficiency, for a couple of reasons. One, lawyers are notoriously inconsistent docketers — many time sheets are filled out at the end of the day or the week through recollection and guesswork, meaning lawyers overestimate (or, with surprising frequency, underestimate) the number of hours they spent on a given matter. And two, forcing a lawyer to record her time, even if the sheets aren’t used to support invoices, reinforces the importance of “time spent” and encourages the belief that time really is what the lawyer is selling.

But Doug is correct — law firms need ways to measure the productivity of their lawyers, the efficiency of their practices, and the overall effectiveness of their working  days. Firms need lawyer performance metrics — that is, they need to (a) identify a lawyer’s activities and accomplishments that contribute the most value to the firm, (b) come up with ways to effectively measure those activities and accomplishments, and (c) create systems and encourage habits by which a lawyer can improve her performance in these respects. Larger firms would create performance metrics for individual practice groups, or regional offices, not just for individual lawyers. (And firms of all sizes should start with the definitive discussion of performance metrics in the law, John Alber’s July 2005 “Delivering Actionable Information To Front-Line Lawyers”).

Jason Anderman took a good step in this direction with a recent blog post 3 True Outcomes: Sabermetrics for Lawyers? Using Michael Lewis’s baseball best-seller Moneyball as a resource, he kicked off a discussion of legal practice metrics by echoing the concept of the only “three true outcomes” (strikeout, walk, home run) over which a pitcher has complete control. He suggested identifying and measuring the only aspects of a given legal process over which a lawyer has complete control (for example, time spent on a first client meeting, time spent to deliver a first draft to the other side, and revision turnaround time) and gathering them together under a “cycle time” statistic. While he acknowledges there’s more to the process than timeliness — a negligent lawyer who barely reviews documents would have very good cycle time stats — he thinks, and I agree, that it would be a good start.

Jason’s post drummed up a lot of interest when it was featured at Legal OnRamp. From a litigator’s perspective, Patrick J. Lamb agreed that total cycle time from engagement to resolution of a matter would be relevant, and suggested interim steps such as how quickly documents were obtained and examined, how long it took to draft written discovery, and average time of depositions (while noting that these aren’t all under a lawyer’s complete control). Fred Bartlit added measures such as preparation and examination of a two-day expert damage witness and research and drafting of a motion to dismiss. But he also observed that the ultimate metric from any litigator’s (and client’s) perspective is victory — as important as lawyers’ productivity and efficiency are, they’re secondary to the outcome. (See Ronald Baker for more on client-focused productivity metrics.)

What all this illustrates is yet another aspect of law firm business that needs to be re-examined and adjusted in light of new marketplace realities: how to measure a lawyer’s value to the firm. Pretending that billable-hour totals can pass for a productivity metric (as some firms still believe) won’t work anymore — firms are going to have to identify reliable lawyer performance metrics and, more importantly, figure out ways to help their lawyers improve the performances that those metrics reflect. Time spent on a task can be an acceptable piece of the puzzle, so long as everyone understands it’s only a piece and not all that big.

Lawyer productivity metrics will have to move away from the effort-based measures of the past (e.g., hours billed) towards metrics that focus on accomplishment, usually measured against a series of predetermined criteria. Firms that have decided to move away from lockstep compensation for associates have already committed themselves to going down this path anyway. It’s yet another perfectly ordinary aspect of running a business that lawyers have shied away from, but just as there’s a process revolution coming to the law, a productivity revolution is now also well underway.

Trust and the marketing department

Timothy Corcoran’s excellent and essential new blog tracks and expands upon a provocative article at the AmLaw Daily called “How essential is a CMO?” As many large firms scale back their marketing spending or lose their Chief Marketing Officers, Tim finds both lawyers and marketers can share some blame. I was especially drawn to this dead-on observation:

BigLaw partners operate under the amusing notion that a flat governance model in which every partner is an equal owner with equal authority is somehow a rational business choice, when in fact it’s an inefficient, extraordinarily dilutive and disruptive structure that persists due to inertia.  To be clear, the partners can organize their sandbox however they want, but this scenario rewards senior marketers who have learned to please partners above advancing the financial interests of the firm.  Indeed, there are countless examples of experienced marketers from other disciplines stymied by the bizarre world of BigLaw.

