Legal Demand 3.0

Every market has both supply and demand. But law is unusual in the degree to which the vast majority of attention has been paid to the supply side. I’m willing to wager that at least 80% of everything that’s been written about legal services has concerned lawyers and law firms — and most of the remainder that’s been written about clients has shown up in just the last 10 or 15 years. Maybe that’s what monopoly markets produce: a certain amount of navel-gazing by the people and institutions that call the shots. “Whither lawyers?” and so forth.

It’s past time we began paying more attention to the demand side of legal services, given that the law is a buyer’s market and all. I don’t write as much anymore about the consumer and small-business legal market, but we’ve already seen a significant power shift towards buyers in this sector, thanks to services like LegalZoom, Rocket Lawyer, and Avvo. Once somebody develops a truly reliable and accessible chatbot for everyday legal questions (and that shouldn’t be too much longer), this process is going to rapidly accelerate. Regulators that are even now trying to push the genie back into its bottle will be left struggling to catch up with reality on the ground.

But in this post, I’m focused mainly on the corporate and institutional legal markets — specifically, on how the demand side of these markets has shifted through three distinct phases over just the last decade or so. I decided to classify these phases according to naming conventions for obsolete software products, because that’s how I roll.

“Demand ’95” would’ve been even more hip.

Legal Demand 1.0. In the beginning, there was the client and the law firm, one buyer and one seller, side by side in perfect symbiosis. When the client encountered a legal issue that was too complex or resource-intensive to handle internally — and a lot of legal issues fell into that category — the client threw it over the wall to the law firm. The firm tackled the issue in the time-honoured way — handed it to a lawyer, gave the lawyer a clock to record his or her hours, and let nature take its course. In the fullness of time, a resolution of the issue was tossed back over the wall, along with an invoice for lawyer time spent, photocopier ink consumed, and so forth. The law department signed off on the bill — not necessarily with glee, but signed off nonetheless — and the cycle continued.

The remarkable aspect of this system was its longevity. It stretched from the murky beginnings of the legal services market right up to the early 2000s — and in some sheltered jurisdictions and sectors, continues to this day. In fairness to its participants, it’s true that this was the only model available for anyone’s consideration — but it’s also true that it met the basic needs of all the parties involved. Law firms received regular streams of (not particularly demanding) work, law firm lawyers pulled down massive annual profits, and in-house lawyers spent the corporation’s money on law firms that in many cases, they hailed from and in some cases, would eventually join as partners.

That’s not to say this was a perfect world. In-house counsel complained regularly about inefficient firms, outrageous rates, and arrogant outside counsel. Articles appeared in the legal press, seemingly in a regular rotation, decrying the billable hour and calling for something better to replace it. CEOs grumbled about the “cost center” that Legal had become. Lots of talk, but little action. This steady state would continue until something broke in from the outside to change it. And starting in 2007, something did.

Legal Demand 2.0. The antecedents of this stage can be traced back five or ten years before the collapse of Lehman Brothers and the onset of the Great Financial Crisis. Primordial substitutes for lawyers and alternatives to law firms had already begun to emerge at the edges of the market: LPOs in the late 1990s, flex-lawyer platforms in the early 2000s, technology-assisted review in the mid-2000s. But when the Great Recession swept through the world in 2008 and brought many companies almost to their knees, this growing array of legal service alternatives met an urgent corporate impetus to corral costs, reduce risk, and entirely rethink the notion that Legal was a world apart.

Phase 2.0 of legal demand involved one buyer and multiple sellers of legal services. In-house counsel had a mandate from upper management to get more done with less money, and they quickly realized they could never achieve that goal by relying on law firms for all their outside needs. But now they didn’t have to: there were multiple sources available to them for different types of legal services at different price points. Non-firm options included contract lawyers, flex platforms, LPOs, and managed legal services companies; non-human options included powerful software programs, burgeoning AI platforms, and efficiency-enhancing process improvements. They could even find a few boutique and NewLaw firms to do outside counsel work differently and better.

This was, and still is, the multi-sourcing era in legal services. It kicked off in earnest in the late 2000s and is still accelerating today. It’s the rare general counsel who believes she can still get all her legal needs from traditional law firms without facing hard questions from the CEO, and it’s the rare law firm that hasn’t experienced a significant diversion of its corporate client revenue stream into other channels. And the least expected alternative option to law firms has turned out to be the client itself: insourcing its own legal work, taking back or keeping ab initio straightforward tasks that previously had been routed to outside counsel as a matter of course. Demand 2.0 launched in 2008, and it’s still going strong; but it’s about to be superseded by a third stage.

Legal Demand 3.0. Up until now, true to the tendency I identified at the start of this article, we’ve been focused on the supply side, first with law firms as the sole providers of legal services and then with an array of new suppliers competing with them. But starting a few years ago, and accelerating rapidly right now, we’re seeing multiplicity on the demand side as well. It’s no longer just the Legal Department calling the shots for corporate buyers; there’s now a trifecta of players on the demand side. Legal has been joined on the one side by Procurement, and on the other by Legal Ops.

How the traditional law firm sees Demand 3.0.

Procurement professionals are pricing experts. They are very good at ensuring the company pays as little as it feasibly can for the products and services it purchases. They have sophisticated pricing models and mechanisms, they have wellsprings of data on law firm billing rates, and they are skilfully trained in the art of negotiating price; in most cases, they are up against law firms lacking all three. Following some initial tensions between Procurement and Legal, during which each side scouted out the other and jockeyed for position, there’s now an increasingly common front, as Procurement accepts that buying legal services is not like buying pencils, and Legal accepts that Procurement can help the law department achieve the cost certainty now demanded of it.

As important as Procurement is, I suspect that the other new player on the demand side, Legal Operations, will prove to be even more impactful. Whereas Procurement seeks to lower the price of legal services, Legal Ops is interested in lowering the volume of legal services, reducing risks and eliminating unnecessary or inefficient activities. Legal Ops, it seems to me, would like to re-engineer corporations’ entire approach to their legal risks and obligations. Can we act in ways that reduce our legal exposure, streamline our legal processes, standardize our legal activities, and minimize our overall legal spend, both inside and outside? These are important questions, and as companies begin to answer them under Legal Ops’ leadership, the whole corporate legal market will be shaken to its roots.

One interesting dynamic to note here is that there are fewer lawyers in Legal Ops than there are in the Legal Department itself, and fewer still (possibly none at all) in Procurement. This is one of the main reasons why Procurement and Ops are getting so much done so quickly: they’re not hamstrung either by lawyers’ general change-aversion or by the habitual tendency in many law departments to mimic the habits and behaviours of law firms. Many in-house lawyers started their careers in law firms and carry with them the unconscious cultural assumption that law firms are the center of the legal universe. That is not the way Legal Ops and Procurement think, and it is not the way they will act. That could have implications, down the road, for just how much authority and jurisdiction the Law Department will retain by the time this process sorts itself out.

Demand 3.0 is just getting started, and at this particular moment in the evolution of the legal market, you can find all three types of demand operating in different sectors, lending a growing sense of chaos to an already complicated landscape. Both the demand and supply sides of the market are in flux —  the three dimensions of Demand are sorting out who’s best at doing what and sizing up the increasingly diverse Supply environment, while traditional law firms are either adapting to their new competitive conditions or pulling the sheets up over their head and hoping it all works out somehow.

I can see this state of affairs carrying on for another three or four years, probably. At some point soon, the Demand side of the legal services market will have worked out its strategies and powered up its engines, and it will be a formidable player in the market. The Supply side is experiencing both the constant appearance of new alternative service providers and an over-arching process of consolidation and adaptation among law firms. Ultimately, this will produce larger, stronger, and equally formidable suppliers — but this process is likely to take longer, and for at least the next several years, Demand figures to have a very good time of it.

So where does that leave law firms? As I mentioned, several prominent firms (and many other less prominent ones) have made great strides in adapting to these new circumstances, upgrading their internal operations and expanding their external business development activities to include these new dimensions of Demand. But they are still the exception, rather than the rule. And even among the most progressive and innovative firms, there still remains one singular handicap that’s going to stymie their efforts to gain market share.

