Rebundling the law firm

Perhaps most importantly, unbundling has the immensely positive effect of removing from lawyers our self-imposed burden of omnipotence. Our intense dislike of risk and our fervent striving for control has left us vulnerable to taking on more responsibility for our clients’ outcomes than we often should. The modern view of clients — one they share themselves — emphasizes partnership over patronization, collaboration over command-and-control. Many lawyer-client relationships still fit well within the traditional model; but many more do not, and they need a better option. Limited scope retainers make for a very good start.

That’s a brief excerpt from my foreword to Stephanie Kimbro’s forthcoming book Limited Scope Legal Services: Unbundling and the Self-Help Client, to be published next month by the ABA’s Law Practice Management Section. (With Stephanie’s permission, I’ll post the entire foreword here when the book comes out.) Perhaps needless to add, I support both the theory and practice of limited-scope retainers. Yes, it must be done carefully and yes, there are insurance issues that need to be addressed. But the potential risks of unbundling shouldn’t keep us from doing what we can to help people access its substantial benefits.

Interestingly, though, I’ve recently been thinking about what might be a related concept to unbundling. It came up in a conversation I had with Thomas Prowse, an innovative open-source technology lawyer based here in Ottawa, as we were discussing the imminent dismantling of the traditional law firm. Thomas coined a phrase that I immediately liked: “rebundling.”

Unbundling, Thomas suggested, is not a sign to give up on lawyers and law firms as primary legal service providers. It’s merely the first step in the process, similar to the creative destruction that occurs periodically in the high-tech sector, where the failure of one industry or company provides the conditions needed to foster the emergence of new ones. He also saw a parallel with situations where the internet-enabled disintermediation process led to the emergence of new intermediaries to deal with continuing market complexities (e.g.,  iTunes filling many roles once played by recording companies).

I find “rebundling” a very appealing notion. Unbundling, as I suggested above, requires the lawyer to let go some of the work she has traditionally performed, permitting some flexibility to take hold in the previously rigid definition of law practice. But once you’ve unbundled legal tasks or even entire law practices, what do you do with all the individual elements left lying around? One of the reasons law practices have been such successful entities is that there are real benefits of efficiency and specialization to be gained from integrating related tasks and elements into a single enterprise.

The problem is that these enterprises — law firms — have grown stolid, over-encumbered, and intransigent. The traditional law firm is like one of those old steamer trunks — huge, heavy, unwieldy, often latched with padlocks and difficult to move anywhere, but highly effective at gathering everything you might need and keeping it safely tucked away. The problem, of course, is that hardly anyone uses steamer trunks anymore. We opened them up, unbundled the contents, and for the most part threw them away.

But we didn’t leave our unbundled clothes and toiletries and such lying about individually, or stagger around with everything stuffed into our arms. We rebundled most of it into more portable containers: rollaway suitcases, smaller luggage, carry-on handbags, and so forth. Some items we stopped bringing altogether or trusted others to provide, buying water at the airport or downloading books onto our Kindles. We repackaged our assets into smaller, more flexible cases, some of which could either snap together as a larger unit or function on their own. As travel became more difficult and confining, we adjusted how we traveled.

I don’t want to stretch the analogy beyond its modest capacity, but I do think “rebundling” is a helpful way to think about the challenge that lies ahead for law firms. Doing everything for everyone is a difficult business proposition, but it’s the fundamental basis not just of the full-service law firm, but also of the full-service lawyer. We need to become more flexible and nuanced in how we construct our legal enterprises and carry out our legal projects. We need to make greater use of the construction industry model, where a general contractor gathers individual tradespeople for their skills and disbands the team when the work is done. We need more small boutiques in niche areas to flourish. We need to see the relaunch of the sole practitioner as a 21st-century online mobile entrepreneur. We need fewer steamer trunks and more rollaway carry-ons.

Despite what you may have heard (or what some may think I’ve been saying), the lawyer is not dead and the law firm is not dying. But the time is here to restructure our models, our approaches and our offerings — to start rebundling the law practices that market forces are relentlessly unbundling for us.

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 franchised future of small law firms

Today’s dispatch from England & Wales, the world’s legal laboratory, informs us of a new company called Evident Legal that is setting up the latest in a series of law firm franchises. Simplify the Law (STL) aims to create a national network of law firms with between 2 and 20 partners that serve both individual and commercial clients and produce annual revenue of between £2 and £10 million. STL figures there are about 440 firms throughout the UK that fit that definition and that could use the franchise’s help to “stand up against the brand-heavy big hitters,” as the company’s home page puts it. Quality of service and client communication will be STL’s primary selling points to the buying public, while solicitors are offered exclusive territory and marketing and branding support to draw them in.