As one CMO put it to me without irony, “Success in a large law firm is all about credibility, which means accepting that we don’t often do things the right way, we do them our partners’ way, but after about a year of serving their needs you should have built up enough credibility to gently make suggestions, most of which they’ll discard, but to survive you can’t try to do too much too quickly.”

Politics and personality do take on outsized importance in a large enterprise, such that the merits of any given initiative often take a back seat to figuring out which important people’s interests require catering or flattering. By effectively giving every partner veto power over business decisions, law firms make that situation a lot worse. Appeasement replaces innovation, expectations are lowered repeatedly, and pretty soon nobody has the heart to try anything new. It’s no way to run a business of any substantial size, and if non-lawyer ownership of law firms ever catches on worldwide, that might well be the beginning of the end for this model.

For the foreseeable future, though, the flat partnership structure is a fact of life.  But I tend to think the organizational model per se isn’t the problem so much as the fact that many lawyers seem incapable of letting other professionals do their jobs without interference or second-guessing.

Lawyers seem to come factory-shipped with the notion that they know better than you how to do things you’ve been trained to do. People who work with or for lawyers — secretaries, paralegals, marketers, recruiters, PD experts, consultants, and so on — can all relate eye-rolling stories of lawyers who really believe that their fleeting sentiments on a given subject merit equal consideration to what the trained professional in question has advised. It seems that only IT people escape this kind of treatment, probably because many lawyers are intimidated by anything more technological than a BlackBerry.

But marketing seems to get the worst of it. I’ve heard one business consultant, who has worked with professionals in numerous fields, say that nobody treats their own marketing people with as little respect as lawyers do. Many qualified law firm marketers are reduced to menial publicity tasks after yet another initiative of real substance has been stalled or buried. I’ve seen worthwhile legal marketing and branding campaigns snuffed out because one or two lawyers in the room didn’t like a particular tag line, image, or even colour scheme in an advertisement — even when it’s made clear that the campaigns are not directed to lawyers at all, but to clients.

Why are lawyers so prone to this kind of behaviour? Some of it certainly can be traced to the particular strain of arrogance that legal training seems to inculcate. Being a lawyer can operate as a kind of expertise multiplier, making a small knowledge base suddenly seem much larger. My English degree may be gathering dust in a closet somewhere, but I can at least remember Pope’s Essay on Criticism: “A little learning is a dangerous thing /Drink deep, or taste not the Pierian spring / There shallow draughts intoxicate the brain.”

But I think a lot of it comes down to trust — many lawyers are just plain reluctant to trust the opinions and instincts of people from outside the profession. One of the reasons lawyers invite a colleague into partnerships is that they trust the lawyer’s skills and acumen — a partner by definition is someone you trust without even thinking about it. I wonder if one of the reasons most ethics rules prohibit “non-lawyer” (a hateful phrase) admission to partnership is that lawyers can’t quite bring themselves to grant that same level of trust to those outside the bar. Yes, you’re qualified and diligent, experienced and savvy — but you’re not a lawyer, and that still matters for some reason. Few lawyers trust the merits of something they can’t authenticate through direct experience; most lawyers have never marketed; and marketing looks easy from the outside.

This is more than just an annoying quirk — this is a major obstacle to the efficient operation of legal enterprises of all sizes. If you’re constantly overruling or second-guessing or stymieing the best efforts of your qualified professional associates — if you just can’t accept that someone without a law degree knows more about a business management issue than you do — then you’re wasting time, missing opportunities and burning money. Law firms everywhere are doing all three, at a time when the importance of these professionals to the firm’s survival has never been greater.

Successful law firms have figured out that there are some things lawyers do very well and some things that other professionals do very well, and they delegate authority accordingly. Good lawyers do more than just hire a marketing or recruitment or strategic professional — they trust them enough to follow their advice and give them enough room to operate. Good lawyers have the  wisdom to accept that they don’t know everything and the confidence to yield control to those better qualified. Of course they consult with these professionals and raise concerns when they have them. But at the end of the day, there’s no substitute for trust and no disguising its absence.  If you don’t trust your professionals to do the jobs you hired them to do, everyone in the firm figures it out pretty quickly and behaves accordingly.