Every other player in this market, both Demand and Supply, has recognized and acted on one killer observation: You can’t succeed in this market by using lawyers alone. Alternative legal service providers combine lawyers and “non-lawyers,” professionals and technicians, machines and processes, to deliver what their customers need. On the client side, in-house lawyers are being joined by in-house procurement and in-house operations to form a multi-dimensional legal machine, accepting that lawyers alone can only get you part of the way to your goal.

Lawyers and law firms have not yet accepted this. Lawyers, through their regulatory arms, continue to beat back every attempt to liberalize the rules surrounding legal services provision and “non-lawyer” law firm ownership. Law firms, forced by regulation to restrict equity to practicing lawyers, compound their troubles by discounting the skills and perspectives of any “non-lawyer” professional or technician, continuing to pay fealty in their cultures and practices to the Cult of the Lawyer. They are on the wrong side of history.

The future legal market is multi-dimensional and multi-disciplinary. Today’s legal market, thanks to Demand 2.0 and 3.0, has already come quite some distance towards that goal. When are lawyers going to see this and act on it? Or will they?

Law firms’ problem with women

The last time I wrote about women and the law, it took weeks for the flames to die down. Only a glutton for punishment would return to this topic again. Ahem.

So I’ve been collecting articles about the seemingly endless issue of the apparently insurmountable barrier to the full participation of women in law firms. Another article on that score, this one from The New York Times earlier this week, galvanized me to pull them all together and talk about them. To wit:

  • A Bleak Picture’ for Women Trying to Rise at Law Firms (The New York Times, July 24, 2017): “Women are 50.3 percent of current law school graduates, yet they still make up just under 35 percent of lawyers at law firms, [according to the 2017 Law360 Glass Ceiling Report.] Most important, their share of equity partnerships — where the highest compensation and leadership positions are lodged — remains at 20 percent and has not changed in recent years, the report found.”
  • Study Shows Gender Diversity Varies Widely Across Practice Areas (The American Lawyer, April 17, 2017): “The majority of AmLaw 200 practices have an average female head count ratio of 30 percent. Practice areas with the highest compensation and focus within Big Law, such as banking, intellectual property and litigation, had the lowest percentages of women. Women made up only 35 percent of Am Law 200 litigation departments, 31 percent of banking and taxation practices and accounted for 27 and 23 percent of IP and M&A teams, respectively, [according to a study by ALM Intelligence, Where Do We Go From Here? Big Law’s Struggle With Recruiting and Retaining Female Talent.]
  • The Gender Pay Gap for Big Law Partners: 44 Percent (Bloomberg Business of Law, Oct. 12, 2016): “Of the 2,153 [BigLaw] partners polled [by Major, Lindsey & Africa], men earned an average of $949,000 per year while women brought in $659,000. The differences in partner billing rates ($701 for men and $636 for women) and hours billed (1,703 for men and 1,632 for women) remained relatively small. But the results show women still lag behind significantly in originations, pulling in an average of $1,730,000 versus $2,590,000 for men. … Lack of credit for origination is a common complaint leveled by women in BigLaw.”

And here are a few other recent articles that have been archived at Lexis-Nexis and have thereby been hidden from the world at large:

None of this, of course, is new. When I was a legal newspaper editor 20 years ago, we were assigning articles on the discrepancies between men and women in law firms. I have to admit, if you’d asked me then whether the situation would have resolved itself, or at least improved, 20 years into the future, my optimistic younger self would have said, “Of course!”

Yet here we are, in 2017, having the same discussion, talking in the same careful way about diversity and representation and trying not to upset anyone in upper management. “It really is striking how much attention this problem is getting without any movement whatsoever,” Daniella Isaacson, a senior analyst for legal intelligence at ALI, is quoted in the AmLaw article above. Yes, it is.

I want to say two things here about causes and one about remedies.

The first point I want to make is about sexism. In almost every conversation we have about women in law firms, some folks go to great lengths to de-emphasize the role of overt, intentional sexism in law firms’ overwhelming maleness, in an effort not to offend (male) senior decision-makers. I don’t buy it. There’s an enormous amount of overt, intentional sexism in law firms, as there is in society generally. There are plenty of male lawyers who think less of their female colleagues as a group, who denigrate them (or tolerate those who do), who are fully aware that men exercise more power and make more money in their firms than women do and are perfectly fine with that. Let’s not pretend that sexism isn’t a significant contributor to women’s status in law firms. I’ve seen and heard differently, and I’m confident that you have too.

The second point I want to make is that in addition to sexism, the fundamental structure and culture of law firms relegate women to second-class status. Mark Cohen of Legal Mosaic phrased this issue succinctly and accurately: “BigLaw was architected by men for men.”

Today’s law firms were built by and for late-20th-century married white men, and everything about these firms reflects the choices, habits, preferences, and conveniences of their builders. Anyone is welcome to join these firms and experience great success — just so long as they adopt the choices, habits, preferences, and conveniences of their architects. Work long hours, glad-hand clients, immerse yourself totally in the job. Can’t manage that, because you’re pregnant or you’ve got primary home care or child-care responsibility? Too bad for you. Everyone else here can manage it just fine.

How to succeed in law firms without really trying.

The traditional law firm is more favourable to men than to women because men built it. The people who founded and built these firms enjoyed preferential status in business and society and could leave child-rearing to their domestic partners; they could walk through any door they liked and could spend all the time they wanted in the rooms on the other side. From their perspective, spending 3,500 hours a year on work and billing two-thirds of that time is normal. It’s just the way things are. If you struggled to succeed in this environment, you were the problem. If you tried to challenge the normalcy and sensibility of this environment, you were a threat. If you’ve wondered what the term “privilege” refers to (the non-legal, non-fun kind), this is an example.

So to a certain extent, calling out law firms for being unwelcoming and discouraging to women is like criticizing water for being wet. Law firms were built by and for men; so were most other businesses and organizations in the world. The great majority of other businesses and organizations, though, got over it. They decided that maintaining their default male architecture put them at a strategic disadvantage in terms of talent acquisition and market competitiveness, and they adapted. They haven’t adapted fully, not by a long shot, but most are at least trying.

Similar attempts to restructure law firms away from their “maleness,” however, have met with much less success. At the heart of law firms’ inherent inhospitability to women is the lawyer compensation system, which rewards the outlay of enormous amounts of lawyers’ time and effort, and the procurement of clients and business, above everything else. Go get clients and bill tons of hours: that’s the law firm advancement system in eight words. I and many others can speak from experience how incredibly hard it is to move law firms away from this system of valuing lawyers’ contribution. And yes, partly this is because it’s difficult to rewire any company’s reward system, at any time.

But let’s not kid ourselves: at least as important a reason is because the people who own and control the firm (80% male, most of them in their 50s and 60s) benefit directly from time- and effort-based remuneration, because they have loads of time and they have almost nothing distracting them from their efforts to go get clients and bill tons of hours.

It’s not just that this system makes these guys more money; it’s that it values them for who they are and what they do. This system affirms to them that their choices are the right choices; it vindicates and rewards them for doing things their way. It’s the mirror on the wall assuring them they’re the fairest of all. And if a side-effect of that system is to drive away by the thousands women (and men) who don’t live that life or choose those choices, well, c’est la guerre.

I promised one thing about remedies. I must tell you that I don’t have much to offer here (although happily, others do), because neither sexism nor law firm compensation systems are going to change tomorrow. But I do have an appeal to make, to any law firm lawyer who has read this far and has not stomped off feeling bruised or offended.

My appeal is this: Imagine a world in which half of all graduating lawyers are men (as is the case now), but only about one-third of your firm’s lawyers are male, and barely a fifth of your men are equity partners. Moreover, your few male lawyers are predominantly found in practice areas widely regarded as less profitable and less influential than the practice areas dominated by women. To make matters worse, your women lawyers out-earn your male lawyers by hundreds of thousands of dollars every year. Imagine further that your firm has been like this for decades.

Now ask yourself: Wouldn’t you think there was something wrong with that? If you happen to be male, sure, you’d almost certainly feel like the deck was stacked against you and your fellow men. I’m not appealing to your sense of fairness, though, but to your business instincts.

