And the walls came down

Last week, I had the pleasure of delivering a speech to the Institute for the Advancement of the American Legal System (IAALS), an innovative program headquartered at the University of Denver that addresses reforms to legal education, access to justice, and judicial selection. They had asked me for a presentation that would explain the challenges facing the legal profession today and outline the contours of the legal market of tomorrow.

I thought you might like to read a condensed version of my remarks, which touched upon many issues that I’ve canvassed here at Law21 over the past few years. Considering that this is also my 400th post here, it seemed appropriate to share what amounts to a summary of my views on the legal profession, the legal market, and the legal system.


We face enormous change in the legal marketplace: primarily, the emergence of new competitive and disruptive forces that are mounting increasingly formidable challenges to our traditional assumptions and understandings about legal work. At the same time, we are grappling with a legal and justice system that is not giving anyone much satisfaction, and is in fact giving many people a great deal of heartache. There are numerous disconnects among how things used to be in the law, what they’re like today, and what we wish they would be.

So what can we do? Perhaps not surprisingly, I say we adapt. We need to see the legal world as it is and as it surely will become, and then we imagine what it might be and do everything we can to make that vision real. Our memories, our narratives, our assumptions and expectations about the law — both individual and collective — these are the walls we’ve built around the legal market and around ourselves, and they are limiting our vision. It’s time to lower the walls and let illumination come in.

Let’s begin by seeing the legal world as it is. What are we up against? What are we dealing with? Here are five points to get us started.

  1. Growth in lawyers’ business has stalled. With a few exceptions, law firms of all sizes have seen business slow down, revenues flatline or decrease, and new business become increasingly difficult to find.
  2. Lawyers’ pricing is under tremendous pressure from clients. I mean “pricing” in both a dollar amount sense — rate discounts are multiplying — and as a methodology — flat fees are proliferating.
  3. Low-cost alternatives to lawyers are picking up business. Large firms have seen the rise of law department insourcing and legal business outsourcing. Smaller firms have seen Legal Zoom, Rocket Lawyer and the like target their markets.
  4. A huge glut of unemployed new lawyers is building up. Employment rates for new lawyers in the United States have fallen sharply in the wake of the financial crisis. At large law firms, they’ve fallen off a cliff — down 40% in the last five years.
  5. And finally, although you may not have felt it, an earthquake struck the legal profession earlier this year. Its epicenter was London: it was the issuance of the first licenses to operate what’s called Alternative Business Structures, law firms owned by non-lawyers.

These, at least, are not predictions or suppositions. This is really happening, right now. And it’s happening because of a series of changes to the legal marketplace, both here in the US and worldwide. Once again, I’ll give you five to consider.

  1. A lengthy period of strong economic growth powered by heavy borrowing, interspersed with occasional hyper-growth bubbles and busts, has come to an end. We are not in a “recession,” in the usual sense of the word. We are in a lengthy period of slow deleveraging and weak, fitful growth. It should last at least another five years, and maybe longer, give or take a fiscal cliff, a Euro collapse, or a hard landing for China’s housing boom.
  2. Clients have acquired a potent combination of knowledge, power and urgency. Basic legal information is more widely available today than ever before. Basic legal tools are easily accessible at low cost or no cost across the internet. And clients cannot and will not spend a dollar more than they absolutely must on anything, and most especially on lawyers.
  3. New providers and new technology are starting to enter the market. I mentioned companies like LegalZoom and legal process outsourcers a moment ago, companies in their infancy that have already generated a surprising amount of business. But there’s also new, disruptive technology that can replicate basic lawyer functions and, in some cases, more complex lawyer functions.
  4. Generational change continues. We tend to forget about this — partly, I think, because everyone was talking about the rise of the millennials and the retirement of the boomers, right up until the financial crisis. And then suddenly, we didn’t hear much about work-life balance anymore. But generational turnover continues, and it affects legal organizations of every kind. And let’s not forget: it also affects clients. The cultural values of both legal buyers and legal sellers are slowly transforming.
  5. Finally, the regulatory environment for legal services is changing. Lawyer self-regulation is gone in Australia and it’s gone in England and Wales. In my home province of Ontario, paralegals are members in full standing of the Law Society of Upper Canada, lawyers’ governing body. The United States will hold out against this trend longer than anyone else — except possibly India — but its arrival here is still only a matter of time. Lawyers will be sharing the market with non-lawyers, and I cannot overstate how important that will prove to be.

So where will this lead us? What does the “future of the legal profession” look like? Here are some of the key features I think we can expect in the legal marketplace of the future.

1. Systems and technology will make substantial inroads into the legal market.

Today, if someone asks me, “Can machines replace lawyers?” I’m inclined to say, “Well, only if the lawyer in question isn’t very good.” Now, that’s a little harsh, and it’s not entirely fair — to either the lawyer or the machine. If you were to ask me instead, “Can a machine replace aspects of what lawyers currently do?” —  well, that’s a different question, and the answer in many cases is yes.

Automated contract creation, data-crunching analysis systems, expert applications that answer regulatory and compliance questions, online dispute systems powered by game theory — all these programs are available right now. They are solidly built, they are attracting investor interest, and they are only going to get better as they grow. They do their jobs in minutes, not in billable hours, and they are more reliable and sophisticated than many lawyers would be prepared to credit.

We’re at least 10 years away, probably more, from machines that can completely replace lawyers. But we’re already in the era when machines can displace lawyers — take on some aspects of their work, some percentage of their tasks, bump them aside, jostle into their seats, force them to go do something else. And that percentage is going to grow. I can’t tell you at what rate, or how quickly. It will be different for different markets and different types of work.

But the fact is that a great deal of what most lawyers do is not that complicated. At least some of it can be done by non-lawyers — and in some firms, it already is, by secretaries, paralegals and clerks; in future, it will be done by machines, processes and systems. But in many law firms today, it’s being done by lawyers. It’s what many of the hours billed in the legal profession today consist of — and that is not sustainable. That’s a hard truth. But we need to hear it said.