So the fundamental problem might not be that lawyers can torpedo or hijack a given initiative. The problem is that they do, often reflexively, without sufficient grounds. Few lawyers have the discipine and confidence to keep from wading into unfamiliar waters until they’re over their head. Law firm leaders need to keep improving trust between a firm’s lawyers and its other professionals, until the latter can maximize the firm’s value and effectiveness without having to constantly look over their shoulder at the former.

Get ready for the process era

You know the old expression, “Life’s not a destination, it’s a journey”? I have to say, it’s never worked for me. I’m all about the destination — the journey is the time-consuming necessity between Point A and Point B that I’d dispense with if I could. I don’t have much interest in the scenic route — my itineraries are designed to provide the shortest distance and quickest trip (though I’ll make an exception to avoid ever having to go through Heathrow again). Similarly, I never liked having to “show my work” in math class, or to follow the standard procedures, or to get bogged down in anything that delays my arrival at a solution. Let’s just get to it already!

I’ll also be the first to admit that this isn’t a particularly healthy or sensible way to be. Scenic routes are, well, scenic — they deliver numerous physiological benefits and they’re, you know, nice to look at. Showing your work demonstrates you actually understand the formulas and how they’re applied. Everyone should go thr0ugh Heathrow once, just so they can tell their grandchildren scary stories one day. Nonetheless, I appear to be wired for the destination first and the journey second, and I’m finding that it’s very hard to change.

I have a theory that many lawyers are like that, too. We think our essential purpose is to solve problems, and we focus our energies on cutting through the clutter in order to reach that destination. But you know, clients think the clutter is kind of important: telling the story of how they got here is at least as important to them as finding out where to go next. This applies to both corporate clients — who wish their lawyers would take a big-picture view of their ongoing business realities, not just the legal matter at hand — and individual clients, who want to relate personal stories of complex and difficult life events, but whose lawyers often dismiss all the “background” in favour of summarizing the facts and reciting the applicable law.

So I think we could all stand to be better at holistic legal services — putting the client’s well-being on par with the legal issue he or she has brought, paying more attention to the process by which we address client concerns. Now, you might not buy that, thinking it’s too touchy-feely for a gunslinger like you. If so, then you ought to consider that process is about to become the most important feature of modern legal services delivery.

There’s a process revolution coming to the legal industry. For decades if not longer, law firms of all sizes have tackled client issues the same way: by creating a file and giving it to a lawyer to complete (although the dullest tasks sometimes made their way to secretaries and paralegals). The lawyer’s process was simple: (a) identify the legal problem and work out a legal solution, (b) using a pen, a legal pad, and whatever precedents are on hand, (c) taking as long as required and docketing time spent along the way. Clients invariably didn’t know enough to question this process, and in any event, many tools by which more efficiency could be introduced didn’t yet exist.

Now, however, the tools are appearing — not just through technological advances, but also with the development of business process theory and the rise of logistics. There are now entire disciplines devoted to making manufacturing and service provision more efficient, from workflow analysis to project management to business process outsourcing to just-in-time delivery systems. Contrary to what many lawyers might believe, a substantial amount of what law firms do is susceptible to the application of workflow and logistics. (You think document review can’t be automated, due diligence can’t be systematized, legal knowledge can’t be distilled and packaged?) Modern clients, especially on the corporate side, understand these systems very well and believe quite sincerely that they can apply to what law firms sell.

Ron Friedmann touched on these points in a post at Strategic Legal Technology late last year:

I think most GCs are failing, however, to focus enough effort on process, on how lawyers practice law. [Early case assessment] and staffing controls go to the “how”. Where … are efforts to require matter budgets, application of best practices, automation, risk analysis with decision trees, document assembly, and proper use of KM systems? … Real costs savings mean changing the process, focusing on how lawyers practice. The profession needs to overcome its “I am an artiste” attitude and develop better ways of working.