Wouldn’t you think that your firm was being hamstrung by some kind of systemic, gender-based flaw in its retention, compensation, and promotion practices? Shouldn’t simple arithmetic suggest that about half your lawyers should be men, and that maybe you’ve got a whole lot of less qualified women lawyers hanging around the office and filling out your equity ranks? Doesn’t it seem like you’re needlessly missing out on a whole bunch of great male lawyers? That somehow, you’re not getting the full benefit of what the legal talent market has to offer? And if the answer to all these questions is yes, is it really that hard to flip the scenario around the other way?

My last word on the subject to law firms is this: If you have a significant gender imbalance within your firm’s lawyer population, and especially within your firm’s equity partnership, there’s something wrong with your firm. Somewhere along the line, somewhere inside your firm, something went off the rails and crashed. You don’t have enough of the best people — you demonstrably, obviously, do not. And the reason you don’t have enough of the best people is that you are systematically driving half of them away. This isn’t normal. No matter what it might feel like to your most powerful people, if your firm is 65% male and your ownership is 80% male, your firm is fundamentally screwed up. Fix it.

Fight the future

Most law firm retreats are not what you’d call somber exercises in austerity. Lawyers don’t go out that often, but when they do, they usually go in style. Smaller firms might gather in high-end lodges or resorts adjacent to lakes or golf courses, while larger firms will convert a luxury hotel ballroom into a casino or book entertainers for a private concert; in both cases, the food is abundant and the drink flows freely.

I’ve come to think that firms shell out the money and crank up the fun at these bonspiels for a couple of reasons. First, they serve as internal messaging to signal the firm’s success and self-confidence to its shareholders; and second, they act as an incentive strong enough to persuade lawyers to give up perfectly good billable time for mere socializing.

Often, the business agenda at these meetings will strive to match the upbeat vibe. Because really, who wants to fight about partner succession or de-equitization just before hitting the links? So when lawyers gather to talk about their firm, they prefer to visualize a sunnier future and to discuss expansion, rate increases, new business opportunities, and the like. And so they should, of course: Growth is essential for law firms, so obviously these are good and important topics to tackle.

But hard issues and tough choices are no less important, especially now, when challenges to law firms seem to multiply around us. The understandable tendency is to punt these issues to an “offline discussion” or hurry past these parts of the agenda. But I would submit that the more uncomfortable a topic makes everyone, the more important it is to deal with it, and soon.

So in the time-honoured spirit of Spoiling It For Everyone, I’d like to propose that at your firm’s next retreat (or at least, at an upcoming executive or partnership meeting), you engage in a strategic visioning exercise that’s more of a downer. Specifically, I suggest that you and your colleagues contemplate the following unhappy scenario: It is two years into the future, and your law firm has just failed. (Credit where it’s due: I picked up this idea in a discussion at the Toronto Legal Innovators Roundtable earlier this year.)

The scenario goes like this: Your small group (and there can be multiple groups pondering this question at a larger gathering) is part of the cleanup team charged with sorting through the fallout of your firm’s collapse. Your group’s specific task is to conduct a post-mortem on the firm’s failure, to ask and answer two questions:

  1. Why did our firm fail? What was the proximate cause, and were there contributing causes? What was the general sequence of events that led to this outcome?
  2. What could we have done two years ago (i.e., today), to prevent the firm’s collapse? What steps could we have taken, in what order, and at what cost?

Don’t send this guy back to change the future, though.

You’ll need to provide the group(s) with enough information that they can make informed predictions about extinction-level events. This would include summarized financial indicators from the last few years (e.g., revenue per lawyer, collected realization rates, profitability by firm and sector), client churn, lawyer departures, and so forth. But you don’t want to drown people in facts and figures; just give them enough that they can detect troubling or dangerous trend lines and reasonably extrapolate from them. And ask your people to focus more on the second question, the “if only we had” part, because our goal here is not to find scapegoats, but to reduce the need for any scaping at all.

You’ve surely read accounts of major law firms that have failed, publicly and spectacularly, in the last few years. You may also have heard insider stories about less publicized failures of smaller firms in your region or community. What all these reports and accounts share is their dazzling 20/20 hindsight. It’s easy to pick apart the entrails of a deceased firm after the fact, but it doesn’t do the departed much good. Travel back in time before the disaster, though, and you can stop the chain of causation before it gets started.

Or these guys.

It might also be helpful, especially if your people haven’t given these issues much thought before, to provide the participants with some potential “failure trigger” candidates for their consideration. Here are some seriously important issues that I know law firms are (or should be) seriously concerned about right now:

  • Client attrition during a process of key partner succession.
  • Technology changing the old rules of workflow, leverage, and pricing.
  • Shrinking market share in sectors critical to firm revenue.
  • Over-distribution of profits relative to contribution and cash flow.
  • New and discomfiting client criteria for satisfaction and firm retention.
  • Cybersecurity and the inevitability of a client data ransom attack.
  • Dangerous clients that could ruin the firm’s brand and reputation.

Your firm almost certainly faces some of these challenges. (If your firm is facing them all simultaneously, you might want to rethink the partners’ retreat at the ski resort.) But not all challenges are risks, and not all risks pose an equivalent threat. So encourage your visioneers to rank these challenges in order of their risk payload; that is, which challenges does your firm face that have real potential to:

  • Drive away clients,
  • Push out key personnel,
  • Cripple your operations,
  • Damage your brand,
  • Infect your culture,
  • Invite regulatory scrutiny, or
  • Expose your firm to liability?

You know what? Go find Marty McFly instead.

Rare as they might be, these risks are nonetheless existential; that is, they threaten the firm’s continued viability. But few law firms convene their partners to think about potentially ruinous developments, not least because it’s kind of a drag. Who wants to spend a weekend at a posh resort thinking about all the ways the firm might go belly up? No one’s in the mood to listen to Hootie and the Blowfish after that.

But risks and rewards await your firm in equal measure, tomorrow and in the months to come. During times of intense market dynamism like this one, the peaks are higher, but the depths are deeper. You don’t want to keep your firm’s eyes so fixed on the mountains that you stumble into the valleys. And there are assuredly valleys ahead of you right now.

So ask yourself: What risks does your firm face today? Which of them are more threatening than others? Which of these has the potential, alone or in combination with other factors, to wreck you? Then, once you’ve settled on the clearest dangers to your firm, select the most acute one and assemble a crack team of the firm’s leaders and power brokers, with instructions to demonstrably reduce this risk in the next 120 days. It might put a damper on the party; but it could also go a long way to ensuring there’ll be many more parties in the future.

Dispatches, but not from the brink

Something I used to do here at Law21 was to regularly gather and publish links to reports, articles and columns I’ve written elsewhere. It occurred to me that I haven’t done one of these roundup posts for a while, so this seems like a good time to pull one together. Here’s what’s new (and newish) from me in the written and spoken word, with illustrative excerpts.

When in doubt, release a Greatest Hits compilation.

1. Ask Your Clients to Help You Improve Your Client Experience, at Lawyerist:  “Only your clients know what it’s like to experience the delivery of legal services from your firm. So ask them to tell you. Invite them to your offices for a day and have them meet the secretary who handles their files and inquries. Then sit down with the client and do a review of his or her entire timeline of interactions with the firm, and ask, “What could I have done better for you? Where did I fall short? Be honest.”

2. Is Your Law Firm Fulfilling Its Purpose? at Slaw: “Law firms exist to do exactly one thing: to deliver outcomes to paying clients. That is their entire market rationale. That is why clients give them money and wait very patiently for a return on that investment. Yet I can’t name a law firm that systematically, at the end of each client engagement, tracks whether it has delivered on the promise it made to each client in the retainer agreement for that engagement. Does your firm do this?”

3. The Rise of the Millennial Lawyer: 14 Ways a Generation is Changing the Rules for Lawyers On Demand: “Millennial clients will want to know not just the fixed price of a firm’s services, but also how that price compares with others. They will routinely ask their peers how you stack up against the competition. They will use billing data to compare how a lawyer’s hourly rate compares with the industry standard. All this information will drive their buying decisions.”

4. Q&A with LawStrat of India: “For the consumer law sector, watch for the growth of ‘chatbots’ that dispense legal information and sometimes advice, whether or not that information is sound and that advice is wise. Everyone has a smartphone, everyone texts, and everyone has legal issues that they can’t afford to hire a lawyer to resolve. Someone’s going to create a wildly popular Law Chatbot and own this segment of the market, for better or for worse.”