2. Non-lawyers will have proliferated throughout the market.

I dislike that term intensely, by the way: “non-lawyers.” We are the only profession I know that divides the world into “us” and “not us.” We use that term all the time, and we rarely appreciate how insulting it is to the people thus described.

But non-lawyers are coming. We are going to share this market with them. The sooner we accept that and start working to accommodate its impact, the better. They’re coming because they are proving their abilities and reliability every day. They’re coming because lawyers have claimed too much territory under the all-powerful description “the practice of law,” too many activities that do not require a lawyer’s rare and valuable skill and judgment.

And they are coming because we have done a lousy job of serving the entire legal market. Clients, both individual and corporate, are spending more and more and waiting longer and longer for outcomes that leave them less and less satisfied. And that’s just the people who can afford lawyers and the legal system in the first place. Many people are not even in the game at all.

And that is on us. These problems developed on our watch, under our administration and stewardship of the legal system. They are our responsibility. We have had ample opportunity to rectify them, and as everyone here knows, we have not moved fast enough or far enough. So governments and citizens are going to start saying, “Time to let someone else try.” Time to start putting the “Unauthorized Practice of Law” in the history books. Look at what’s happening in England and Wales, and recognize that eventually, inevitably, it will happen here.

3. The legal profession will be smaller, but also more specialized and successful, than it is today.

I don’t really see a way around a smaller bar. Gradually, year by year, innovations will continue to disrupt the legal profession. The capabilities of providers outside our profession will expand, from lawyers in India to para-professionals in North America to software packages in the cloud. Lawyers simply will not be necessary to accomplish things that required our services in the past.

It’s possible that we may still need more than 1.1 million lawyers in the United States ten years from now. But I don’t see it as probable. What I see as probable is an endgame for a legal education system that is already producing more law graduates than the market can employ and far more than it will need in future. And I don’t see any likelier outcome than that dozens of law schools will find themselves superfluous to the new legal market.

I do think we will need fewer lawyers. But I also think that the tasks those lawyers end up doing will, on average, be more valuable, more sophisticated, more demanding, and more remunerative than they are today. I think that a market will emerge for more sophisticated legal needs, a robust market that needs lawyers to provide counsel, wisdom, advocacy and preventive law services — the fence at the top of the cliff, as Richard Susskind says, rather than the ambulance at the bottom.

This is where I think the modern law firm has made its greatest mistake. It keeps trying to force more and more low-value, hourly-billed work out of a resource — real, live, human lawyers — that is intrinsically intended to provide high-value work. We’re not meant to spend our days filling out documents and conducting basic transactions and providing “commodity” services. That’s not why we went to law school. We’re supposed to be put to a higher, better use. Call me a cockeyed optimist — not many people do — but I believe that in the future legal market, that’s what will emerge.

It’s not just our clients that would benefit from this, nor just the latent legal market that would finally be tapped by a wider, deeper range of fully accessible legal service providers at affordable prices. We would benefit from this. We are professionals, and if you trace that word back to its Latin roots, you’ll find that it comes from the Latin profiteri, “to serve.”

We are a serving profession. We are fiduciaries to our clients, ambassadors of the rule of law, foundation stones for a civil society. Or at least, we’re meant to be, although I think we’ve lost our way a little over the past few decades. But I believe, in future, that’s what we can become again. And we should be a happier, more fulfilled profession as a result, because we’ll be better aligned with our best use and our best purpose.

In the words of IAALS’s mission statement, we need “continuous improvement” in the legal system — constant development, ongoing innovation, relentless efforts to make tomorrow’s reality better than today’s. We need to challenge assumptions, break down walls, illuminate the landscape.

My advice to you, in this ongoing effort, is to look beyond the walls of the legal profession, beyond the boundaries of what we have always taken for granted, always assumed is the normal state of affairs in legal services. It’s not normal; it never really was. As a profession, we need to be prepared to let go of our defenses and preconceptions, to lower the walls we’ve built around ourselves and our clients.

We need to recognize that we’re not the only ones who can help. There are other people, other solutions out there that want to help improve the legal system too. Yes, they’re a little unsteady on their feet. Yes, they’re still getting the hang of it. But they want to help, and they can help — and whether we like it or not, eventually, they will help. If and when they displace us, then it’s up to us to find a new, better place and a new, better purpose.

The only real question is whether we’ll extend our hand, and how long it will take for us to do that, to build the future legal marketplace and reforge our profession at the same time. If we do, then I’m hopeful and confident that that future will arrive a lot sooner than we think.

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

The limited-profit law firm

What if your law firm were legally prohibited from making too much money? What if there were a fixed profit ceiling for equity partners, and any profit exceeding that amount had to be distributed to others? What if your firm explicitly placed social goals ahead of revenue goals — what would change about your firm’s culture, structure and position in the marketplace?

This is, perhaps needless to say, mostly a thought experiment, since the number of law firms clamouring for this kind of setup are vanishingly few. But a recent article in The Economist about an emerging corporate form called a “benefit corporation,” or B Corp, got me thinking. B Corps, the article explains, “must have an explicit social or environmental mission and a legally binding fiduciary responsibility to take into account the interests of workers, the community and the environment as well as its shareholders. It must also publish independently verified reports on its social and environmental impact alongside its financial results.”

Companies seeking to establish themselves as B Corps are those wishing to place social or environmental goals above profit and revenue objectives, but which find it difficult to do that under the traditional corporate form. These aren’t non-profit organizations, but you might call them limited-profit, qualified-profit, or “yes,but” companies: yes, they want to make money, but they want to accomplish other things more. The Economist cites other corporate vehicles in this vein like flexible purpose companies (FlexCs), low-profit limited-liability companies (LC3s) and in the UK, community interest companies.