In The End of Lawyers?, Richard Susskind talks about “decomposing and multisourcing” legal tasks, chopping them up  and directing each segment to the solution with the best combination of competence and cost-effectiveness. Lawyers simply aren’t wired to think this way, but systems analysts are:

Sometimes, by decomposing legal work and viewing it with the eye of a systems analyst rather than a lawyer, it will become apparent, in the jargon, that some “re-engineering” can occur.  This means that some fairly fundamental reconfiguration or reorganization of the tasks can be introduced which of itself might being greater efficiency. An analyst, looking at some legal work with a fresh mind, might pinpoint, for example, some opportunities for avoiding the duplication of tasks or might identify some tasks as redundant. From a systems and process analysis point of view, the lawyer sometimes cannot see the wood for the trees.

I was listening to Richard deliver the keynote address at the ABA TECHSHOW last month when it occurred to me how fundamental a change this will be within our profession. We’ve never needed to worry about process or efficiency before — we dictated the terms of the marketplace, so we could take as long as we liked to do our work and in whatever fashion pleased us. That’s coming to an end, and most law firms will face a huge challenge converting their business models to adapt. I twittered as much during Richard’s presentation: “Future legal business: process consultant for law firms. Lawyers will need help mapping out and re-engineering their practices.”

In the near future, it won’t be good enough for lawyers to ignore the journey and focus on the destination — we won’t be able to focus solely on the ends and let the means take care of themselves. The nature and quality of how we do our work will become at least as important as the work itself. That’s going to be very tough for us to wrap our heads around, but I don’t see any way we can avoid it.

Rightsizing

The massive grocery superstore in my neighbourhood has something like 17 checkouts. Great, you might think — 17 lines, no waiting. But I do wait, often, behind two or three people usually, and it’s not because the store is bulging with shoppers at any given time. It’s because at least some of those checkouts are always unattended — in fact, in almost four years buying groceries there, even at Christmas and other high-volume times, I’ve never seen all 17 checkouts in use. I’m not sure I’ve seen more than 12, and I’ve often seen fewer than five. And invariably, I have to line up.

Then there’s the check-in counter at the airport. I always get my boarding pass at home or at the self-serve kiosk, but I still need to drop off my bags and get my claim ticket, so invariably there’s another line waiting for me. And no matter how heavy or light the passenger traffic, I see the same thing — only a handful of the check-in stations are ever occupied. It should go without saying that checking out of a supermarket and checking into a flight are the most critical points of contact these companies have with their customers.

I wonder if my grocery store or airline has ever done the math here. You have to figure the cost of paying a reasonably diligent 20-something to run eggs over a scanner for eight hours would be covered by one family’s grocery bill, or that the cost of a few counter shifts at the airport ought to be paid for by one executive-class ticket. Meanwhile, the capital these companies have invested in their idle workstations depreciates away — a cost ultimately borne by those customers shifting irritably on their feet as they wait in a nearby lineup.

But this isn’t a post about understaffing in the food and travel industries; it’s about the growing downside of overcapacity. These companies evidently felt compelled to create a bigger footprint than they actually required or intended to fill. Possibly they anticipated greater growth in prosperous times ahead (though I think we just came through as much prosperity as we’re going to see for awhile).  More likely, though, they just thought (as we all tend to do) that size is self-evidently good. Maybe they liked seeing all those workstations on the blueprints. Maybe they liked being able to attach “bigger than ever” to a project that bears their name.

Here’s the problem: “more than necessary” is out. I don’t just mean as a matter of aesthetics, the fear of being seen as extravagant in a time of restraint. I mean that as a business imperative, carrying more than you need to get the job done is not just inefficient, it’s now dangerous. Seth Godin puts it this way:

Many businesses that are in trouble are in trouble for a simple reason: they’re the wrong size. A newspaper that only had a few dozen employees would be doing great today. But they have hundreds or thousands of employees because that was an appropriate scale twenty years ago. …

It’s tempting to get bigger. But is bigger better? In many cases, it’s worse, particularly when you can leverage reliable systems that are cheaper and faster and more stable in the outside world. If you can make your product better by assembling it yourself, you should. But if that action makes it worse, why do it?

That last paragraph applies to pretty much everyone except lawyers. Many law firms are as big as they want to be, not as big as they need to be. They hire and acquire and expand because of the peculiar financial logic of legal services: the more people you have working for you, the more you can bill and the more money you can make. In other industries, the market sets the price and demand drives profitability; in the law, the seller sets the price and supply drives profitability. But as the basic rules of commerce finally start filtering into the legal services marketplace, that’s all starting to change.