5. Why Should You Care About AI? at FlipCat LLC: “The biggest mistake that incumbents in every industry make is saying, ‘My customers won’t want that.’ Never assume your customers or clients won’t be interested in something that’s faster than you and cheaper than you. Never assume that something faster and cheaper than you can’t also be as good as you, or maybe even better. And never assume that ‘quality’ — which is what I hear most lawyers say is their unbeatable advantage — is as important to your clients as you think it is.”

6. Do You Really Know Why Your Law Firm Has Partners? at Canadian Lawyer: “Take a look at all the partners in your law firm. How many of them are utterly indispensable to the firm? Consider each current partner in your firm, as well as each potential partner coming up the pipeline, and ask yourself: (a) If this lawyer left your firm to join a rival, would it be a serious blow or a manageable inconvenience? Why? (b) If this lawyer was at a rival firm and you had the opportunity to recruit them at some expense, would you jump at the chance or would you hesitate? Why?”

Then there’s a couple of recent podcasts that I was fortunate enough to participate in:

And hey, can I sneak in a couple of book reviews here as well?

Finally, if you’d like to get advance notice of my published work and receive exclusive original content not available anywhere else, sign up for the Law21 Dispatch, my free e-newsletter distributed the first week of every month. To be added to the Dispatch list, subscribe to Law21 today.

That’s all I’ve got. I’ll be back with a new post later this month.

The rise of market pricing

So yesterday, I posted some thoughts about the problems I saw with value pricing in the legal market. The post drew a lot of interest and several insightful comments, especially from Ron Baker, and I encourage you to read the post and comments together when drawing your conclusions about value pricing.

Today, in this follow-up post, I want to expand on yesterday’s closing comments about how I think the future likely belongs to “market pricing” — that is, a system based almost entirely on how much the buyer is willing to pay the provider. I’ll preface these thoughts with what I should probably have prefaced yesterday’s — that I’m not a pricing expert by any means, and that I’m not advocating for or against any particular pricing mechanism (well, except the billable hour — I’m always happy to rail against that). What I’m aiming to do here — what I do most of the time at Law21, frankly — is not to describe the preferable future, but the probable future. Sometimes, happily, these are the same thing. Sometimes they’re not.

In order to have “market pricing,” one of the first things you’ll need is a market. Law has not always provided this element — in fact, I would argue, the legal sector has not been a functional “market” in the traditional sense for most of its history. To have a market, you need both buyers and sellers — plural. If you have one buyer and one seller, you’ve got a transaction. If you’ve got one buyer and many sellers, you’ve got a monopsony. And if you’ve got many buyers and one seller, you’ve got a monopoly — in this case, personified by the legal profession.

When you think about it, monopolizing a city’s housing market is a weird subject for a family game.

As I’ve written before, whatever the positive outcomes of restricting the authorized provision of legal services to a single class of provider, consumer choice is not among them. It’s trite to observe that most lawyers don’t view themselves in commercial terms (“Law is a profession, not a business!”), don’t like to compete against each other (it’s still forbidden in many jurisdictions for one lawyer even to suggest she’s better than others), and strike back ferociously against “non-lawyer” market activity. Lawyers have always been the exclusive supplier of legal services, and the organized Bar devotes enormous energy and resources every day to keeping it that way.

That’s why “market pricing” in the law has essentially always been “lawyer pricing.” We value our services according to the effort required and the costs incurred in applying our talents, and we decide what those efforts and costs should be. As I argued yesterday, this is largely because we don’t know any other way of doing it — but let’s be honest, it’s also because doing it this way has been easy, convenient, and profitable. So long as we’re the only authorized and competent providers of legal services (and lawyers get the final word on both authorization and competence), so long as we have knowledge and access and skill that no one else has, then we are the market. And we’ll price our services however we like.

That’s the world we all lived in up until about a decade or so ago. That’s when we began to see the emergence of unauthorized (hello, LegalZoom), newly authorized (hello, LLLTs), and unanticipated (hello, computer) suppliers of competent legal services. You could write a book about this (some have), but what matters for our purposes is that there is now more than one type of seller in the legal world.

And while these new players are still in their relative infancy, and lawyers still command the vast majority of legal spending, the seal has been broken. Lawyers’ share of the legal services market has peaked. (Since it used to be 100%, it really had nowhere to go but down.) Our share will decline from this point onwards — not down to zero, not anywhere close to it, but low enough that other suppliers can gain and solidify viable positions. And we will have an actual, functional market in legal services.

As we approach this event horizon, a lot of things are going to change, and the pricing of legal services will be among them. A multi-provider legal services market will breed intense competition for market share. There are three principal ways to win and retain market share in the legal sector.

Compete on quality. This is where lawyers instinctively gather — we maintain a nearly religious belief that our excellence, expertise, and education will persuade clients to choose us (as they should!) over anyone else. The problem with trying to compete on superior quality, though, is that not many clients can accurately assess quality, and fewer still base their purchasing decisions on getting the “very best.” And as technology upgrades and process improvements continue to take hold in the legal sector, the standardization (get used to that word, lawyers) of legal work will come ever closer, and quality distinctions between providers will cease to be very meaningful. Quality, from the client’s perspective, is table stakes: they assume it. What else you got?

Compete on service. A number of smart providers (not all of them lawyers) will differentiate themselves on the basis of the way in which they deliver their services, including the client’s experience throughout the transaction. Ron Friedmann’s excellent post on this subject should be a call to arms for lawyers to take service seriously, through better operations, user design, relationship-building, and responsiveness to client preferences. The great thing to remember about competing on service delivery is that anyone can do it — it takes no special intellect or pedigree to treat your customers like gold, just effort and commitment. But for all I champion competing on service, there are still significant investment costs to get there, and as more providers figure it out, it could well be a diminishing differentiator over time. And that leaves:

Compete on price. This is where the legal market is going — slowly and fitfully in some areas, rapidly in others. We’re going there because price is the one thing clients can understand at the beginning of a transaction — service doesn’t manifest itself until during the transaction, and quality doesn’t manifest itself until afterwards. Price is clear, obvious, comparable, and certain — you know what your investment is going to be right from the start. A billable rate and an estimate of hours is not a price — it’s a non-binding estimate. Nobody prefers non-binding estimates over a set price, including lawyers. The legal market is now filling up with providers willing and able to offer a set price at the outset. They’re going to take business away from providers who can’t.

Note that I haven’t said “Compete on the lowest price.” That’s not what I’m talking about. Number one, we’re not there yet — first we need to get to a point where most legal services are sold with a price tag, not a running meter, and that’s still some distance away. Number two, the lowest price in any market is not always the winning one — for many buyers, price is a proxy for quality, both low and high, and some buyers are not comfortable with the lowest bid. But rest assured, as quality differences among suppliers continue to narrow — and we are a lot closer to that point, in both the corporate and consumer legal markets, than many lawyers think — and the risk that “low price = low quality” falls, then prices will fall, too. And as price competition heats up, many legal services will become much more affordable than they are now.

Ideally, the value of a legal service will match up reasonably well with its price, but there’s no guarantee of that. Ask a criminal defence lawyer how that feels. (In my own perfect world, governments would significantly subsidize the income of lawyers who practise criminal, family, and refugee law, in recognition that the value of their services to the client and to society far surpasses what even healthy market mechanisms can provide. This would be more than just “legal aid” — this would be a restructuring of private legal services in these areas into a quasi-public service, maybe even a utility.)

Steer clear of Water Works, though.

Some areas of the law will be less amenable to automation and standardization pressures, of course. This is where you’ll find your outstanding advocates, your shrewdest negotiators, your most insightful counsellors. They’ll charge staggering amounts of money for their services, far more than they do now, because their customers need what they’re selling and can afford it. In some ways, they’ll come closest to “value pricing” as I described it yesterday — really getting paid what their services are worth — but probably still won’t achieve it. (If you give one piece of good advice every week to the $50 million CEO of a $50 billion company, what should your take-home pay be? I’d say a lot more than $1,000 an hour.)