Simplify The Law joins several other British companies that are setting up chains or franchises of sole practices and small law firms. Quality Solicitors (QS) was one of the first out of the gate — it describes itself as a collection of “the UK’s best law firms who have come together to create a national legal brand with locations nationwide.” Not precisely a franchise, QS already boasts well over 100 firms in its orbit and made a significant breakthrough earlier this year when it signed a deal to open kiosks in 150 WH Smith bookstores throughout Britain (with an eye on an eventual total of 500). These “Legal Access Points” represent a key approach of consumer-oriented franchises: go where the customer is and meet him or her on familiar ground.

Then there’s face2face solicitors (f2f), which specifically self-identifies as a franchise and, like other franchisors, offers small law firms the benefits to match, including IT infrastructure, case management, billing and collections support, time recording, IT backup and disaster recovery, and perhaps most importantly, centralized marketing and branding. f2f essentially promises to relieve franchisees of the burden of running their business so that they can focus on practising law. f2f focuses on smaller firms than STL or QS, targeting those with annual turnover of £1.5 million or less. As an example of the financial arrangements between law firm franchisors and franchisees, firms pay f2f a one-time fee of £25,000 and 8% of their annual income thereafter.

Other franchises like Lawyers2You and High Street Lawyer have already come out, and more will establish themselves in future. They are driven in part by the very difficult economy in the UK, but even more by the advent of Alternative Business Structures and the specter of massive chains like The Co-Operative getting into the consumer legal business through its banks and potentially its supermarkets. (Disclosure note here: STL has received business plan and start-up advice from Chris Bull, a partner of mine in Edge International).

There are at least two likely conclusions we can draw at this stage of the emergence of law firm franchises. The first is that this looks very much like the future of the small and solo law practice. The challenges facing small law firms these days — including downward price pressure, non-lawyer online competition, and the same range of business, technical and regulatory requirements that large firms can tackle with far more resources — will only be exacerbated by the difficult economic decade ahead. More ominously, solos in particular are older than average, are disproportionately based in smaller, stagnating or declining populations, and have few younger practitioners to whom their practices can be passed. New lawyers who might otherwise welcome the chance to hang out a shingle are discouraged by heavy debt loads, a lack of business experience, and the well-known risks of running a small enterprise.

Franchises are in a position to counter many of those concerns. They promise to take away the hassles of billing and marketing and file management. They provide the security of a branded name and logo and the advertising budgets to go with them. In some cases, they even provide training and a degree of knowledge management that all franchisees can take advantage of. Those are the kinds of lifelines that existing practices need and the kind of safety nets that could attract new practitioners by reducing their startup risks. Franchisors figure, probably correctly, that the same lure of reliable, secure, well-known brands can draw not just clients but also lawyers into their orbits.

There are potential downsides, to be sure. One of the reasons that marketing is so important to a law firm is that it forces the lawyer to give some real thought to identifying his or her personal and professional attributes and scanning the marketplace to determine the clients he or she should be targeting; it’s not something to be outsourced lightly. Taking the financial side of a law practice out of a lawyer’s sight can lead to taking it out of the lawyer’s mind; there are great risks to a small business whose owner is too distant and disconnected from cash flow and other daily financial realities. And any lawyer who practises franchise law will tell you that relationships historically between franchisors and franchisees have been, shall we say, a little fraught. But the pros of this sort of arrangement appear to give the cons a good run for their money.

The second observation is that this trend is by no means limited to the UK. The challenges facing solos and small firms in Britain are scarcely different from those bearing down on similar practices in the US, Canada and elsewhere. Solos value their independence, but they also recognize that the flip side of independence is isolation, and they know the harsh reality that if you start to sink, no one’s going to extend a hand to catch you. The benefits of franchising look intriguing no matter which side of the pond you’re standing on. (I recall, back in the mid-1990s, an attempted national law firm franchise called First American Law that wasn’t able to gain traction outside its native Florida; but it might simply have been ahead of its time in both market and, more importantly, technology and connectivity terms.)

Significantly, to my way of thinking, franchises also represent a way to bring in outside non-lawyer support to small firms in North America without running afoul of the rules on non-lawyer ownership of law firms. ABSs are now legal in the UK (although thanks to hangups with certification at the Solicitors Regulation Authority, only one conveyancing firm has so far received ABS approval). ABSs might eventually expand globally enough that US authorities will need to respond; alternatively, the Jacoby & Meyers lawsuit could be the powder keg that blows it all apart. But assuming that non-lawyer ownership restrictions remain in place in the US for the foreseeable future, franchises could be an alternative to outright non-lawyer control that still manages to give small firms an infusion of well-financed professional business support.