The mega-firms now chopping thousands of jobs are, as I’ve said before, not conducting layoffs: they’re reducing their full-time employee complement indefinitely. These firms were overlawyered (and often overstaffed) relative to the value of the services they were performing — but it didn’t matter, because there were no effective market pressures to reduce costs. Now, these firms are having to seriously consider ways to automate basic tasks, and to delegate and outsource mid-level work, in the name of efficiency. They have to “leverage reliable systems that are cheaper and faster and more stable in the outside world.” Reducing unnecessary capacity is only the first step; getting more efficient is the next and more important one.

This applies to firms of all sizes, even solos, because it’s not just about whether you have too many lawyers on the payroll. It’s about whether you’ve struck the right balance between the services you’re delivering to the marketplace and the resources you’ve accumulated to deliver those services. It’s the rare law firm that has fewer resources than it needs to service its clients. More often, firms overextend themselves in terms of workers, salary, bonuses, equipment, decor, locations, practice areas — overbuilding their capacity because, at least in part, the costs of overcapacity have always been directly transferable to the client.

Overcapacity is bad from a financial perspective, but it might actually be worse from a marketing and client relationship angle. One effect of a multitude of workstations at the supermarket or airport is to create an expectation of convenient and rapid service. That’s why the failure to utilize those workstations  is doubly irritating to the customer: it’s not just poor service, but poorer service than the company evidently is capable of delivering. An unstaffed check-in or checkout sends the message: “You mean so little to us that we can’t be bothered to put someone at a station we’ve already built and paid for.”

Take a moment to look around your law practice for empty check-in counters and extraneous check-out lanes — acquisitions that have outlived whatever usefulness they once had, promises you’ve made to clients that you no longer intend to keep. If you say you practise w, x, y and z law, can clients get equally effective representation in each of them? If you give them your phone, fax, email and web coordinates, can they get fast information and responses on any of them? If you’re offering clients a host of newsletters, is their content actually worth the investment of clients’ time? If you’re making them wait in a million-dollar lobby, are they going to get million-dollar service?

Figure out the capacity disconnects in your practice —  from underemployed professionals to extravagant premises, from inefficient workflows to dusty websites and abandoned blogs.  And as soon as you identify them, fix them. Think of it as a new definition of “rightsizing” — as your chance to make your practice the size and shape it needs to be.

Staff cuts and short-term thinking

That sound you hear is the rapidly accelerating crash of dominoes. The mainstream legal media is tracking, body blow by body blow, the shocking personnel reductions taking place at law firms throughout the US and UK. One after another, firms are laying off employees, and it seems each firm’s announcement gives three others the confidence to go ahead and announce their own. I’ll be exploring this in greater depth in a post early next week, but for now, I wanted to point out an interesting subtext in all these cuts: the extraordinarily high rate of staff-alone layoffs.

It’s not just that firms firing lawyers are also firing two to three times as many non-lawyers; an unusual number of firms are firing only staff. Here are just some of the staff-alone cuts reported in the last couple of months: 9 at Squire Sanders, 14 at Ice Miller, 20 at Moore & Van Allen, up to 25 at Buchanan Ingersoll, 30 at Fish & Richardson, 36 at Fenwick & West, 38 at Cassels Brock & Blackwell, 40 at Goulston & Storrs, 60 at Edwards Angell Palmer & Dodge, 65 at Akin Gump, 72 at Dechert, and an astonishing 106 at Ropes & Gray and 115 at Reed Smith. Remember, these aren’t part and parcel of bigger, organization-wide cuts — each of these firms let go of staff, but no lawyers.

The official reason for these layoffs, of course, is the recession, though the actual causes and motivations will vary from firm to firm. But a staff cut without a corresponding lawyer reduction is a little odd. If a firm chops 30 or 40 associates, you expect to see another 60 to 90 staff go with them, on the theory that these support staff no longer have lawyers to support. So what does it mean when a firm jettisons scores of staff members but leaves the lawyers untouched? Beyond the well-known fact that many firms view and treat their staff the same way golf and country clubs do?