My larger point, however, is that the pricing of lawyers’ services will be affected by many factors — but lawyers’ opinion of what their services are worth won’t be among them. This is what I mean by “market pricing” — buyer preferences, enabled by market forces beyond lawyers’ control, will determine how much money buyers fork over for legal services, and in what format. If the new legal market resembles other markets to any degree, then buyers’ pricing preferences are going to include:

  • simplicity,
  • convenience,
  • reliability,
  • comparability, and
  • affordability.

Roughly, I suspect, in that order.

And I’ll add this: It is in the direct financial interest of clients to accelerate the evolution of the legal sector towards multi-provider status. This might not yet have occurred to groups like corporate counsel associations and chambers of commerce, but if not, it very soon will. The more sellers, and the greater diversity of sellers, of legal services in this market, the sooner that buyer-driven pricing will become a reality. Lawyers and bar groups that continue to fight the “non-lawyer” battle should be aware that it won’t take long for their clients to choose a side in that fight.

So what’s the takeaway for lawyers? Above all, I think, it’s this: In a market in which you have little control over your price, you must have complete control over your costs. You cannot tolerate a situation in which your costs of doing business are unstable or unpredictable. You can’t be at the mercy of your suppliers of goods and services (as indeed, your own clients cannot be at the mercy of you). You can’t run a business riddled with inefficiency and duplication, or you’ll be cleaned out by other businesses that aren’t. You must know not only how much it costs you to deliver a service, but also how to continuously reduce that cost, how to increase your productivity, to remain competitive. If you invest well in process enhancements, service upgrades, and marketing improvements, then you’ll be able to influence your price, perhaps significantly. But complete control? Very unlikely.

Pricing is hard. One of the reasons it’s especially hard in the legal sector is that we’re just now emerging from a monopoly situation in which pricing didn’t really matter — we didn’t even have “price,” in many cases. Our current struggles around pricing are just part of the birthing pains of an actual, healthy, bouncing baby market. If you don’t have a handle on it yet, don’t be too hard on yourself — not many people do. But you do need to get a handle on it as soon as you can. When it comes to legal pricing, our time is not our own.

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I’m honoured to have received this review of my new book, Law is a Buyer’s Market: Building a Client-First Law Firm, from James G. Leipold, Executive Director of the National Association of Law Placement (NALP).

“This is a book you should buy and read if you take an active interest in the future of large law firms in North America, but I would go further and recommend you buy two copies, sneaking one onto the desk of your managing partner or dean by stealth in the dark of night. [Jordan] does as good a job as anyone of diagnosing the current law firm malaise, and he does it with an easy grace and style that makes the read a pleasure — then he goes further and offers a road map for building the law firm of the future.”

Learn more about Law is a Buyer’s Market, including how to order here at Law21.

The problem with value pricing

A day in the life of the corporate legal market:

A law firm submits a bill to a client. The client doesn’t like the bill because the amount is higher than expected or seems incommensurate with the value of the service. The client contacts the firm and asks for the amount to be reduced.

What does the firm do? Eight times out of ten, it reduces the amount, at least according to all the accounts I’ve heard and read. The client pushes back, and the firm gives way. This happens every day in the corporate legal world, and when it happens often enough, the nature of the transaction itself changes. The “final” bill issued by the firm actually becomes the starting point in negotiations — short and one-sided negotiations, as it turns out, because the client says, “I will pay this much,” and the firm invariably says, “Okay.”

Why doesn’t the firm push back harder? Why doesn’t it take steps to demonstrate that the bill represented good value? Because, in most cases, the firm can’t. It can’t really explain why Lawyer A spent 37 hours on the client’s project, beyond “That’s how long it takes,” and why her billable rate is $275 per hour, beyond “That’s how much she costs.” Why does it take this long? Why does she cost this much? These questions are terrifying to lawyers, because their honest answer would be: I don’t know. Lawyers have never thought much about it, because they’ve never needed to think about it. That’s not how the legal market has worked up till now.

But, notice: The client does not normally offer a substitute value definition. The client does not say, “The value of the services you provided to us is closer to $X, an amount we calculated according to the attached methodology, so send us a bill for this amount.” Most clients can’t easily assess the value of the legal services they received either, but they’re pretty sure the firm’s bill is too high and they’re very sure they can get it reduced. So they’re likelier to simply say, “Knock 12% off the amount” or “Drop all billings for lawyers called fewer than three years ago” or some such. In practical terms, neither lawyers nor clients really know the value of the lawyers’ work. They’re both groping around in the dark.

Clients undertaking a careful assessment of lawyer value.

Lawyers have always measured and sold their services according to inputs — their hourly efforts, primarily — because it’s all they’ve had to go on. Lawyers can easily measure their inputs, but they can’t really measure outputs, because legal output value is entirely situational and subject to the client’s experience and assessment. Clients have never enjoyed paying lawyers on the basis of inputs, but it’s not like they had any better ideas. “Value pricing,” attractive as it is in theory, confronts clients with some hard questions: “How much are these services really worth to me? Do I want to take the time to find out? And if I do find out, do I want to tell the lawyer?”

Consider: How much is a contract worth if it never gets so much as glanced at by either party for its entire term? (This describes a whole lot of contracts.) Based on outcome and use, the contract arguably is worth almost nothing. How much is that same contract worth if it ends up helping to clinch a transaction worth $300,000? Now, what if a $300,000 dispute is avoided because the contract was so well-drafted? Would anyone ever know the dispute was avoided? If the client somehow found out, do you think he’s going to call up the lawyer and invite her to send him a new bill to reflect this higher value?

Or how much is a last will and testament worth? Set aside for a moment the insurmountable challenge of pricing the peace of mind that comes with knowing your loved ones will receive the assets you intend for them. Suppose the testator has assets of $10,000 — how much should the client pay for that will? What if the testator wins the lottery the day after he buys the will, and his estate is suddenly worth $10,000,000 — is the drafting of the will suddenly worth more?

The most frequent response to these objections, and it’s an entirely reasonable one — I’ve been making it myself for some time — is that the lawyer and the client should have detailed conversations about their respective needs and situations, develop a degree of trust in the other’s good faith, and arrive at an amount (or a framework for determining an amount) that strikes both sides as fair in the circumstances and attentive to each side’s needs. A fine example can be found in this insightful article in Bloomberg Business of Law, which describes Ron Baker’s excellent eight-step model for setting up a value-pricing system between a law firm and a client.

I’m confident that this model is extremely effective, and for those lawyer-client relationships that have managed to put it into practice (mostly those with large volumes of repeat business, I’d imagine), it seems to be delightful. But I’m also confident that many firms and clients alike would consider it to be a significant outlay of effort and resources. It requires a lot of time, expertise and goodwill on both sides to make it happen — a degree of exertion that rarely scales and that most people, lawyers and clients alike, aren’t interested in making. (I’m not saying, to be clear, that they shouldn’t make the effort. I’m just saying, in practical terms, most won’t.)

So close to unprofitable.

This is the real reason, I think, why value pricing has been slow to make headway in the legal market: It is incredibly difficult to calculate the value of lawyers’ services. It’s a huge hassle. Many people want something easier to understand and simpler to implement, even if it’s less reflective of actual value. The billable hour is not hanging around because it’s a brilliant pricing mechanism. It’s hanging around because we haven’t come up with anything equally simple but markedly better.

And these are just the easiest examples. How much is it worth to help someone escape an abusive marriage and keep a violent ex-spouse away? How much is it worth to help someone stay out of a brutalizing federal penitentiary? How much is it worth to help someone flee certain death from religious persecution by enabling their emigration to a liberal democracy?

The value provided by lawyers in family, criminal, and refugee law is off the charts — yet they’re some of the lowest-earning lawyers in the profession, because the value of their services routinely outstrips their clients’ ability to pay it. The “value pricing” argument cuts both ways, and not always to the client’s benefit. And anyway, in none of these situations does either the client or the lawyer have the time or inclination to develop a trusting relationship that can enable fair pricing.

The real value proposition of most legal services is an enigma, one that can be solved with great effort over a sustained period of time — but my expectation is that few people will consider this kind of effort worthwhile.

So how can we better price lawyers’ services? “Input pricing” is a fiasco: the price bears no relation at all to the value of the work, and the client bears all the risk of errors and inefficiencies by the lawyer. “Value pricing,” as I’ve tried to demonstrate, is theoretically appealing but is often unworkable without a significant investment of effort in each client transaction — an effort that in itself will raise the cost of the lawyer’s services and complicate a process that most clients desperately want to streamline.

