The next top model: Law firm edition

As you probably know, I wrote a book a couple of years ago strongly suggesting that the traditional law firm, shot through with various defects, is a poor fit for the new legal market and won’t survive competition from newer and better models for legal services. Smarter people than me have since asked: Okay, supposing you’re right about that — and we’ll know soon enough if you are or aren’t —  then what exactly is going to replace your much-maligned traditional law firm?

It’s a good question, and luckily for me, I’m not the only one pondering it. Managing partners, industry consultants, conference organizers, and venture capitalists have been kicking this one around for a few years now. The consensus answer, up to this point, has essentially been “something that’s not a law firm,” and there are plenty of candidates for consideration.

We’ve seen the emergence, over the past several years, of legal process outsourcers, legal technology platforms, flex-time and project lawyer companies, and managed legal services providers, These and other entities have collectively been grouped  under banners like “NewLaw,” “alternative legal services providers,” and the latest term, “law companies.” Together, they already represent about a US$10 billion slice of the legal market.

Most of these businesses share several common features, including:

  • corporate structure and governance,
  • investments of external funding,
  • extensive use of process and technology,
  • reliance on people who aren’t lawyers,
  • focus on efficiency and cost control, and
  • ability to leverage knowledge and data.

Search iStock for “future office model” and this is what you get.

But you could more easily describe all these entities simply by saying that “they’re not law firms.” Because the characteristics of law firms are well-known: Lawyer-owned and -operated, expensive, elite, inefficient, lawyer-centric, risk-averse, kind of pretentious, and a little out of touch. Defining your new legal business by distancing yourself from these attributes is a pretty good way to get clients’ attention in a shifting market.

So it’s fashionable, and maybe even reasonable, to assume that traditional law firms will largely be replaced by their diametric opposites — the alternative legal business, the agile legal company, the AI-powered legal machine. I’m confident these businesses will secure a significant space for themselves in the new legal market, and I suppose it’s even possible that ALSPs and law companies will turn out to be the dominant species of legal services supplier in future.

But here’s another possibility. Maybe traditional law firms will be replaced not by law companies, but by law firms — radically different law firms, to be specific. Law firms that, while still lawyer-owned and -operated, are also:

  • efficient,
  • accessible,
  • progressive,
  • modernized,
  • collaborative, and
  • resolutely, enthusiastically client-first.

These won’t be old law firms with a fresh coat of innovation paint. They will be systematically distinct from old law firms, based on a whole new model, right down to their DNA.

I think there’s a place in the market for law firms like this — a really big place, in fact. And I want to find them. I want to identify, profile, and publicize law firms around the world that are — right now, today — throwing away the outdated attributes of their forebears while keeping the most important parts and adding new and better elements to their core function: allowing lawyers to truly meet clients’ most pressing and important legal needs.

In short, I want to conduct a search for the next law firm model. And I’d like you to help me.

Why should we do this? Three main reasons:

1. Tens of thousands of bright, hard-working lawyers worldwide, associates and partners alike, feel trapped inside traditional law firms, deep in debt and deeper in regret for having chosen what turned out to be a disheartening workplace. They can sense how dysfunctional their firms are, distant from their clients and often damaging to their employees, and they yearn for a better environment in which to exercise their skills and serve their clients. But they don’t know where else to go, or how they could go about building anything different and better.

2. Many more lawyers have walked out of those firms, or have been cut loose by them, or were never even hired in the first place — they’re exiles from the traditional platforms for practising law. But they can’t, or don’t want to, hang out solo shingles or get jobs with law companies — they want to work in law firms, just not at the cost of their personal and professional well-being. And they’re joined every year by thousands of law school graduates who have already heard about, or will soon learn, what’s in store for them. All these lawyers long for better, radically different law firms, too.

Doesn’t look that futuristic, to be honest.

3. Clients still need law firms. No disrespect to law companies, which generate a wide range of high-quality legal solutions for clients in a timely and affordable fashion. But I expect most of them would readily agree that they can’t and don’t want to provide every kind of legal service. In particular, they don’t offer legal advice, personal advocacy, strategic counsel, complex legal opinions, and other mid- or high-level legal services, and most of them have no ambitions in that direction. Clients, both individuals and organizations, need mid- and high-level legal services, and I think they’d welcome with open arms the arrival of radically different and better law firms that can deliver them.

And one other factor, on the personal side: If this effort to identify radically different law firms succeeds, and if these examples can be used to design templates for building more such law firms in future, then I’m thinking of making this the subject of my next book.