One possibility is that firms have to cut fixed personnel expenses somewhere, but they fear the recruitment black eye that comes from associate layoffs and the seismic impact of partner cuts, so it’s the secretaries, paralegals, IT and marketing people who get the heave. Another is that these firms were overstaffed to begin with, not an unreasonable guess — everyone was living large in the recent boom times, and if a one-to-one ratio of lawyers to assistants made some of the fee earners happy, it was all worthwhile. A darker possibility — that associates are keeping the administrative tasks to themselves to maintain their billable hour totals, depriving assistants of work — is all too likely.

It’s also very likely that in many of these cases, the firms either don’t realize or don’t care about the negative effects of deep, across-the-board staff cuts. Aside from the damage to morale, chopping people in key areas like marketing is just foolish, a reflection of the belief that marketing is a cost center, not an essential element of the firm’s business model. Ron Friedmann rightly points out, in two recent posts, that indiscriminate staff cuts reflect the fact that the “firm has no idea what support is really required. Evenly distributed cuts imply that rational decisions were made in the past, that support needs remain constant over time in spite of the march of technology, and that wild gyrations in practice group revenue have no impact on support needs.”

It looks like many firms are missing an opportunity here to carefully and intelligently review their support needs and re-engineer both their personnel and their infrastructure investment accordingly. Simply cutting staff jobs provides only a short-term bottom-line assist while creating many other short- and long-term problems, whereas a more creative approach could both save money and improve the firm’s operations at the same time. Here are just a few possibilities:

  • Equip every lawyer with voice-recognition software, so that memos and messages need no longer be dictated or even typed out. Ditto for real-time docketing and billing programs.
  • Get lawyers blogging about their areas of practice, the release of relevant decisions, changes to applicable laws, and more — instruct them in 21st-century personal marketing.
  • Outsource or offshore functions like human resources, IT or even research and other quasi-legal tasks — firms have already done this, from West Virginia to India.
  • Then, save jobs through upsizing: convert legal secretaries to workflow managers, specialize assistants by assigning them to practice groups, train marketers to conduct client meetings and do cross-selling — basically, give your non-lawyer employees the chance to show what else and what more they can do for you, rather than automatically putting them first in line on the chopping block.

There’s a better way to cut costs than simply throwing staff overboard while keeping lawyers around — all it requires is a little more ingenuity, far-sightedness and courage than law firms are used to showing. And as 2009 unfolds, we’re going to see all three of these traits evolve from nice-to-haves to full-scale survival skills.

The perils of squandering talent

Malcolm Gladwell has written a new book about the factors that most influence the likelihood that you’ll achieve (traditionally defined) career success. Outliers: The Story of Success posits that much of what affects our success is out of our control, and that arbitrary or even trivial factors play a disproportionate role in what we end up doing and how well we do it. As part of the book promotion tour, he spoke with the Globe & Mail the other day and made an observation that I think resonates deeply with the legal profession.

Giving an example of arbitrary success factors, Gladwell noted that a huge percentage of professional hockey players have birthdays early in the year. That’s because the standard cutoff date for hockey programs is January 1, so when all-star teams and other squads are recruited, the players who seem most talented are invariably picked — but in fact, they only seem more talented because they’re older and more physically capable. But then these players get special attention, more coaching, more opportunities, and by the time they hit their teens, they actually are more talented. The same applies in school — Jan. 1 cutoffs mean kids born later in the year are younger and therefore farther back on the learning curve. His point is that arbitrary dividing lines can have huge unintended consequences.

Then the interviewer asked Gladwell, at the end of their conversation, why anyone should care enough about this to actually do anything about it. His reply made me sit up straight:

Because we squander talent. Even in a country like Canada, where hockey is a priority, an obsession, we’re squandering a huge amount of hockey talent without realizing it. We could have twice as many star players if we just changed the institutional rules around finding talent. To me, that’s such a powerful lesson. Because it just says, look, in a simple area like hockey, in a country that cares more about it than almost anything else, if you’re still squandering 50 per cent of your ability, how much more are we squandering everywhere else?