Could a law firm become a B Corp? Several small firms in the US have already done so, but there are complications. Carolyn Elefant explores the problems with B Corp law firms in a detailed post that points out a fundamental conflict: lawyers are required to place their clients’ interests ahead of all others, so a firm whose founding documents placed the highest priority on, say, the environment, would be breaking the profession’s ethical rules.

For example, consider a situation where a client receives a generous settlement offer in a contingency matter against the Sierra Club or some other environmentally conscious company popular in the community, but the client, reasonably, does not want to accept the offer because of certain conditions attached to the offer. However, pursuing the case to trial will be upsetting to the community and further, force the lawyer to lay off several employees to conserve cash flow for remaining discovery and trial and could potentially limit the Sierra Club’s conservation efforts due to lack of funding.

Ethically, so long as the client’s rejection of the offer is reasonable (which it is here), the lawyer must abide by the client’s decision. But under the b-certification framework, equal consideration of the interests of firm employees, the community and the client would militate in favor of the lawyer either strong-arming the client to accept the settlement or withdrawing from the case.

This is a strong objection to the use of B-Corp status for law firms, and if push came to shove, I could see a regulatory body ordering a law firm to abandon a corporate form that explicitly placed someone other than the client at the top of the priority pyramid.

Nonetheless, I wonder if there might not be other solutions. Slater & Gordon, for instance, the Australian personal injury firm that floated on the stock market several years ago and is now an international behemoth, makes for an interesting case study. As my Edge colleague Gerry Riskin pointed out at the time, Slater & Gordon’s initial prospectus was very clear with potential shareholders where its priorities lay:

“Lawyers have a primary duty to the courts and a secondary duty to their clients. These duties are paramount given the nature of the Company’s business as an Incorporated Legal Practice. There could be circumstances in which the lawyers of Slater & Gordon are required to act in accordance with these duties and contrary to other corporate responsibilities and against the interests of Shareholders or the short-term profitability of the Company.”

This seems to me a good way of making clear to shareholders that their profits are a tertiary concern for the firm: the firm believes (correctly) that its first duty is to the courts and its second is to clients. A modified form of B Corp or other limited-profit corporate form could be envisioned that would similarly arrange the peculiar priorities of a fixed-profit law firm. Might this kind of qualification address the ethical concerns that Carolyn raises? I’m not certain, but it’s worth thinking about.

For myself, I keep coming back to ponder the strengths and weaknesses of a limited-profit or fixed-profit law firm. Disadvantages? Legion: rainmakers and high earners would desert a firm like that immediately, knowing that their hard work would quickly strike an immovable low ceiling of financial returns. The firm would be unable to recruit ambitious lawyers or high-potential law students for the same reason. Clients who want the very best lawyers would turn away from a firm of anti-capitalist do-gooders. As a vehicle for anything more than a modest mid-sized firm, it’s almost certainly a non-starter.

But there’s upside, too. A law firm that was precluded from chasing ever-higher profits would have to find some other guiding business purpose. Maybe, as with many B Corps, it’s an environmental target, a quest to reduce its ecological footprint and those of its clients. Maybe, more likely for a law firm, it’s a social purpose: serving only clients in low- or middle-income brackets, making access to justice its higher calling.

Alternatively, maybe the firm simply rearranges how its profits are spread. Partner profits would be fixed at the start of the year on a percentage basis (lockstep or otherwise), so that beyond a certain dollar figure or percentage of total revenue, the partners couldn’t make any more money. Accordingly, the excess would be divided equally among associates or staff — everyone gets a bonus when the firm succeeds, driving everyone to make the firm’s success the top priority. And if you want to really go around the bend, make clients the beneficiary of success: every extra dollar at the end of the year is returned to clients per capita, like a co-operative. How’s that for a marketing tactic? Hire our firm and you might get a refund on your fees.

Yes, I know I’m dreaming in technicolour. And anyway, law firms don’t need a special corporate structure to do many of these things. But what these new vehicles really do is allow us to re-envision the purpose of the corporate entity, enabling reasons for existence other than the generation of wealth for ownership. The great majority of problems afflicting modern law firms, it seems to me, come down to money: competition for revenue, fights over profit, arguments about who makes more. Imagine a law firm that was structurally relieved from any of those concerns. You think we could live with a few of those in the legal market today?

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.

Frugal innovation and the law

Lawyers need to learn a very important lesson from a salad spinner.  Specifically, we need to understand the implications of the Sally Centrifuge, developed by students at Rice University in Texas:

The necessary parts: one salad spinner, some hair combs, a yogurt container, plastic lids, and a glue gun. The finished product: a manual, push-pump centrifuge that could be a lifesaver in developing world medical clinics. … A team of college students invented this low-cost centrifuge, which can be built for about $30, as a project for a global health class at Rice University. The teacher challenged them to build an inexpensive, portable tool that could diagnose anemia without access to electricity, and the tinkerers got to work.

The students, Lila Kerr and Lauren Theis, found that spinning tiny tubes of blood in the device for 10 minutes was enough to separate the blood into heavier red blood cells and lighter plasma. Then they used a gauge to measure the hematocrit, the ratio of red blood cells to the total volume. That information tells a doctor whether a patient is anemic, which can in turn help to diagnose conditions like malnutrition, tuberculosis, HIV/AIDS, and malaria. … “We’ve pumped it for 20 minutes with no problem,” Theis said. “Ten minutes is a breeze.” It has proven to be fairly robust. “It’s all plastic and pretty durable,” Kerr said.

If you think the multinational makers of expensive medical devices would fight a cheap innovation like this, then let me also introduce you to the Mac 400, a hand-held electrocardiogram developed by General Electric’s health-care laboratory in Bangalore, as reported in The Economist:

The device is a masterpiece of simplification. The multiple buttons on conventional ECGs have been reduced to just four. The bulky printer has been replaced by one of those tiny gadgets used in portable ticket machines. The whole thing is small enough to fit into a small backpack and can run on batteries as well as on the mains. This miracle of compression sells for $800, instead of $2,000 for a conventional ECG, and has reduced the cost of an ECG test to just $1 per patient.