I still believe that solos and small firms have a bright future — brighter, in many ways, than most of the national and international giants whose business models are too archaic to survive a new century and too rigid to allow adaptation to new market demands. Small law firms, far more than big ones, can be financially and systematically structured with the kind of client focus that will be required for survival in the years to come. When I speak to law students — as I did again just last week — I advise them to plan their future legal careers as if they’ll be solos, because the skills they’ll acquire in that process will serve them regardess of their eventual work lives, and because it really is pretty great being your own boss.

But increasingly, the future for solos and small firms need not exclusively be the free-wheeling, fully independent entrepreneur of yesterday and today. In the long run, large consumer chains will be allowed to sell at least basic legal services in all major jurisdictions, and the challenges facing solos and small firms at that point will be similar to what your local variety store faced when Wal-Mart moved into town.

A number of small firms — not all, by any means, but more than a mere handful — will become part of a branded chain or franchise with centralized marketing, management and administration. These solos will find themselves in a franchised suburban or shopping center law office, or operating a purely virtual firm from home under a centralized brand. In the new legal marketplace, there will be worse places to wind up.

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.

Innovation pays

I’m willing to wager that the one phrase most frequently spoken in partnership meetings, when the subject of potential new initiatives comes up, is: “Are any other firms doing this?” Law is virtually the only industry where a negative answer to that question is met with disappointment.

Doing what everyone else is doing will get you everyone else’s results. This is patently obvious, and lawyers are more than smart enough to recognize it. So the continued insistence by many lawyers that new and better results must be obtained by employing the same old approaches will have to remain one of life’s great mysteries.

Happily, there’s a sufficient (and growing) number of lawyers and law firms breaking that habit to enhance my own confidence that some members of the legal profession really are starting to get it, from the smallest solo practice to the largest global firms.

Back in the spring, for example, I announced a contest seeking five examples of 21st-century solo practice, which would be rewarded with a free one-year scholarship to Solo Practice University, courtesy of Susan Cartier Liebel and the rest of her team at SPU. I’m now very happy to announce the winning entries!

Our winners range from virtual family law practices focused on low-income clients to a special-education niche firm and an online environmental law practice. Our winners are June Gold of Connecticut, Jack Lebowitz of New York State, Diane Littlejohn of North Carolina and Neal Rice of Pennsylvania (the fifth winner will be announced at a later date). My best wishes and congratulations to these scholarship winners, and my thanks again to Susan and SPU for helping launch five more innovative law practices!

I also spent the spring and summer helping promote the College of Law Practice Management‘s InnovAction Awards, which recognize law firms and legal organizations that are committed to doing things differently and better in this marketplace. Today, I can announce that out of a near-record number of entries, we have three InnovAction Award winners from three different countries:

  1. Law Without Walls, a multi-school initiative to rethink legal education, spearheaded by the University of Miami Faculty of Law
  2. Lawyers on Demand, a brand-new legal service delivery model pioneered by London-based law firm Berwin Leighton Paisner
  3. The Internationally Trained Lawyers Program, a bridging program for qualified foreign lawyers at the University of Toronto Faculty of Law

Yes, you read that right — two winning entries from law schools, confirming that the legal academy is part of the changing legal landscape as well.

I’d be seriously remiss, though, if I didn’t also recognize the excellent entries from law firms and legal organizations worldwide, especially from large law firms, that didn’t take home an award but that definitely merit your attention. They are:

Take the time to click through and read the one-paragraph descriptions of each of these entries, and then find out more by visiting the firm’s or company’s website. These are lawyers and legal service providers who are making the effort, successfully, to redefine the terms upon which lawyers create legal services and by which clients access them.

Take a good look, because this is the future of the legal marketplace, arriving early.

Solo innovation

Conventional wisdom has it that when the meteor struck the earth millions of years ago, the small early mammals survived because they could slip into underground holes and caves, while the larger dinosaurs, with nowhere to go, were struck down. Not to do overdo the analogy, but a series of innovations in solo and small-firm practice indicates to me we’re looking at mammals making contingency plans.

From the UK, where so much innovation is emerging these days, comes Get Solicitors, which Legal Futures describes as “an alternative to national, branded networks by giving solicitors the tools to market and build their own brands. … Managing partner Brian McKibbin said the focus is online marketing, along with relationship building to help firms become lynch pins in their local business communities. There is also practice management advice. ‘We don’t think the way forward is a homogenous legal brand,’ he said. The future for law firms is going to be in looking and feeling like a law firm, rather than like Co-operative Legal Services or RBS Legal.'”