I’d go further and say that squandering talent actually has two components: failing to realize the potential universe of talent at your disposal, and then failing to maximize the talent that you do choose. When you apply that analysis to talent identification, intake and management in the law, you come to realize just how arbitrary and undisciplined we’ve been. Look at it in these terms: Continue Reading

Law firm capital and the financial crisis

I don’t normally link to articles in National, the magazine I edit — this blog is my personal project and doesn’t necessarily represent my employer’s views, and so I try to keep Law21 and CBA in watertight compartments. But I’m making an exception for our September 2008 cover story “Who owns the firm?“, which looks at non-lawyer investment in and ownership of law firms, something that’s already underway in Australia and that’s coming to the UK within the next few years.

I provide the link partly because I think it’s a pretty good article — but mostly because it’s turned out to be awfully timely as well, in two respects. For one thing, the UK reform process is accelerating. The Solicitors Regulation Authority is fast-tracking plans to allow up to 25% non-lawyer partnership in UK law firms. “The timetable,” LegalWeek reports, “would put the SRA ahead of schedule, allowing it to fast-track applications when the regulations come into force, which is anticipated in March 2009.”

(The article is a little unclear on an important point. It refers to the SRA accepting applications for new Legal Disciplinary Partnerships (LDPs) — these are operations that comprise solicitors, barristers, licensed conveyancers and other legal professionals who up till now have not been permitted to form partnerships in the UK. But the proposal to allow non-lawyers to practise law in partnership with lawyers, a far more radical notion, envisions something called Alternative Business Structures (ABS). This article in Managing Partner magazine explains the difference very well.)

So the UK reform process is gathering speed. But the other reason why National‘s cover story is timely lies in the front pages of your newspaper over the past week — the financial crisis besetting the US (and increasingly, the world) economy. Continue Reading

An overlooked recruitment opportunity

At a certain point, a market’s inability to correct an imbalance becomes a competitive advantage for others within that market. In that spirit, allow me to illustrate an imbalance that innovative law practitioners can exploit right now.

We’ve all heard and said a great deal about how law firms need to better address the treatment of their new lawyers and associates. The volume of that conversation has grown sufficiently loud to capture at least a few firms’ attention, suggesting that we’re building towards a critical mass. Consider this update on Ford & Harrison’s successful decision to drop billable requirements for associates, as well as Denton Wilde Sapte’s move to give associates more control over their own business development plans and even Curtis-Mallet’s decision to start a recruting page on Facebook.

All well and good — nice to see a few firms coming to appreciate the importance of adapting their traditional practices to make best use of the incoming lawyer talent wave. Now, let’s see; we’re working on the associates, the partners always look after themselves … is there anyone we’re missing? Any significant group within the law firm that’s still being overlooked?

Employee survey reveals support staff dissatisfied, says The Lawyer in reporting the results of its first employee engagement survey. The poll “shows a chasm between lawyers and business services staff, with the latter feeling undervalued, underpaid and out of the loop. An overwhelming ­majority of business support staff -– 64 per cent -– did not feel that non-fee-earning roles are valued at their firm.” Read the article for the depressing details, including one recruiter’s characterization of how lawyers view support staff: “lackeys to ­support the real business of generating fees.”

I’ve argued before that most law firms come up very short in this regard. Lawyers are notorious for their habit of treating employees without law degrees as separate and lesser entities within the firm structure, less worthy of respect and collegiality. We’ve done articles in the magazine on sensitive topics within law firms, including advancement of women and associate dissatisfaction. But the only time we’ve ever been turned down flat by every potential interviewee was when we tried to do an article on legal secretaries’ views of their workplace. Not even the offer of anonymity could overcome the intimidation factor.

So what can you, the innovative legal professional, take from all this? Valuable members of your rivals’ firms are disaffected and alienated, seeking workplaces where they’re fully integrated into the firm’s business and culture. Build or reinforce those elements in your own operation, developing a deserved reputation for proper treatment and engagement of non-lawyer professional staff. When that reputation starts circulating in your legal community’s support staff grapevine (and there is one, believe me), you’ll have a major lead over your competitors in the pursuit of these underrated and underappreciated employees.

Firms work hard to rank highly in surveys of associate satisfaction, as well they might. There may never be similar surveys of support staff, but all the better for you: recruiting the best of these professionals in stealth mode means your lead will go unnoticed, and unchallenged, that much longer.