The Economist goes on to explain, in a special report on innovation in emerging markets, what these developments represent: a reinvention of the product development cycle for markets with very limited resources. Like Japan before them, which developed lean production systems to compensate for a lack of physical space and material, India and China (and a few other smart entities) are developing production systems for buyers without much money, mobility or infrastructure:

[Companies] are taking the needs of poor consumers as a starting point and working backwards. Instead of adding ever more bells and whistles, they strip the products down to their bare essentials. Jeff Immelt, GE’s boss, and Vijay Govindarajan, of the Tuck Business School, have dubbed this “reverse innovation”. Others call it “frugal” or “constraint-based” innovation.

Chances are that you, like me, live in an affluent society and are familiar with unnecessary options. Most of us have more consumer choices than we need or could hope to sample, choices that don’t make our lives that much better or happier. Most of us have never used 80% of the buttons on a standard remote control or could even identify what they do. Most of us with elderly parents wish someone would invent a computer with only four functions: “Read email,” “Write email,” “Send email,” and “Check the weather forecast.” Most of us can, for a few cents, supersize the meal we just ordered, even though what we ordered was enough to satisfy us just a few moments earlier. Collectively, we’re hooked on the idea that more is better — and in our low-cost, resource-rich world, that’s an idea both easy to indulge and profitable to sell. Continue Reading

The trusted advisor

My collection of prized possessions is extremely small — the feature item is probably a ticket stub from Game 6 of the 1993 World Series (Joe Carter’s home run off Mitch Williams). Among that narrow collection, you’ll find a personally inscribed copy of David Maister’s last book, Strategy and the Fat Smoker, and if your passion is making the legal services marketplace better for both lawyers and clients (as mine is), you’ll understand why. A remarkable number of very successful lawyers and law firm leaders have a copy of one of David’s groundbreaking books, such as True Professionalism or Managing the Professional Services Firm or The Trusted Advisor (co-authored with Charles H. Green and Robert M. Galford), on their bookshelves. His status in law practice management circles can fairly be called institutional, and unfortunately for us, the new year has brought word of the institution’s closure: David is retiring from consulting, speaking and writing on professional service delivery.

My own interactions with David Maister have been only glancing — he contributed a fine article to a College of Law Practice Management e-zine on innovation that I edited in 2006, and he generously gave me a credit in his last book for some very slight suggestions I contributed. But his influence on me and his impact on a generation of legal professionals have been profound — not only through his practical guidance and his contributions to a rational law practice business model, but for the principles he constantly advanced as essential to excellent professional service. David exhorted lawyers and accountants to stay true to the highest standards of trustworthiness and ethics and to focus relentlessly on serving the client’s best interests. Continue Reading

All good things…

My newest column is up and running at Slaw, where I’m always honoured it has a place. You can also find it directly below:


“Eighty percent of the poor in the United States are unable to afford a lawyer or find pro bono help for their civil legal problems, according to the American Bar Association.” That sentence, from an American Lawyer article last month, is not only embarrassing. It’s also an omen.

The article in question, titled “Unmet Needs,” was part of a special series on pro bono in the United States, including AmLaw’s list of the top 100 pro bono-friendly law firms and a powerful critique of big-firm pro bono by Deborah Rhode. The latter piece highlighted how pro bono at many firms is less an exercise in professional and public responsibility than it is an opportunity to enhance associate recruitment and retention and score some easy PR points. The result, Rhode points out, is that the clients most in need — the “sob stories” and “difficult clients” referenced in the article — are the least likely to get pro bono help from these firms.

It reminded me of a conversation I had last year with two senior local practitioners. Both lawyers were partners in national firms; both were also extensively involved in volunteer and community activities. They were lamenting the pro bono culture that had taken hold in law firms, especially among newer lawyers. Young associates were constantly clamouring to do pro bono work for one socially aware organization or another. “What I’d like to see,” one lawyer said, “is a lot more of them go down to family court and help out some of the unrepresented litigants there. That’s where we need pro bono help right now.”

Pro bono assistance of that kind is just the sort of “unmet need” that the American Lawyer article was talking about. The writers spoke with legal aid and pro bono lawyers across the US and identified five “needs baskets” where the demand for pro bono work is great and the supply from big firms is limited:

  1. Representing military personnel
  2. Helping the unemployed
  3. Easing the load in family court
  4. The cracking pro bono infrastructure
  5. Serving the rural poor

The first category might be uniquely demanding in the US (and perhaps also Great Britain) right now, but the other four needs baskets are present in virtually every common-law jurisdiction. AmLaw was focusing on pro bono and large law firms, but it seems to me that this is part of a larger pattern of areas systematically under-served by lawyers.

It’s almost received wisdom in our profession that many practitioners couldn’t afford to hire themselves if they needed a lawyer, a statement that I suspect is at least a little exaggerated. But for many people, especially those in the categories above, it’s no joke: they flatly cannot afford to hire a lawyer for anything more than the most basic tasks. Legal assistance is a service that middle-class people, with help from family members and savings accounts, can just about manage. It’s something that working-class people struggle terribly to afford. But for the poor and unemployed, it’s legal aid, pro bono, or nothing. And thanks to the recession, legal aid systems are being cut back in the US, the UK and Canada, while the number of people applying for legal aid is growing.

If you’re a lawyer with a conscience, that should bother you a great deal. But even if you’re without a conscience, you should still be worried by this trend, because it’s about to dovetail with another trend and lead to some serious consequences: lawyer shortages outside urban centers are starting to become endemic in some countries.

Canada: “43 percent of lawyers practising in [B.C.] are now over the age of 50 … in the last 10 years, the numbers of lawyers aged 51 to 60 has doubled, with an average age across the province of 47 years old. In small communities, the aging of the profession is even more pronounced, with an average age of over 50 years old.”