From the US comes an even more attractive proposition: my friends at Solo Practice University have announced a creative new program called “Building Bridges to Professional Independence,” under which law schools partner with SPU to provide scholarships to some of their upper-year students and discounted tuition rates for other students and alumni. This weekend at the Future Ed conference co-sponsored by New York Law School and Harvard Law School, the first Bridges partner, New York Law School, will come on board. I know that SPU is speaking with other law schools about coming on board as well, but kudos to New York Law School for starting it off. (And while I’m thinking of it, don’t forget about Law21’s SPU scholarship contest.)

This is the way, it seems to me, that solos and small-firm lawyers will survive the deluge and thrive afterwards. GetSolicitors and similar services provide a practice management and marketplace foundation for small-firm lawyers, putting them in position to focus on their work. The Bridges program, moreover, is exactly what we need in this profession — a way for new lawyers to get the best of both worlds, a solid law school education and a practical introduction to what being a lawyer actually involves. While a few larger firms have set up excellent professional development programs, most seem to assume that their new lawyers will “pick it up” along the way to various degree. Solos don’t have that luxury, and that’s why it’s natural that this sector is taking the right steps forward.

Is the future of BigLaw smaller? Quite possibly — but the future of law generally is going to belong to whoever is first and best out of the gate these next few years, as the assumptions upon which we’ve depended start to fall away.

Jordan Furlong speaks 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 21st-century solo

(Author’s note: Read to the end to learn about a scholarship contest for sole practitioners.) During my recent webinar on legal marketplace trends with Susan Cartier Liebel of Solo Practice University, I raised a point about solo law practice that’s been bothering me for a while.

Almost every lawyers’ association in North America, I noted, has a section devoted to “Solo, Small-Firm and General Practice” lawyers. My problem with that category is that it still lumps together two groups — solo and small firm lawyers, and general practice lawyers — that should now be considered separately. Today’s (and especially tomorrow’s) sole practitioner has to pursue a niched, specialized practice — one that offers a focused set of skills and expertise with which to compete in an extremely fractured and specialized marketplace. If anything, I argued, today’s “general practitioners” are in fact the national and global giants — the full-service firms who assure the marketplace that “we do everything.” The traditional roles have been reversed.

This reversal is part of what I think we can justifiably call a “paradigm shift” for the solo bar — a change in its underlying assumptions and realities. Sole practitioners (for the purposes of this post, I’ll risk a charge of hypocrisy and bundle “very small firms” under the same term) have been accustomed to viewing themselves in a certain light, a view that the rest of the bar has shared and encouraged: the jack-of-all-trades, the storefront attorney, the low-cost but personal-touch underdog. This view of solos directly contrasts them with bigger law firms: we are more flexible, more affordable, and more personal. The flip side of that contrast, of course, is that solos are viewed as less specialized, less sophisticated and less able to take on big tasks.

Many solos have long been content with this trade-off.  Not only that, many have welcomed the current upheaval in the market that has caused bigger firms so much heartburn. We’re now poised, they say, to take in those price-conscious, relationship-hungry clients who’ve left the giants — this is our time.

To which I reply: not so fast. Solos are not exempt from the revolution. Everyone else in this market — big firms, mid-size firms, corporate clients, consumer clients, law schools, legal publishers and many others — is being transformed by the crucible of these times. Solos will prove to be no different. Taking advantage of this new market will require solos to change as well, which will mean abandoning some long-held habits and identities.

Here’s what I see as four characteristics of the successful 21st-century sole practitioner.

1. Specialized. I mentioned this at the outset, but it bears repeating. “General practice,” in real terms, has traditionally encompassed a range of product and service offerings that today have become economically unfeasible for lawyers. Real estate transactions, straightforward wills, contract drafting, incorporation and other basic business law services, and so forth — these are the stock in trade of the online, automated, or para-professional providers now accelerating into the market. This type of work has never paid handsomely, but in future, it will rarely pay enough to justify a lawyer’s efforts. Running a general practice has usually meant being good at a broad yet shallow range of services; but the shallow waters are precisely those into which the new competitors have advanced.