So my request of you today is: Help me find the next law firm model. I’d like you to nominate law firms that meet the criteria described below, regardless of size or jurisdiction. You can add your nominees in the comments, or send them to me via the email contact form at the bottom of the page. Feel free to immodestly nominate your own firm if it qualifies. If I can accumulate a critical mass of nominees, I’ll list a selection of them in a subsequent post, and I’ll follow up with some of them to arrange more in-depth interviews for a book.

Here are my criteria.

1. The law firm must be no more than 15 years old. (Founded in 2004 or later.)

2. The law firm must not be a law company or ALSP of the kind described in the third paragraph above.

3. The law firm must feature at least one (and preferably more) of the following attributes:

a) New Structure: The firm is not a lawyer partnership, it divides ownership from management from labour, and/or it has a strict corporate decision-making governance system to which lawyers have surrendered autonomy over the firm’s decisions and direction.

b) Greater Accessibility: The firm is physically located, marketed, and/or priced for maximum client convenience, affordability, and relevance. The firm knows where its clients are, and it goes out to meet them there with offerings they can understand and afford.

c) Fresh Markets: The firm is heavily focused on markets that either are brand-new, or have been traditionally under-served, or have been locked out of the legal services world for all practical purposes. The firm has identified and is unlocking latent legal markets.

d) Serious Technology: The firm offers extensive client-facing technology that provides legal answers or solves legal problems, and/or it has used technology to build super-efficient internal systems for creating legal products and services that improve profit margins.

e) Outsourcing: The firm repeatedly partners with law companies or ALSPs (e.g., LPOs, flex agencies, managed legal services providers) to complement its more advanced offerings. The firm identifies what law companies can do more effectively than it can, and collaborates accordingly.

f) Better Pricing: The firm prices most or all its work on a subscription, fixed-fee, risk-sharing, and/or incentives-driven basis. Hourly billing of lawyer work does not necessarily disqualify a firm, but its overall pricing must be intensely client-focused and outcome- or value-based.

“Simple and stylish manager office.” Futurism meter reads: 0.

g) Smarter Compensation: The firm generously rewards lawyers for a wide range of activities and outcomes (including client satisfaction, contribution to productivity, mentoring of juniors, leadership and management) other than hours billed and clients landed.

h) Leveraged Knowledge: The firm makes extensive use of legal knowledge resources and business/competitive/client intelligence to create new services, serve clients better, improve internal productivity, and/or sharpen external competitiveness.

i) Diversified Sales: The firm applies resources other than lawyers to generate new business opportunities from new and/or existing clients, including sales professionals and industry data. Rainmakers and partners are not the sole or critical engine of the firm’s new business generation efforts.

j) Multiple Disciplines: The firm employs (or if permitted, extends equity to) “non-lawyer” professionals and technicians who play significant client-facing and/or revenue-generating and/or system re-engineering roles. And it doesn’t call them “non-lawyers.”

I want to be clear that this is not a “legal innovation contest.” I’m not interested in receiving a raft of submissions from firms that have added one or two innovative tweaks to a standard law firm partnership. I’m looking for law firms that are truly, radically different from the traditional law firm model, such that the criteria above exemplify that essential difference, rather than constitute mere bolted-on accessories to the old familiar model. And I’m looking for firms that have done this recently enough that they can serve as an inspiration and a template for today’s and tomorrow’s lawyers to follow their lead.

Also note my use of strong modifiers in the criteria: “intensely,” “repeatedly,” “extensive,” “maximum,” and so forth. Again, this is to separate traditional firms that are (admirably) trying some different things from the radically different law firms I’m seeking — those for which these attributes and activities are the everyday rule, rather than the exception.

We need new and better law firms to replace the old and struggling ones now littering the legal landscape. We need to give young lawyers and law students examples and templates to help them build their own sustainable, profitable, fulfilling, client-focused, radically new firms. We need to give the client world better mousetraps to whose doors they can beat a path. In short, we need to find and promote examples of the next great law firm model. Your help would be invaluable.

The moral issue here

“I’m not worried about the moral issue here,” said Gordon Caplan, the co-chair of AmLaw 100 law firm Wilkie Farr, according to transcripts of wiretaps in the college admission scandal that you’re already starting to forget about. Mr. Caplan was concerned that if his daughter “was caught …she’d be finished,” and that her faked ACT score should not be set “too high” and therefore not be credible. Beyond that, all we know from the transcripts about Mr. Caplan’s ethical qualms is that “to be honest, it feels a little weird. But.”