Australia: “[M]any rural and regional practices do not have enough lawyers to service community needs, with 43 per cent of principals indicating that their practice currently does not have enough lawyers to service its client base. The problem looks set to escalate, with a large number of lawyers – many of whom are sole practitioners – looking to retire from practice in the next five years.”

Japan: “The dateline is Yakumo, a small city of almost 20,000 within a legal district of about 50,000. Journalist Norimitsu Onishi reports that it is not unusual for cities five times that size to have not a single lawyer.”

The root causes of most lawyer shortages are the same: aging practitioners ready to wind down their practices, not enough young lawyers willing to move to smaller communities to replace them. It’s not surprising that the US, a country with more than one million lawyers, doesn’t have many lawyer shortages, but less heavily populated states like Maine and Idaho are reporting such shortages already. Many industrialized countries are facing the prospect of communities without enough lawyers to serve the local population.

So from one direction, we have growing numbers of people in dire circumstances needing but not getting lawyers’ help. And from the other direction comes a growing number of non-urban centers without enough lawyers to meet residents’ legal needs. Without question, the demand for legal services is growing — but the supply of these services, how much they cost, and where and to whom they’ll be delivered all lie within the control of lawyers. And as we’ve seen, we can’t always count on lawyers to put the public interest ahead of their own interest when deciding how their supply will meet that demand.

So how do you think this is going to end? Faced with a legal profession unable or unwilling to provide affordable legal services to clients whom and in communities where they have little economic interest, do you suppose governments will stand idly by? Do you think they won’t wonder why it is that lawyers and only lawyers are licensed to provide the great majority of legal services? Do you think they’ll continue to believe that the Unauthorized Practice of Law is a legitimate restraint on the delivery of legal services? Do you think they’ll ever consider that lawyers are anything other than facilitators of legal services delivery?

If you think all these things will come to pass, that the status quo will roll along unchecked, then more power to you. But if not, then you might yet come to believe that the era when lawyers were in control of the legal services marketplace is drawing rapidly to a close.

Spend wisely

One of the reasons — maybe the main reason — why lawyers are so risk-averse is that averting risk is kind of the whole point of having lawyers. People hire us for two reasons: (a) to fix a problem that’s already occurred, or (b) to arrange things so as to minimize or eliminate the risk that problems will occur. In Susskindian terms, these are the ambulance at the bottom of the cliff and the fence at the top, respectively.

The idea that we’d be better off with fewer ambulances and more fences is starting to catch on within the profession. But there’s an important question in there: how many fences do you really need? Is it possible you’re installing more fences than can be justified by the reduced risk of accidents? And as sellers of both fences and ambulances, are lawyers sufficiently objective to be the ones making that call?

Ron Friedmann got me thinking about all this with two insightful and provocative posts about reducing corporate legal spend. He argues that institutional clients “need to do a better job assessing risk and deciding what warrants legal attention,” and draws an analogy to the US health care system which, by many accounts, costs so much in part because of rampant unnecessary treatment. If clients took the time to review all their legal spending and figure out what percentage could be eliminated with an acceptably small increase in risk, they could lower their legal spend without dramatically increasing the company’s exposure.

The idea that companies are over-protecting themselves against risk and therefore overspending on lawyers is compelling. Obviously, there are legal costs that can’t be eliminated — if the government tells you to comply with a given regulation or face prosecution, you’re going to comply. But if you separated corporate legal spend into two piles — one for “we need to do this or we’ll go out of business” and “we’d better do this to make sure we’ve covered all our bases” — you might find the second pile a lot higher than you expected. And if you weighed the savings of not covering a given base against its reasonably foreseeable consequences — not the possibility, but the probability of trouble — you might decide you’re buying too much legal risk aversion.

I can see more companies doing just that — figuring out what they can live without in terms of legal coverage and proceeding to live without it. The lawyer’s argument against that, of course, is that even the smallest detail overlooked can lead to devastating liability consequences in court. But as the rise of “good enough” continues, especially in what figures to be an economically difficult period of time to come, I can see rules and regulations being interpreted in similarly “good enough” fashion — threshold standards being lowered slightly, breaches looked upon more leniently, etc. In the aggregate, it could add up to a collective consensus that not every stone needs to be unturned and not every potential risk needs to be run by the lawyers. If that came to pass, the impact on lawyers would be profound.

In his posts, Ron specifically notes he’s excluding consumer legal spending from the discussion. But if anything, I think the reverse applies to the way individuals buy legal services: I think they underestimate risks and under-purchase legal protection. How many people buy and sell a house without using a lawyer, bypassing expertise and institutional protection in order to save a few hundred bucks on a transaction worth hundreds of thousands of dollars? How many people die intestate every year, even with children and extensive assets, because they just never got around to making a will? How many litigants choose to make their own way through our labyrinthine court system?

Individuals’ failure to avail themselves of lawyers isn’t entirely, or even mainly, their own fault, of course. Too often, lawyers have either failed to adequately market the value and importance of their services, or allowed their prices to balloon past the point where many people can afford to hire a lawyer without help from family members or government programs. In my ideal world, you couldn’t get a  driver’s license until you’d filled out even a basic will, and you couldn’t get a marriage license without having to take a basic course in family breakdown, support, custody and access — both at low costs.

Unless and until that comes to pass, lawyers have an obligation — not just for business reasons but also for social ones — to let people know how important these sorts of fundamental legal instruments are and to ensure they’re accessible to the majority of potential buyers. And at the other end of the spectrum, lawyers also have a responsibility to help their institutional clients tell the difference between “need-to-haves” and “nice-to-haves,” and to place the focus of their services firmly on the former. A trusted contractor won’t replace your garage if a repair will do just as well; trusted lawyers do the same.