The solution for solos is to go deeper and develop specialties. Yes, as you give up a wide swath of your current broad practice, you will lose clients — but as you drill down and build up valuable expertise in a specific area of law for which there’s market demand, you’ll add clients, many of which will pay better for your scarcer skills and knowledge. And thanks to the internet, your geographic market has widened enough to allow you to maintain your reach while narrowing your offerings. Solo specialties are not unprecedented: criminal defence and family law practices are longstanding examples (although “vocation” is also a good way to describe these challenging but socially crucial practices). Most solos outside these areas of practice, though, have been general business and consumer lawyers. Now they need to focus.

2. Sophisticated. This is partly a function of specialization, as described above, but it’s also a function of business infrastructure. Solos cannot afford to give anything away to their rivals in bigger firms — yet they’ve usually been quick to concede organizational sophistication: we don’t have the marketing budget, we don’t have the IT capability, we don’t have the administrative capacity to do what bigger firms do. This simply isn’t a viable concession to make anymore — solos need to be running businesses as powerful and efficient as any big firm in their neighbourhood. Mid-size and larger firms that have taken infrastructure seriously and invested in it (especially on the client-facing side) have changed marketplace expectations of what a law practice should be able to do. You’ll have to keep up.

Fortunately, now you can. The available suites of law practice management software have never been better, more varied, or more affordable than they are today. In addition, cloud-based law practice management providers have emerged and have become completely reliable in a remarkably short period of time, removing the need to host any of this software or data on your own office systems. Virtual assistants can carry out administrative tasks as or more cost-effectively than an on-site person, often at customizable hours. Good websites and blogs allow solos to build up market profiles many multiples greater than their physical footprint could manage alone. Advanced client intake/contact and workflow systems can be implemented once and left humming for years to come. Your business can now be as sophisticated as you need it to be without overwhelming you with time and financial costs.

3. Collaborative. The “lone wolf” image of the sole practitioner was hard-won and is something many solos continue to treasure. But as I’m sure you’ve heard, this is no time for lone wolves, not in this economy or in this society. Solos simply must be networked, connected and collaborative in order to survive. Partly this is a matter of taking advantage of both old and new networks, from specialty bar groups to LinkedIn, and of contributing to communities like the blawgosphere. But it’s really about learning to collaborate with other solos, and even with larger firms, on projects that more and more frequently will involve multiple types of lawyers to achieve the client’s objectives.

The biggest knock against small law practices is that clients are reluctant to entrust them with anything more than small jobs — that for work of any real size or scale, clients consistently seek out the bigger firms with their greater manpower and their brand assurance that size guarantees reliability. This may prove to be many large firms’ strongest and most resilient selling point: don’t worry, because we have the critical mass to get anything done. That may be a battle that solos can’t win — but it’s not territory that you want to give up altogether, because the financial and intellectual rewards of big projects can be immense. So find ways to collaborate with other practitioners — perhaps as part of the free-agent lawyer wave, perhaps by launching your own specialist solo network that works together on projects — finding ways to punch above your traditional weight class.

4. Innovative. In many ways, I think this is the most important feature of the successful 21st-century solo. Sole practitioners have long prided themselves on flexibility, nimbleness and efficiency as market advantages, but bigger firms are now picking up some of these features by necessity. Solos can continue to have an entrenched advantage in innovation, however, because the bigger you are, the harder it is to enter new markets and try new things. Here’s how Clayton Christensen puts it in The Innovator’s Dilemma:

[C]reating new markets is significantly less risky and more rewarding than entering established markets against entrenched competition. But as companies become larger and more successful, it becomes even more difficult to enter emerging markets early enough. Because growing companies need to add increasingly large chunks of new revenue each year just to maintain their desired level of growth, it becomes less and less possible that small markets can be viable as vehicles through which to find these chunks of revenue.

Newly emerging markets offer tremendous potential, but big companies simply can’t afford to expend the resources necessary to exploit them early enough. That’s not a problem for smaller companies, which is one of the reasons why so many of today’s disruptive technologies and new markets were harnessed by start-ups. (Christensen himself recommends that big companies set up separate small divisions to pursue such opportunities.) Small law firms are in the same position: they can afford to innovate, to take chances and to try new markets and approaches in ways that big firms can’t. I submit that this will prove to be solos’ most formidable marketplace advantage, and they should press it.

What that means is that you can’t continue to practise solo law the way you always have before. You need to break out of the habits, limitations and rules that you always assumed constituted the underlying framework of sole practice. Maybe they did, once; they don’t have to anymore. Seek out clients from sectors you always thought were beyond your reach: what would it take to bring them in and keep them? Run your business in ways few other solos or small-firm lawyers would try:

and many others beyond what I’ve just tossed off in a few lines. Create markets where they didn’t exist before, deliver services in ways that haven’t been done before, define and run your business in ways that haven’t occurred to other lawyers before. The ability to conceive of, and then act to exploit, new opportunities will be the hallmark of the successful 21st-century solo.