For these reasons, I’m coming to think that the likeliest pricing system to emerge for legal services will be simply “market pricing” — that is, how much the client is willing to pay the provider. I don’t pretend that this is necessarily a desirable system — it’s a highly imperfect one, and potentially regressive. But as the legal market continues to evolve and legal supply continues to diversify, I think “market pricing” will be able to deliver more fairness, value, and expedience to the pricing of legal services than we have today. More on this in a follow-up post, “The rise of market pricing.”

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Law is a Buyer’s Market: Building a Client-First Law Firm is available here at Law21 (in print) and at Amazon (as a Kindle e-book). “This is an exceptionally clear book, brimming with practical help, and humorous into the bargain,” says Richard Susskind, author of Tomorrow’s Lawyers. “Jordan’s assessment of the legal market should be read carefully by clients and lawyers everywhere.”

Faster horses

Abraham Lincoln never said, “If you want to test a man’s character, give him power.” Albert Einstein never said, “If you judge a fish by its ability to climb a tree, it will live its whole life believing it is stupid.” I suggest openly mocking your Facebook friends who post these and other misquotes, because we live in a post-Snopes world and there’s no excuse for that kind of thing anymore.

Probably not 100% historically accurate.

Here’s another classic misattribution: Henry Ford never said, “If I’d asked my customers what they wanted, they’d have said, ‘Faster horses.'” What’s interesting about this one, though, isn’t whether the real Ford said it (the attitude embodied by the quote does seem to have cost his company auto market leadership in the 1920s, at any rate). It’s whether the “fictional Ford” was correct. Is it foolish to ask your customers what they want when you’re trying to innovate new and better products and services? This is a live question today for lawyers and law firms in a rapidly accelerating buyer’s market.

The argument in favour of shunning your customers’ input on product development is that they see only the products and services they’ve always had, and so they only ever seek incremental improvements (in Clayton Christensen’s phraseology, sustaining innovations). They’re not going to make the leap of imagination required to visualize something brand new, an improvement in kind rather than degree (disruptive innovations).

Steve Jobs is the modern ambassador for this latter approach. While the world was trying to build better BlackBerries, he asked a question nobody else had asked: What if we do away with the keyboard and make the whole device a touch screen? Asking and answering that question made Apple several kajillion dollars, so you can see why people are enamoured of it. There are other examples. James Dyson asked: Why do fans needs blades? Muhammad Yunus asked: Why not lend very small amounts of money? iPhones, bladeless fans, and microfinance are three great innovations of our times, all decidedly not generated by customer focus groups.

So how should lawyers approach this question? Should we incorporate our clients into the process of making our law firms better? That certainly seems like a good idea — I’ve been hammering away at it for years, at any rate — given that our clients will have a much clearer sense of their needs than we will, and we should be gearing everything we do to maximize the effectiveness of the outcomes we provide to them.

And yet, even in this era of unprecedented access to legal information, clients often don’t know what they don’t know. The problem or the need they perceive isn’t always the one that they should be addressing — good legal advice isn’t just about fixing problems, but is also about correctly diagnosing which problem needs to be fixed. Moreover, your client might identify the wrong solution to his problem. He might tell you that he worries constantly about his legal matter, and so what he wants is your cellphone number so he can call you any hour of the day or night to get reassurance. Is that really in anyone’s best interests, especially yours?

Here’s what I think. Our fictional, customer-scoffing Henry Ford was both right and wrong. He was right insofar as he recognized that his customers couldn’t also be his product development people. They couldn’t be expected both to buy the current thing in great quantities, and simultaneously to recognize the shortcomings of the current thing and busy themselves in proposing a replacement. Your clients represent an important resource upon which you should draw to build a better law firm, but if you wait for them to come up with better ideas, your competitors will come up with them a whole lot sooner.

But fictional Ford was also wrong, because he stopped the process of inquiry there. “Faster horses,” he harrumphed, and that was that. Here’s what fictional Ford should have done: When his customers said, “Faster horses,” he should have replied, “And what do you need them for?

The reason why people say “faster horses” is that they’re in a hurry. They want to get somewhere in less time than it currently takes them. But they’ve never conceived of a horseless carriage with an internal combustion engine, so they express their desire in terms they know and understand. Once they’ve seen an automobile, their frame of reference changes. Now they want faster automobiles, and eventually, they’ll want warmer and safer and air-conditioned and Wifi-enabled automobiles. But the point is that it was never the “horses” they wanted. It was always the “faster.”

Last week, I was told about a major courier company that conducted an extensive strategic review of the core purpose of its business. What emerged from that review process was a decision to branch out into 3-D printing. Stop and think about that for a minute. The company recognized that it wasn’t in the business of sending packages; it was in the business of helping people get something they didn’t currently have, but wanted as soon as possible. Overnight delivery, one-hour delivery — these are just faster horses, the best solution that current technology can offer. 3-D printing is the automobile: a solution you never knew you wanted until it was offered to you.

Nobody ever asked for these features.

Smart companies ask customers what outcome they want, not what vehicle they think should deliver the outcome. The outcome could be concrete — I want something here, in my hands, right now — or it could be experiential — I want to access the world’s information as quickly and easily as possible. Then the companies listen closely to the answer and ask, “And why do you want it?” And they keep asking, keep drilling down, until they come to the heart of what the customer desires. Then they ask themselves: How can we fulfill this desire better than anyone else and better than this customer imagines?

Your client says, “Give me your cell number,” but that’s not really what he wants. He wants to know the latest information about his legal matter because he’s deeply anxious about it, and he wants to be able to relieve that anxiety whenever it arises. So you tell the client that you’ve created a password-protected private page on your firm’s website where he can log in to access the status of his case and his bill any time of day or night. I promise you he’ll forget all about your cellphone, because he doesn’t really want to talk to you. You’re just the fastest horse he can think of. Give him an automobile instead.

Bring your clients into the process of making your firm better — they’re the whole reason your firm even exists, after all. But don’t ask them what you should do next, because that’s not their role. Ask them what they want and need, and why they want and need it. Keep asking and digging until you’re sure you’ve reached the bedrock motivations that drive them to consult your firm. Then create services, products, and solutions that respond to those motivations. It’s not the “horses.” It’s the “faster.”

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Gerry Riskin, chairman of Edge International Consulting, reviewed my new book, Law Is a Buyer’s Market: Building a Client-First Law Firm, and called ita must-read for firm leaders and anyone else who has a concern about the future of the legal profession.” For more information, other reviews, and a link to purchase, please visit Law21’s Books page.

How to bring about change in law firms

(Note to readers: Pursuant to the terms of the New Author Self-Promotion Act of 2006, please be advised the statutory maximum of three (3) plugs for my new book will appear in this post. Thank you.)

Everyone’s gotten the memo by now. The legal market has experienced fundamental change, and law firms need to respond in equal measure. If your firm’s leadership doesn’t know or accept this, then with great respect, I think your firm needs new leadership. Ignorantia mutatio non excusat, to muddle a phrase.

Nor should any law firm leader be allowed to say, “I don’t know what we can do.” There’s now a wealth of practical, reliable information about how firms can change their operations and run themselves more effectively and profitably. This information is widely and easily accessible in countless articles, blog posts, and books, such as the brand-new and well-reviewed Law Is a Buyer’s Market: Building A Client-First Law Firm(1)

So we know what we need to do. What we don’t yet know, for the most part, is how to do it. Bringing about change in a law firm remains extraordinarily difficult, and the more fundamental the change, the greater the difficulty. That’s a problem, because we need to start implementing all these great ideas and putting them into practice at our earliest opportunity. Owning the tools won’t help us if we don’t take them out of the toolbox and start using them.

I couldn’t embed the video, so here’s the 45 cover.

These were some of the thoughts on my mind when I addressed the annual meeting of the Association of Legal Administrators in Denver earlier this month. I felt confident that this audience of law firm leaders and managers understood, more so than most, the steep challenges looming over law firms today. I also hoped — correctly, as it turned out — that they would be able to share some success stories about how they had overcome the incredible resistance within law firms to doing things differently.