Over the years, legal spending patterns have become habit-forming: institutions have gotten used to buying ever more risk-avoidance services, while individuals have gotten used to buying only those services that circumstances require them to buy. It would be reasonable, in an extended period of economic malaise, to expect those habits to change. Lawyers who want to stay ahead of dangerous curves like that should spend time thinking about what their clients absolutely require, and changing what they sell — more of some things, less of others — to match.

The legacy of work-life balance

I think we’ll soon be closing the book on one of the legal profession’s most-used and least-understood phrases of the last decade: “work-life balance.” It was still all the rage just a couple of years ago — new lawyers invoked it as a mantra, talent recruiters bandied it about, and many legal publications (including those I’m responsible for) frequently referenced it. But even before the economy fell off a cliff, you could see the pushback growing — and not just from cranky corner-office partners who felt the youngsters hadn’t paid their dues. The pushback came from a growing sense that “work-life balance” (WLB) was a meaningless phrase that obfuscated some real issues lawyers needed to grapple with.

Essentially, WLB was shorthand for the widespread sense that the demands of a legal career had outstripped the personal benefits it conferred — or, as my father used to say, “There’s not much point in earning a living if you can’t live the living you’re earning.” WLB was applied most frequently within the context of large law firms, where even jaded observers would admit that billable-hour targets had escaped any rational trajectory. Across all firm sizes, though, people looked at the law and saw a career where effort and satisfaction were headed in opposite directions. It was not irrational to think that this could stand some improvement.

(It’s important to recognize, by the way, that WLB was not exclusively a Millennial issue. Lawyers of all ages reported dissatisfaction with the perceived effort/reward ratio of their careers, especially in larger firms — though Gen Y was the most willing to talk about it, at length. Remember that WLB was also often used to describe the plight of older small-firm lawyers whose clients had come to demand legal services far more quickly and cheaply than before, catching the lawyer in a vise between ever more work and ever less time. Wherever legal work seemed to grow beyond the boundaries of “worth it,” we heard about WLB.)

Most lawyers seeking WLB were really seeking an answer to the question: “Does a legal career have to be all-consuming and exhausting?” As to that, I’ve written before that lawyers now work long hours thanks to a competitive economy and our own inefficiency, and that we’ll always have to run fast enough to keep up with our clients. But during the economic bubble, lawyers who asked that question often perceived that the answer was “no.” The demand for legal services sufficiently outstripped the supply of lawyers, such that lawyers could start to dictate the terms of their availability to employers and sometimes even to clients. The whole thing got wrapped up too often in buzzwords like “personal fulfillment,” “family time,” and WLB, but what it really came down to was lawyers’ rational response to market conditions. They had a chance to get more rewards for their time and effort — unfortunately, many of them chose those rewards in $160,000 annual packages.

Now, of course, the market has changed just a little. After 10,000 lawyer and staff layoffs at large US and UK firms, even the most active WLB boosters have toned down talk that might earn them the dreaded “entitlement” label. Articles and posts that reference the term “work-life balance” now do so in an environment of cold pragmatism: Ashby Jones at the WSJ Law Blog and Dawn Wagenaar at The Complete Lawyer provide good recent examples. Realist observers like Dan Hull and Scott Greenfield have gained the upper hand in the WLB discussion — check out this slam-bang debate at Legal OnRamp about “work-life balance” generational expectations.

Where proponents of “work-life balance” went off-track, to my mind, was that they argued the duty to ensure a satisfactory proportion between a lawyer’s work and the rest of her life was an institutional responsibility — that it was up to the law firm, basically. The  firms disagreed, and all they had to do was wait for the marketplace to turn their way to make that clear.

Law firms aren’t going to unilaterally change their business models for the sake of WLB. No law firm ever budged an inch on its billable quotas or offered associates more money and perks because its partners genuinely felt they should be nicer employers — appeals to conscience at partners’ meetings don’t have a roaring record of success. Firms change their working conditions as the talent market dictates. In a seller’s market like the one we’ve just had, they play nice; in a buyer’s market like this, they don’t. If almost every potential legal recruit said, “I’m not going to work at that firm — the demands are ridiculous and the benefits to my career aren’t nearly worth it,” and did so for several consecutive years, then you’d see the firm think about changing its business model. That didn’t even happen during the boom, and I doubt it’s going to happen now.

The thing is, “work-life balance” is a lawyer’s personal choice and responsibility. If money and “prestige” are that important to you, you’ll sign up to work 3,000 hours a year at a law firm, and you can reap the rewards and suffer the personal consequences accordingly. If keeping your work hours within a predictable box is important to you, you’ll be seeking out public-sector jobs or setting up a practice with just enough reasonable clients to pay the mortgage — and you’ll always have one eye on your bank statements. When we talk about “balance” in lawyers’ lives, we’re really talking about the tradeoff everyone has to make between compensation and lifestyle. If WLB stood for anything, it was for the fact that we all have the right and the obligation to make that tradeoff on the terms we want.

But here’s the caveat, and here’s where “work-life balance” proponents were right —  most lawyers in their first several years of practice don’t really have that choice. There are two institutional flaws in our system that hurt our newest colleagues. First, there’s the unspoken symbiosis between law schools and law firms — the former charge students huge amounts of money and provide little practical lawyer training, allowing the latter to hire low-skilled and heavily indebted graduates to fill virtually the only positions lucrative enough to pay off their loans. And secondly, billable-hour targets for associates at more than a few firms simply can’t be achieved without damage to one’s health or ethics, or both. These problems are neither natural nor inevitable — they result from our neglect of the system, and they annually damage our profession’s standards and morale.

In the heyday of WLB, we were at least starting to talk about these things, and the whole debate should have shined a light directly on them. What we were groping towards, under the banner of WLB, was the gnawing sense that most everyone starts their legal career behind the eight-ball for no particularly good reason. Now that the moment has passed, I worry that WLB will be relegated to the status of a mere generational quarrel during a freak economy. We need to do better than that. There are still some serious institutional problems for our profession to resolve — dealing with them openly and effectively would be the kind of legacy “work-life balance” deserves.