To that end, I’m going to punctuate this post with something pretty different in itself. In conjunction with Solo Practice University’s second anniversary on March 20, 2011, I’m giving away five scholarships to Solo Practice University (valued at US$695 each; CLE is not included), courtesy of Susan and her team. These scholarships will be given to five current or soon-to-be solos or small-firm lawyers who are now engaging, or are ready to engage, in 21st-century sole practice. Drop me a line at and tell me about the practice you now operate or that you plan to develop — describe the ways in which it is or will be specialized, sophisticated, collaborative and/or innovative.

I’ll be accepting entries from March 15 to April 30, 2011. Throughout the course of May, I’ll select the top 10 entries and my colleagues at Edge International and Stem Legal will help me determine the five winners. I’ll then post the winners, and descriptions of their practices, in a post here at Law21 on Wednesday, June 1. Get ready to innovate!

Jordan Furlong speaks 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.

Are you selling the lawyer or the firm?

From England and Wales, the newest hotbed of innovation in the current legal marketplace, comes word that the first nationwide solicitor franchise is on its way. Legal Futures reports that Face2Face Solicitors “is initially aimed at small private client law firms and will provide franchisee solicitors with centralized back-office systems – including accounts, IT and regulatory compliance – and central marketing and business development, to enable them to focus on the legal work.” Face2Face would seem to fit the Alternative Business Structures model very well, and in fact, the company plans to register as an ABS when the starting gun sounds October 6.

Face2Face is compared to and contrasted with another British operation, Quality Solicitors, which has been around for longer. Quality Solicitors is a network of about 200 independent law firms across the UK, ranging in size from solos to firms with more than 40 partners. Face2Face characterizes QS’s business model as one that rebrands existing firms, whereas its own model is “targeting start-ups, breakaways and firms looking to be ‘reconstructed,’ especially if there is a need to consider succession/exit.” In practice, the two models probably won’t come across much differently to clients; in both cases, they’ll see a small law firm with a franchised brand and the promises that come with it.

The UK, of course, is also home to the still-mythical “Tesco Law,” the widely mooted example of what the ABS provisions of the Legal Services Act would enable: legal services sold by supermarkets. This too would be a franchise operation, albeit with the franchised firms operating inside the mega-stores rather than in downtown or suburban storefronts. Canada has something similar with the “President’s Choice” line of banking and insurance services offered through Loblaw’s or the Great Canadian Superstore supermarket chains. (I enjoy telling US audiences that the Tesco Law equivalent in Canada would be “Loblaw’s Law”).

President’s Choice aside, however, the idea of franchise law firms hasn’t taken off in North America. I still remember the launch, back in the mid-1990s, of First American Law (not to be confused with First American Title Insurance or the First American Law Center), which planned to build a fleet of small branded firms across the US and Canada. Perhaps because it was ahead of its time, FAL didn’t take. The idea hasn’t gone away, though: Richard Granat recently floated the idea that LegalZoom might get into the same kind of business, supporting small firms with a brand and a back-office processing center.

The common thread in all these companies and concepts is this: a series of small firms, from solos up to about five lawyers but conceivably larger, operating independently but under a single brand name and supported by centralized web-based back-office support and marketing functions, serving consumers and some small businesses in heavy-traffic areas of law like family, real estate, wills, and business law. Because the work is what lawyers like to call “commoditized,” the brand becomes extremely important. Among the promises that QS firms make to their clients, for instance, are “no hidden costs,” “direct lawyer contact,” “same day response” and “the first consultation free.”

That’s one vision of the future. At the opposite end of the spectrum lie the global giants, and they’re taking a much different approach. Most of these firms dread the “commodity work” label and strive to serve a high-end market of major corporate clients with complex, challenging, high-stakes work that engages lawyers intellectually and rewards them stunningly. And while smaller firms are turning to a faceless brand to give them an edge, the larger firms are counting on faces, very specific ones, as their salvation.

The Wall Street Journal‘s recent report on lateral hiring trends was one of a growing number of accounts of law firms raiding rival firms for superstar partners with large books of business. These laterals don’t come cheap: many new arrivals expect compensation up to ten times heftier than what some of their new colleagues are earning. The compensation gap is to be expected, of course: just as LeBron James is paid a lot of money because he’s expected to fill a lot of seats, laterals are expected to earn their keep and more. But it’s still interesting to hear DLA Piper chairman Frank Burch explain the rationale behind lateral hires: “We are focused on making big, strategic hires, who can allow us to achieve greater stature and visibility in the business community.” That’s not a productivity argument; that’s a marketing argument, a profile-augmentation rationale.