That’s the line that stays with me, right through the “But” at the end. I want to tell you why, and I especially want to tell you if you’re a law student or a new lawyer, because it is extraordinarily important that you understand what’s going on here.

Mr. Caplan, who’s been placed on a leave of absence by his tight-lipped firm, was just one of dozens of rich, high-powered individuals now under indictment for bribery and mail fraud and such. I’m less interested in the two actresses who were arrested, however, than I am in the titans of industry who felt not just pressured to cheat their children’s way into prestigious colleges, but also strangely entitled to do so. Here’s a lengthier excerpt from the conversation between Mr. Caplan and the cooperating witness (the owner of the business running the con) who recorded him: [Emphasis added]

CW-1: What happened is, all the wealthy families that figured out that if I get my kid tested and they get extended time, they can do better on the test. So most of these kids don’t even have issues, but they’re getting time. The playing field is not fair.
CAPLAN: No, it’s not. I mean this is, to be honest, it feels a little weird. But.
CW-1: I know it does. I know it does. But when she gets the score and we have choices, you’re gonna be saying, okay, I’ll take all my kids, we’re gonna do the same thing. (laughing)
CAPLAN: Yeah, I will.

What the witness is telling Mr. Caplan here is that most of the rich-kid college applicants with various learning challenges who require extra testing time and accommodation — they don’t really have such challenges. It’s all a scam, you know. Political correctness run amok, everybody gets to have a disability of some kind these days, yada yada. And see, Gordon, all the rich people are taking advantage of this. They’re getting their kids bogus certifications that allow them to cut in line in front of you. Everyone’s doing it, Gordon. Everyone else is already cheating the colleges. All you’re really doing is evening the score.

Let’s set aside for a moment that the co-chair of a firm where the average partner earned $2,969,000 in 2018 can consider himself not one of “the wealthy families,” or the sheer irony that one of the richer and more powerful people in the profession really believes that the playing field is tilted against him. What’s really important to appreciate, I think, is that two things are happening here:

  1. Person A is telling Person B a series of lies.
  2. Person B wants to believe they’re not lies.

“It takes two to lie, Marge,” Homer Simpson once told his wife. “One to lie, and one to listen.” It’s a hilarious line, yes, but you know what else? It’s true. The effectiveness of a lie is directly proportional to the credulity of the person who hears it, and most people aren’t credulous because they’re stupid. I guarantee you the co-chair of an AmLaw 100 firm isn’t stupid. They’re credulous because they choose to be.

Most people believe the lies they’re told because they want the lies to be true. They want the world they live in to operate according to a series of principles and practices that make sense to them, confirming their suspicions, fulfilling their deepest wishes, and absolving them of blame for how they feel and what they do.

Lay it out, Leonard.

All the rich and powerful people who allegedly consented to participate in these crimes did so because they wanted to believe the justification that was offered to them. “You’re not really cheating. You’re just fighting back, refusing to be a sucker anymore while everyone else cheats to get ahead of you.” How intoxicating that is. How sweet and reassuring and vindicating. How interesting that it’s invariably people already overstuffed with money and power and privilege who’ll pay anything to buy that lie.

So why does any of this matter to lawyers, especially to young lawyers? Because of that one line I quoted.

“I mean this is, to be honest, it feels a little weird. But.”

Do you recognize that sound? That’s the sound of a person’s conscience, a lawyer’s conscience, struggling to make its voice heard.

This one apparently can’t muster much more than a twinge of doubt, a feeling of discomfort, a nagging sense of this isn’t right and I shouldn’t be doing it. It lasts for only a second, though, because the next word fatally undermines it. But. Yeah, I know, at some fundamental level, this is wrong. But.

It doesn’t matter what rationalization or justification follows the But, because at this point, it’s all over. The battle has been abandoned. If the next word out of his mouth had been So or Therefore, Mr. Caplan’s life would have gone in a very different direction.

You need to be able to recognize the sound of your own conscience. You need to listen to what it’s telling you, and not wave it aside with a But or an Anyway or a Nevertheless. You might be sitting there, fresh out of law school, saying, “No problem, I’m ready for whatever the practice of law wants to throw at me, I’ll stand my ground.” And I’m here to tell you, you have no idea what’s coming. You have no idea of the forces you’re up against. You don’t appreciate just how badly compromised the legal profession and law firm culture already are.