Lawyers as a public good

Thanks to San Diego lawyer and blogger Joseph Dang, I belatedly caught up with an article in California Lawyer magazine about the University of California at Irvine’s intention to launch a new law school this fall. If you’re not familiar with this plan, UC Irvine ambiti0usly aims to debut in the Top 20 rank of US law schools, in no small part by adopting an innovative, non-traditional approach to the school’s purpose and curriculum:

“Relatively early in the 20th century,” [Dean Erwin] Chemerinsky observes, “preparing lawyers for the practice of law was relegated to the bottom rung of law schools, and the top law schools didn’t see it as their primary mission. Could you imagine if a school graduated medical students or dental students who never treated a patient? Yet most law students have never had a client.”

The new school aims to change all that, starting with its first year, when law students will be introduced to the practical tools of their profession through a lawyering-skills class that integrates clinical experience. Then, in their second year, students will work through simulated fact situations, honing their skills in a particular field of civil or criminal law, so that when they are ready to register for a third-year, semester-long clinical course, they will already have a working knowledge of how to represent clients. “My central vision for the school,” says Chemerinsky, “is that we will do the best job of any school in the country in preparing students for the [actual] practice of law. A top-quality clinical program is key to achieving this.”

Among UC-Irvine’s other goals is to encourage more interdisciplinary study among law students and produce a healthy ratio of graduates taking public-sector jobs. It’s a bold experiment, and the odds are long against it, but there’s no better time than this for a new kind of law school to take root within the profession. Perhaps needless to say, I think this is a great idea.

But what really caught my imagination, and sparked a whole other line of thinking, was one other aspect of the UC Irvine model: thanks to funding by a clutch of law firms, the university plans to offer every student a full scholarship — that is to say, free tuition. That’s a concept that, among other things, cuts to the heart of what law schools are for. If the idea behind a law school is to turn out the world’s best lawyers — and UC Irvine appears to be aiming that way — doesn’t it make sense to remove barriers to that goal raised by the ability of the best candidates to afford the program? And in turn, doesn’t that get us thinking a little about the role of the marketplace in the formation of lawyers and the services they will eventually deliver?

This ended up, interestingly enough, dovetailing with a growing discussion within journalism circles about the future of the newspaper. You’ve certainly read enough articles about it and heard me talk about it here before — the fact that most everyone accepts newspapers are dying (and TV is next) and that the web is the immediate future, but that no one knows how to build a profitable business model that can sustain a news-gathering organization.  Premium subscriptions, micro-payments, online advertising — it’s all been tried and nothing has really worked yet. So now people are starting to talk about radically different solutions.

In The Guardian, Maura Kelly looks at non-profit newsrooms and start-up media organizations like GlobalPost. But interestingly, Bruce Ackerman (of Freakonomics fame) and Ian Ayres effectively combine these two approaches and have proposed (also in The Guardian) national endowment systems for investigative journalism:

In contrast to current proposals, we do not rely on public or private do-gooders to dole out money to their favourite journalists. Each national endowment would subsidize investigations on a strict mathematical formula based on the number of citizens who actually read their reports on news sites. …

[C]ommon sense, as well as fundamental liberal values, counsels against any governmental effort to regulate the quality of news. So long as the endowment only subsidizes investigative expenditures, in-depth reporting will get a large share of the fund – provided that it generates important stories that generate broad interest.

The endowment must monitor media hits and circulation counts. This is doable. Advertisers already rely on independent audits. So can the government. Some governmental monitoring of financial matters is also necessary. News organizations would otherwise be tempted to obtain subsidies for marketing and business operations. Without minimizing the problems involved in institutional design, the creation of an effective and disciplined national endowment seems entirely realistic.

The driving theory behind these efforts to save journalism is that investigative reporting — finding out what people don’t want to tell us — is a public good that’s too important to be left to the vagaries of the market. Just as we don’t rely on privately run firehouses to keep our cities from burning down, we can’t rely on privately run media companies to bring pressure to bear on our society’s power brokers. Newspapers, as Seth Godin says, wrap two cents of journalism with ninety-eight cents of overhead and distraction. Investigative journalism suffers from the tragedy of the commons: everyone benefits from its existence, but hardly anyone is willing to pay for it by itself. By removing (or at least reducing the impact of) market forces from its implementation, we can help investigate reporting to flourish and deliver real benefits of transparency and accountability to our society and its institutions.

What does any of this have to do with UC Irvine’s law school and its full-scholarship program? Think about this: what if every law school in the world had free tuition? (Or, more accurately, no tuition.) What if interested third parties covered all the costs of legal education in order to ensure it was done properly, freed from the shackles of market pressures and US News & World Report silliness? Now think about this: what if lawyers were free?  What if we decided that the provision of legal services was so important to the operation of a just society that market mechanisms preventing access to justice should be removed? What would our profession look like then?

Well, it’s a safe bet that our graduating law school classes would be far more diverse, especially socio-economically: the built-in bias in favour of applicants from wealthy backgrounds would fade. It’s also a safe bet that a law school curriculum designed to maximize the benefit of each graduating lawyer to the public good would be incredibly different from what most law schools now offer. Also very different would be the qualifications required of the people offering the courses.

What would become of the private bar? Remember, lawyers in this system aren’t charging fees directly; they’re billing the government or a non-profit entity for their work (but not, I’ll wager, for their time). Rationally, the funding organization would want to create certain standards of competent advice and productive service; it would be interesting to see which ones they came up with. Law firm compensation and advancement likely would not be based on hours billed but on other criteria — perhaps client satisfaction, risk reduction, value generation and so forth. Solos would be plentiful, mega-firms less so. Millionaire lawyers, like millionaire media and performing artists of the near future, would be rare. More people would go into the law not to make money, but to serve society. (Many doctors are already familiar with this sort of model, and I think those who have to answer to a for-profit entity would describe a very different quality of service than those who answer to a non-profit entity.)