None of this is new, of course: smaller firms that sell what everyone else is selling need to find a market differentiator (hence the interest in brands), while large firms want to sell services of a type or quality that no one else is selling and make that the differentiator. The question, at this stage, is which of these approaches makes more sense in the marketplace of the near future? It seems to me that going forward, the branded commodity approach actually has more upside.

I was speaking at a retreat for an AmLaw 100 firm last summer, and one of the lawyers asked me about what the future held for both “commodity” work and “bet-the-company” work. My response was that virtually every law firm mid-size and higher insists that it wants to pursue the latter kind of work, that that’s what it wants to be known for in the market. The problem, I said, is that there’s actually relatively little work of that kind available — companies don’t bet themselves every day — and thousands of law firms are all chasing it. Compare that to the “commodity” work: there’s tons of it out there and hardly anyone wants to provide it (indeed, judging from the number of self-represented consumer clients, there’s a massive shortage of supply). Which of these two areas looks more promising from a business development perspective?

The high end of the legal market is over-served and the low end is under-served, and there’s two reasons for that. One is that many lawyers don’t find the low-end work “challenging” enough (to which I say, find me a high-paid M&A superstar who can last a week in family court without breaking down). The other, of course, is that the low-end doesn’t pay enough. But I’ve written before about how it doesn’t matter how much the client pays, it matters how much profit you make after the costs you incur are subtracted from the price you charge.

National branded legal franchises look like an excellent way to accomplish the goal of providing more with less to this market. Let us do the things you hate, the franchisors tell lawyers, like marketing and branding and administration and whatnot. You do the things you love, like practise law and serve clients. Our efficiencies reduce your costs, so you can price competitively yet still keep more of what you charge (with a slice to us, of course). As more and more legal tasks pass through Richard Susskind’s five declining stages of work, from bespoke to commodity, the “low-end” “commoditized” share of the market is going to grow. Firms that took a more enlightened approach to this sector should reap the rewards.

And the big firms, the global giants? They have plenty of marketing and branding firepower, without question, and they’re awfully good at what they do. But they’re also susceptible to the weakness inherent in the traditional law firm model: your assets walk out the door every night, and you need to pray they come back the next morning or else you don’t have a business. The Lawyer reported this month on a survey of nearly 2,000 partner moves in London from 2005-2010 that found almost half of those hires left their new firm within five years, and up to a third left after three. Do you think those acquisitions were good investments of those firms’ time, money and effort?

As legal work drifts towards commoditization, lawyers drift towards fungibility. All five partners in your branded storefront franchise walked out today? You can probably find five other lawyers with very similar skill sets to replace them — and in this economy, you can probably do so fairly quickly. But brand names and logos — they don’t leave. Now suppose that all five partners in your large firm’s biotechnology practice group walk out the door; you have a much bigger problem. A wise manager once said that if he discovers he has an irreplaceable employee, his mission become making that employee replaceable. Large firms that boast about the irreplaceability of their top earners perhaps don’t realize the double-edged nature of that particular sword.

The oldest axiom in the legal business is that clients buy the lawyer, not the firm. This is true and always will be true, insofar as the lawyer brings something unique to the table: extraordinary skills, outstanding personality, or perhaps most importantly, the ability to craft and perfect a trusted relationship. But absent those conditions — and those conditions, I expect, will become increasingly rare — and with bespoke legal work diminishing, clients’ buying criteria are going to expand to emphasize factors like price, accessibility and reliability. When you’re sliding towards those criteria, you’re walking into territory where national brands have developed a very strong home-field advantage.

Are you selling clients your lawyers or your firm? Think carefully about the ramifications of your answer, now and down the road, because clients are starting to ask themselves the same question.

Jordan Furlong speaks 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 boutique exodus

I was talking the other day with a partner in a large national firm. For a variety of reasons, including the nature of his practice area, his annual billings have been declining for a couple of years now, and he’s been contacted about it by some of the senior people in the firm. He’s been tempted, from time to time, to respond to their concerns by saying: “Have you ever noticed that every year, you raise my billing rates, and every year, I bill fewer hours?”