In this post, I’m going to lead off with some of my observations about why change in law firms is so hard, and follow that up with suggestions and examples, drawn from the ALA conference and elsewhere, about how firms can nonetheless bring change about.

Why it’s hard to change law firms

Change in law firms is hard mostly because change is hard, period. People hate change. I mean, they love it in the abstract, and they’re happy to tell other people in great detail why they should change, but they don’t want to actually do it themselves. This is human nature, and unless you plan to automate your entire law firm (which I do not think you should do), you’re stuck with it.

I go into more detail about this in Chapter 14 of my new book, Law is A Buyer’s Marke(2), but there’s extensive psychological research documenting people’s resistance to change. Two behavioural patterns in particular, the status quo bias and the endowment effect, show that people naturally prefer things as they are, fear a loss more than they desire an equivalent gain, and place a higher value on an item simply because they already own it. Change represents a loss of the known and familiar, and people will fight that, no matter how attractively you sell the replacement.

But of course, lawyers fight change more aggressively and successfully than other people. Partly this is because we’re wired to be more conservative and trained to be more risk-averse than the general population, and partly because we’re skilled at arguing our way around and past an unpleasant or inconvenient fact. And since law firms are the concentrated commercial expression of lawyer culture, they are especially change-recalcitrant places. For better and more detailed analysis of lawyers’ resistance to change, read this excellent article by Anne Collier and review this slide deck by Ron Friedmann and Jim Tuvell.

So it’s worth keeping in mind, before we proceed to possible solutions, the nature of the problem. Lawyers aren’t fighting your change efforts simply to be difficult. They’re fighting it because everyone fights change; the fact that they’re lawyers just makes them especially good at it.

How to change law firms

The first thing to recognize is that there’s no single right answer. Experience has shown that facilitating change, especially in law firms, requires the use of more than one tactic or even several, sometimes applied in sequence, sometimes simultaneously. This complicates the process, of course, but it might also be a relief to know that there’s no magic bullet out there to which other firms have access and you don’t.

The second thing to recognize is that you are not going to accomplish change by working against your own people. No matter how frustrating you may find their resistance, they are not your enemy. They perceive their own interests very clearly and will fight to protect them, as would you in their place. Strive to understand those interests. You shouldn’t place those interests ahead of the firm’s, but you do need to know them and clearly acknowledge them.

All that having been said, here are five approaches that I’ve seen and heard about that have had some success advancing change in law firms

1. Build trust through transparency. This is my preferred tactic, and it received a lot of support from the ALA audience. Leaders of law firms in difficult circumstances opened up the books inside the firm, showed everyone the nature of the challenge, and asked people to help overcome it. They personally visited lawyers and staff, answered questions as best they could, and tried to defuse any suspicion of a hidden agenda. Call it “change management by walking around.” If you prove yourself trustworthy, you’ll gain trust, and thereby cooperation. I’ve written on this subject before, and I’ll re-up this quote from that post: “Every change requires effort, and the decision to make that effort is a social process.”

2. Give people control. People’s feelings of powerlessness in the face of change fuels much of their resistance to it. You can’t give people the power to reject or excuse themselves from change, but you can give them the power over how to adapt to it. One ALA attendee described how her firm wanted to help improve people’s physical and mental health, but couldn’t settle on a program to achieve it. So they gave everyone a $1,000 voucher to spend on any wellness-improving activity they liked. The diversity was amazing — gym memberships, yoga lessons, vacations, etc. — but so was the massive, firm-wide improvement in morale and productivity. People chose how they wanted to adapt to a new firm directive, and that improved buy-in tremendously.

3. Make it a game. Much has been written on gamification in the law, and possibly it’s been oversold a little at this point. But for lawyers, who like competing and love winning, gamification has a lot of potential to help facilitate change. Another ALA attendee described how her firm struggled to get lawyers to turn in their dockets on time. So they made it a competition, offering incentives to file dockets by a certain time every week and publicizing within the firm which departments and groups led the firm in hitting their deadlines. Cash prizes were also offered to the monthly and annual leaders. Docket compliance, which had been limping along in the 40% range, roared to the mid-90% level. Lawyers love winning.

4. Occasionally, apply the hammer. Carrots are fun and attractive incentives, but sometimes, you just need the stick. There are limits to the volume and intensity of punitive measures you can apply in law firms, especially to lawyers; but on a short-term basis, backed by strong leadership, it’s highly effective. A number of law firms, including one ALA attendee’s, have withheld a partner’s payouts until that partner turned in his or her dockets. This measure was strengthened by its logical argument: we can’t pay you if you don’t bill your work. The bonus here, to my mind, is the quiet, morale-boosting delight junior lawyers and staff take in seeing consequences applied to powerful rule-breakers; it makes them likelier to follow the rules themselves, too.

5. Await new conditions. This can be phrased, less charitably, as “Wait for the difficult people to leave or die.” I included this on my list at the ALA partly as a joke, but it did get a few hands raised here and there. Sometimes there’s a small number of influential people who are blocking a change initiative because they feel it would hurt their personal or financial interests. Pressure from respected peers can often lessen this resistance, but not always. I once advised a legal organization facing this kind of problem. I said, “If you can’t change the landscape, change the weather.” My client introduced a fleet of minor innovations and talked repeatedly about how the future would bring more change. Soon enough, some resisters began to move on, partly because they could tell the climate was changing and it wasn’t going to suit them as well.

Bowie would have been way too obvious.

We talked about other approaches at the ALA event, such as alarming everyone with dire warnings, or selling the benefits of change in detail, but these were generally held to be less effective. “Scared straight” has a checkered history of success as a change tactic, and as mentioned previously, people are usually not persuaded to give up present conditions by the promise of future benefits. I also added my own recommendation that whatever change you want to accomplish in your firm, enlist your clients in the effort. It’s easy to ignore what some consultant or even the managing partner says; it’s harder to ignore what the person behind your origination credits says.

I’d love to hear your own thoughts and success stories about change in law firms in the comments below. But it’s worth emphasizing, again, that the most effective change management processes will combine several of these and other approaches and will be careful to administer the right medicine to the right people.

What matters above all is knowing your firm, knowing your people, listening to their concerns, showing you’ve heard them, and continuously enhancing the level and quality of trust between the firm’s leadership and the people they’re leading. Change isn’t something you do to people. Change is something you help people go through. Make that the mantra of your firm’s change management efforts.

– – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –

Here’s what the business intelligence director of an AmLaw 100 firm wrote me about my new book, Law is A Buyer’s Market: Building A Client-First Law Firm: “You offer an exceptionally clear diagnosis of many law firm ills and concrete recommendations on changes law firms should make in order to thrive in the buyer’s market. It is a very practical book … I hope more lawyers and law firm decision-makers read this book and take appropriate actions.” Law is A Buyer’s Market is available here. (3, right under the wire)

So I wrote a book

This book, to be precise:

This is Law Is A Buyer’s Market: Building a Client-First Law Firm. It’s 224 pages in paperback format, runs 15 chapters, and clocks in at about 75,000 words. It explains why the balance of power in the legal market has shifted from lawyers to clients, forecasts the future success of law firms that recognize and respond to this fact, and recommends courses of action by which today’s firms can reconfigure their purpose, markets, clients, strategies (plural), operations, and personnel to be among those successful responders. I’m really proud of this book, I’m kind of worn out from writing it, and I’m still a little astonished that I’ve managed to pull this off.

I’ve been wanting to author a book for years now, almost since I first set out on this speaking and consulting stage of my career back in 2010. Two years ago, I decided to move from wishing to commitment: I stepped away from posting to this blog, I cut down on my speaking engagements, and I cleared the deck in order to give myself time and space to produce a book about the legal services marketplace. The delays and misadventures I encountered while trying to do that are set out in the book’s introduction. Suffice to say I have enough material to someday produce a blog post titled “How not to write a book.”

But I can also now tell you how to write a book: Identify and maintain a clear vision of what you want a specific audience to know and what you want them to do about it. My specific audience is the people (lawyers and otherwise) who lead, influence, or care about the sustainability of midsize and large law firms over the course of the next five to fifteen years. What I wanted them to know was not just that legal market conditions were changing — their Accounts Receivable reports had already told them that — but why it was changing and how it would change further. And most importantly, I wanted them to have my practical advice about what they should and could do, right now, to change what their firms do and how they do it.