This is, I readily admit, a thought exercise rather than a practical or even fully desirable scenario; think of it as Imagine for lawyers. There would be plenty of complications and downsides to a publicly funded legal profession. But there are plenty of complications and downsides to our current professional setup too. Today, law is a private-sector business that provides what is very arguably a public good. It’s fair to surmise that at least some of the difficulties and tensions between lawyers and society result from that misalignment.

If lawyers were considered a public good — if everyone knew and could access all their rights, could easily build legal risk management and problem avoidance into their lives and businesses, utterly free from worries about the direct cost because we were all collectively funding it for our mutual benefit — what sort of legal profession would we end up with? What would we lose? What would we gain?


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A few thoughts about Wall Street

Ottawa is a long way, literally and figuratively, from the financial core of the United States, and my wife is the economics major in the family. So I’m not going to pretend to have any insights to offer on the sucking chest wounds opening up on Wall Street these days. If you’re looking for good analysis of the situation from a legal profession perspective, start your search at Adam Smith Esq. But I do have three quick thoughts for you that relate in some way to the current troubles.

Media: I’ve been disappointed with how the MLM (mainstream legal media) has been covering the financial turmoil. Most of the focus at the legal media giants has been on which law firms have bagged the corporate work on the breakup, merger or bankruptcy of which financial behemoth. I’m not reading a lot about the human toll of these institutions’ collapse, or about the implications for the corporate legal sector as a whole. And I’ve yet to hear anyone ask the question that people were asking in the wake of the Enron scandal: where were the lawyers? Many global law firms grew very rich off the same hideously complex financial instruments that everyone is now denouncing as having been clearly unstable and unsustainable. Did lawyers not see the disaster coming, or did they prefer not to look that deeply or that far ahead? It’d be nice if the periodicals that lionized these lawyers in the good times asked these questions in the bad.

Clients: Very few lawyers (especially among readers of this blog, I’m guessing) count among their clients the world’s largest banking and financial institutions. But every lawyer has clients who read newspapers and watch television news, and these latter two vehicles have been brimful lately with dire comparisons (do a Google News search for “worst crisis since the Depression” and marvel at the results) and grim forecasts. Ratcheting up their audience’s anxiety levels is great for business, but the end result is a population-wide injection of stress. Bottom line: your clients are probably worried about the handbasket they’re in and where it’s heading. Now might be a good time to drop them a line with some reassuring words and making yourself available to talk (not on billable time, obviously). You don’t need to provide them with expert financial analysis; but you might provide them with an attentive ear, a sympathetic outlet for their anxiety, and a simple reminder of what lawyers are supposed to do: care sufficiently about their clients to be available in difficult times.

Community: A lot of people have lost and will yet lose their jobs in this crisis, and the burden of cleaning up this mess will be borne around the world and well into the future. Harder times than many of us are used to could lie ahead. So this seems like an appropriate time to think about those members of our community who couldn’t dodge these bullets, or who already suffer from misfortune on a greater scale. We’re about to launch our annual United Way drive here at the office, and as the campaign chair, I see and hear a lot about people in our community who never had a chance to get where we did, or who suffer daily from poverty, abuse and mental illness. Lawyers talk a good game about giving back to the community, and many walk that talk — but we need more to step up. They say lawyers thrive in both good and bad times; if so, then it’s even more incumbent on us to help out where and when we’re needed.

Stock market analysts are talking detachedly these days about all the investing opportunities this crisis affords. You might want to give some thought to the personal, client and community opportunities that are opening up as well.

The day after tomorrow

As Patrick J. Lamb of Valorem Law Firm reminds us, change is inevitable once a marketplace has decided to do things differently. In a week in which the American Bar Association not only gave offshoring a passing grade but positively embraced it (Ron Friedmann and Russell Smith contribute their thoughts), and in which the prospect of publicly traded law firms is discussed not in a mere blog but in the hallowed pages of The Economist (as the Australian pioneer in this regard reports more financial success), then you’ve got to know tumult is underway. Maybe law schools will get it too, though they have farther to go, judging from the latest silliness involving the US News and World Report rankings (see me vent my frustration at Legal Blog Watch yesterday). But ready or not, no matter where you are in the law, change is here, and it’s real.

You know, I read a book a few years ago that helped reshape how I view geopolitical and sociological change. The Fourth Turning contends a whole bunch of things, not all of which I necessarily buy, but for present purposes, the most significant is that roughly 80-year chunks of history can be divided into four “seasons,” and we’re now firmly into Winter: a period of destructive crisis. Whereas the preceding Fall (by my estimate, from the mid-’80s to 9/11) was a time of institutional unravelling and decay, Winter is a time of dynamic upheaval, when an old civic order is replaced with a new one. Change and reform that seemed impossible in the Fall come fast and furious in Winter, and there’s no guarantee the change will be for the better.

Looked at in this context, the waves buffeting the legal profession can be understood as part of a cyclical pattern of evolution rather than an unforeseen bolt of upheaval. We’ve been talking about reform in the practice of law for decades — the first article calling for the death of the billable hour probably dates from the Jurassic Era — but the social and institutional paralysis of the past couple of decades has frustrated these efforts. Now, though, greater forces than simple goodwill are in motion, and boulders that once seemed impossible to move now suddenly shift with greater ease than ever. All of which means it’s time for us to pause and take stock of where we’re trying to go.

Look, if you’re reading this blog, you’re aware of the changes manifesting themselves in the law, and probably you’d like to see things change for the better: a more effective and fulfilled legal profession, a more informed and satisfied client base, a more focused and responsive legal education system, a fairer and more accessible justice system, a more collaborative and innovative spirit of lawyering. Those of us so motivated constitute a small minority in the legal community, but we’re growing. And I’m greatly cheered by the thought that at this time of crisis in our profession, we have the means and the opportunity to help direct the forces of change into positive channels, and to help make the profession better than it is and maybe even as good as it needs to be. Continue Reading