That neatly encapsulates what I think is a real and dangerous trend at a lot of the bigger law firms: week by week, rate increase by rate increase, they’re pricing themselves out of the market. The profit imperative is so strong at these firms, and the level of economic sophistication often so low, that rate increases are ordered up regardless of whether the clients want them, can afford them, or are screaming bloody murder about them. To the extent a firm thinks about its clients when raising rates, it often wagers that they have relatively limited options — they need to get the work done and they want it done by lawyers they trust — and that they aren’t prepared to make a radical and onerous move like switching firms (especially since almost all big firms operate the same and bill the same anyway). That gamble has paid off handsomely over the years, and so the firms have had little incentive to change their approach.

What’s happening now, however, is that the clients and their lawyers are teaming up and doing an end run around the firms. There’s been a barrage of reports over the past few months about lawyers abandoning big firms to set up smaller boutique practices, taking clients with them, and thriving in the result. It’s a four-step process: client tells lawyer it can’t afford her rates anymore. Lawyer tells client she doesn’t control her rates and doesn’t want to lose the client. Light bulbs appear simultaneously over their heads. And a few months later, a new small firm is born, with at least one A-list client on its roster. Continue Reading

The lamp and the laser

When you set up a home office, as I’ve recently been doing, you begin to notice lighting in a way you hadn’t before. It quickly becomes apparent that fixed overhead lights and large floor lamps, no matter how bright they might be, don’t illuminate desks and laptops very well. For close-range work, helping you navigate the nooks and crannies of keyboards and file folders, you need more focused lighting — portable, flexible, easily angled, with small super-bright halogen rather than rounded regular bulbs. These light sources are smaller and carry less wattage than the big lights and lamps — but they serve a specific need much better, and many of our illumination needs these days are pretty specific.

I used this analogy — high-wattage lamps that cast vast amounts of light in a wide circle, contrasted with smaller, sharper, focused sources that put only the light you need exactly where you need it — in a recent discussion about the future size of law firms. My theory is that most things being equal, the future belongs to smaller firms and solos, because the large-firm model ultimately suffers from an over-reliance on volume and an inability to finely focus resources. Continue Reading

Solo Practice University guest lecture

After all these years, I’m going back to law school. I’m happy to announce I’m making my first appearance as a Guest Lecturer at Solo Practice University on Tuesday, January 12 at noon ET. After having numerous great conversations with SPU founder Susan Cartier Liebel by phone and email over the years, it’ll be tremendous fun to exchange our ideas with the whole Solo Practice community. Here’s the agenda we’ve prepared — we might not get to all of these topics, but we’ll cover as many as we can:

  1. Why the billable hour’s not dead — just irrelevant.
  2. Why process and systematization will change how legal work is done.
  3. Why “access to justice” no longer has to mean “access to a lawyer'” Will we see the demise of “Unauthorized Practice of Law” restrictions?
  4. How and why client collaboration will affect your practice.
  5. Are we finally ready for preventive lawyering, becoming full-time holistic legal health professionals?
  6. How will the introduction of Brazil, Russia, India, Indonesia and China (BRIIC) into the global legal marketplace affect you and your practice?
  7. Why solos and small firms are the long-term future of the practice of law.
  8. Why law schools won’t change, but legal education will.

All the details of the Guest Lecture can be found at the SPU website. If you’re not currently enrolled at Solo Practice University but would like to access this event, log in to Facebook (or create an account) and become a fan. Hope you can make it next Tuesday!

Update: A recording of the teleseminar is now available by becoming a fan of SPU’s Facebook page here.

The hyperlocal lawyer

You’ve seen plenty of references to the decline of traditional news media here, usually in the context of similar struggles in the legal marketplace. Instead of dwelling on that industry’s problems, however, here’s what looks like one of its future successes, and how it might have potentially profound applications to the law. It’s the rise of hyperlocal news.

Maybe the best way to define “hyperlocal” is to cite new media commentator Max Kalehoff’s question in his blog post: “What is hyperlocal? Can someone please tell me?” We all know what “local” means, he says: content and advertising focused on a specific location or area, rather than on a state, provincial or national level.  City, town, and community newspapers, TV stations, and radio stations all fit the definition of “local,” as do the organizations and subscribers who support them. So what does “hyperlocal” media mean, and how does it differ in a meaningful way from these local media that are dropping like flies all around us? A good answer comes in a comment from Mark Josephson, CEO of hyperlocal news provider

Historically, “local” was defined by city, town or zip. It was very “top down” and assumed that everyone who lived in a certain city, town or zip was interested in the same thing. Now, hyperlocal has come to mean “smaller than city, town or zip” and usually refers to neighborhoods or small town blogs. I think hyperlocal is defined by the individual, built from the ground up; that is, local media, news or information that is personalized by you and YOUR location. Hyperlocal is unique to everyone: what are the places, locations and neighborhoods that are important to you. Continue Reading