I sent advance copies of Law Is A Buyer’s Market to some people in the legal industry whose work I really respected, asking them whether, if they thought the book merited it, they might supply a testimonial. I was deeply gratified to receive, among others, the following responses:

“This is an exceptionally clear book, brimming with practical help, and humorous into the bargain. Jordan’s assessment of the legal market should be read carefully by clients and lawyers everywhere.” – Prof. Richard Susskind, author, Tomorrow’s Lawyers.

“Law firm leaders who adopt Jordan’s suggestions for managing the law firm of the future – focusing on clients, competitiveness, and culture – will more effectively serve the real business needs of their clients and will be better able to face the disruptive forces that are irrevocably changing the legal market.” – Scott Rechtschaffen, Chief Knowledge Officer, Littler Mendelson P.C.

“This book is a must-read for every law firm leader. It informs strategic planning from the client’s perspective, helping law firms improve the legal delivery service model and deliver greater value to clients.” – Jill Weber, Chief Marketing and Business Development Officer, Stinson Leonard Street; 2017 President, Legal Marketing Association

“Jordan’s provocative book is a challenge to all law firms and lawyers — to listen attentively to our clients and see the world through their eyes, to build our businesses on rapidly changing client needs and markets, and to embrace technology-enabled innovation.” – Peter Lukasiewicz, Chief Executive Officer, Gowling WLG

“Jordan Furlong has written a book for the first generation of law firm leaders to face the existential threat of a true buyer’s market.”– Prof. William Henderson, University of Indiana Maurer School of Law

 “If you are a law firm partner or leader, you must read this book and suspend the natural but dangerous desire to believe it doesn’t apply to you – because it applies to everyone in our industry.” – Susan Manch, Chief of People & Development, Norton Rose Fulbright US LLP

For a whole bunch of reasons, I decided not only to self-publish this book, but also to sell it exclusively here at Law21. So if you go looking for Law Is A Buyer’s Market at Amazon, you won’t find the print version there.

What you will find, at Amazon US and Amazon Canada, is the downloadable Kindle version of the book. You’ll also find it at Amazon Mexico, United Kingdom, France, Spain, Germany, Netherlands, Brazil, India, Australia, and Japan — and folks in those jurisdictions might be especially interested because, I’m sorry to say, the shipping costs of the printed book outside North America are more than half the price of the book itself.

That price, by the way, is US$34.95, plus a US$5.00 flat fee to help offset shipping and handling costs for the US and Canada ($25.00 for shipping outside North America). There are also discounts available for bulk orders, should your law firm or law school be interested.

You can find ordering information for Law Is A Buyer’s Market on Law21’s Books page — and while you’re there, you might also want to check out Creating an Online Publishing Strategy for Law Firms, a book I’ve co-authored with my friend Steve Matthews of Stem Legal Web Enterprises that’s been published by the ABA’s Law Practice Division. (I didn’t actually intend to have two books available at the same time — that was just a happy coincidence.)

And if you happen to be in or around Toronto on Thursday, March 23, the official launch event for Law Is A Buyer’s Market takes place at Ryerson University’s Legal Innovation Zone from 5:00 to 7:00 pm (please RSVP through the link if you’d like to attend). I’ll be saying a few words about the book, talking about the latest developments in the legal world, and trying to figure out how to use Shopify’s point-of-sale platform in real time, which should be amusing for all concerned.

Anyway, there you have it. I’m happy to answer any questions you might have about the book — just leave them in the Comments section below and I’ll get to them as soon as I can. If you do pick up a copy of the book, I trust and hope that it will reward your investment. And as always, I tremendously appreciate your continued interest in this small corner of the legal world.

Getting over technology

Since the start of the year, I’ve received three different media calls asking me about the role of artificial intelligence in the law. Partly to make good use of the notes I prepared for these calls, and partly so that I’ve got something written down to which I can send reporters with future inquiries of this type, here are some of my thoughts on the topic of technology in law practice.

The truest observation ever made about technology remains this one from American computer scientist Alan Kay: “Technology is anything that wasn’t around when you were born.” British author and technophile Douglas Adams famously expanded on Kay’s comment: “Anything that’s in the world when you’re born is normal and ordinary and just a natural part of the way the world works. Anything that’s invented when you’re between 15 and 35 is new and exciting and revolutionary and you can probably get a career in it. Anything invented after you’re 35 is against the natural order of things.”

Great game, weird book.

These two quotations should be borne in mind anytime you start talking about technology in law firms. Law firms are stuffed to the rafters with technology, and always have been. There’s the photocopier, for example — an extraordinary device, if you stop and think about it, and who talks anymore about how many monks it replaced? Email blew me away the first time I used it — you can send a written message to someone in the building next door, immediately! The telephone, for crying out loud — maybe the most revolutionary invention of the last 500 years, and now we let almost every incoming call go to voicemail. Since the time feathered quills and inkwells were first replaced by fountain pens, lawyers might have complained about every new technology, probably resisted it, but inevitably they accepted and assimilated it.

So it will be, soon enough, with artificial intelligence. I’m as amazed as you are by what can already be accomplished in legal services by machines equipped with cognitive reasoning, and how much more those machines certainly will accomplish in future. But right now, somewhere in your community, someone in her late teens is thinking about maybe applying to law school someday, and by the time she’s called to the Bar in 2027, AI-powered legal services will be normal. They’ll be routine. They’ll be boring. And our future lawyer will be less than 10 years away from grumbling about genetically engineered judges.

By all means, maintain a childlike sense of wonder about the evergreen miracles of technology as long as you can. Keep postponing and rescheduling your appointment with curmudgeonhood (I missed that train awhile back.) But at the same time, maybe the best thing we can all do to really absorb and apply the astonishing power of technology is to just get over it.

Let AI become normal. Wait for it to become routine — it probably won’t take as long as you think. But the longer we talk about the exciting but virtually indefinable term “artificial intelligence,” and the longer we tolerate the repeated use of “robot lawyers” with anything but self-aware irony, the longer it’s going to take us to make the necessary adjustments to our worldview and just get on with things.

If I could offer one reliable way to help speed along this adjustment, it would be this: Stop asking whether “AI will take away lawyers’ jobs.” Stop asking what AI will do to, or for, the legal profession. Stop thinking about AI from the perspective of the lawyer altogether and start thinking about it from the perspective of the client.

How will AI help clients? Will employing AI, or any burgeoning technology, help a client to get what it needs faster, less expensively, or at a higher degree of quality? Will the client get a better result — measured in outcome, experience, or resource allocation — using a new technology than would have been possible or probable with pre-existing tools and methods? If I’m at a legal tech trade show and I’m talking with an AI vendor, this is what I want to know, and I want numbers and case studies to back up the answers.

Because if there are AI tools out there that can deliver those foregoing outcomes to my clients, then I want them in my law practice, today, while I can still derive a competitive advantage from using them — before they’re widely available, before they’re commonplace, before they’re boring.

Ten to fifteen years from now, by the time our late-teens prospective lawyer is well into her career, many law firms could offer a branded, mobile, user-friendly application to which their clients subscribe, on a paid or even a complimentary basis. Clients would ask this application — out loud, with their voices — questions about how the law applies to a situation they’re facing, or what they should do in a circumstance in which they find themselves. They’d receive immediate, practical, and accurate answers from the application, close it up, and get on with what they’re doing.

Any sufficiently advanced technology is indistinguishable from the Magic School Bus.

Today, we’d consider that to be a significant, even sci-fi-level advancement (and make no mistake, we have a significant distance to go to get there). But by the time we do get there, it will be considered normal. “Yeah, that’s just the Answer App; all the firms have one now.” The great gift (and curse) of technology in the 21st century is how quickly it renders the magical commonplace. Law, which is so far behind technologically and has so much ground to make up, is going to experience that gift in an especially rapid-fire and visceral fashion.

So quit worrying about what technology will do to you and your firm. Start thinking instead about what it can do for your clients. Figuring out the second point will, in due course, take care of the first.


Foreshadowing: Look for a major announcement here at Law21 next Monday, March 20. In fact, I’d even say you should …. [puts on sunglasses] … book the date.