Does the name Ralph Kayser ring a bell with you? Probably not. Back in 2014, Mr. Kayser approached 16 lawyers at the most prestigious law firms in Manhattan as a representative of a government official in a mineral-rich African country who wanted to transfer a large amount of “facilitation money” into the United States without anyone from his country noticing it. You couldn’t have said “money laundering” any more clearly if you’d used a megaphone.

None of the lawyers took Mr. Kayser on as a client, but according to the ABA Journal, 15 of the 16 — including the then-president of the ABA itself — “offered advice on how [Kayser] could buy pricey Manhattan real estate without revealing his identity.” Here are some of their responses:

  • “So we have to scrub it at the beginning, if we can, or scrub it at the intermediary location that I mentioned.”
  • “We could provide you with the list of countries where the banking systems require less detail on ownership or source of funds.”
  • “And you don’t have to declare to bank authorities where the money comes from.”
  • “When I get money from my other clients, it always comes in with some strange name on it. I don’t even ask.”
  • “They don’t send lawyers to jail, because we run the country … We’re still members of a privileged class in this country.”

I want to pause here and remind you that the people saying these things are legal aristocracy. They are some of the finest lawyers at the most famous law firms in the richest legal profession in the world. Breathless articles are written when they change the firms they work at.

Mr. Kayser, as it turned out, was a plant — an operative from global NGO Global Witness who wanted to show just how easily such an obviously dubious offer could be entertained by the aristocracy of the US legal profession. Mission, as they say, accomplished. And even the one lawyer who rejected Kayser’s advances out of hand, Jeffrey Herrmann, was revealing in his dismissal. “This ain’t for me,” he said, “my standards are higher” — but left unspoken in his reply was the acknowledgement, “But it’ll be for someone else, whose standards aren’t.”

In his feature article for The Atlantic, “How Kleptocracy Came to America,” Franklin Foer made the following cutting observations about what the Kayser incident demonstrated:

“Global Witness conducted its experiment to point out BigLaw’s complicity in the spread of kleptocracy. But the footage also provides primary anthropology of an American elite. A profession like law has highly developed ethical codes, yet those codes appear to have receded in recent years. Even the most prestigious firms find themselves fretful about the survival of their high-priced business model, which was profoundly rattled by the 2008 financial crisis and the corporate cost-cutting that followed. Greedy impulses have surely always existed within the white-shoe world, but the sense of Darwinian struggle and the norms of a global elite have eroded boundaries. The same partners who shed underachieving colleagues more ruthlessly than they used to also seem primed to adopt a more permissive attitude toward clients whom they might once have rejected.”

Rip the privilege away from a privileged person and you create a very dangerous individual. Do the same thing to a profession steeped in rankings and prestige and money, where aspiration to elitism is held to be a virtue, and you create an extremely hazardous moral environment.

If you’re about to enter that environment, or if you’ve recently entered it, then I’m also here to tell you: Hold on to yourself. The ground is sticky and the slopes are slippery. You will be told various lies, and you need to know that they’re lies and not wish they were true. Here are some of them:

  1. “Everybody’s doing it.” No, they are not. I say to my teenage daughter, “There’s nothing in this world that everyone does. People can’t even agree on what kind of shampoo to use. If somebody tells you that ‘everyone’s doing it,’ that’s because they need the comfort and support of your co-conspiracy in questionable behaviour.” And she rolls her eyes and says, “I know, Dad.” But not everyone does. Not even in the AmLaw 100.
  2. “That’s how it’s done around here.” You can overestimate your daily billables count, you can order the secretary to work after you leave, you can gossip about a client in the coffeeshop, because that’s what the senior lawyers do all the time. While that last part might be true (frequently it is), the inference — local custom or firm culture supersedes ethical rules or moral dictates — is a lie. But you will find it an unbelievably hard one to resist.
  3. “The big clients deserve what they get.” I had lawyer friends at the start of our careers tell me sincerely that it was alright to file a false insurance claim because insurers were massive and rich and would never miss the money and probably cheated their policyholders anyway. The same logic fuels rampant overbilling on big corporate files every day. It’s a lie. Cheating a cheater doesn’t make you Robin Hood. It makes you a crook.
  4. “You work hard and you’ve earned a little something.” You know who works hard? The person who vacuums up the dinner you spilled at your desk, then goes on to work an overnight shift to support her kids while you go home to bed. And if she was ever so much as caught taking office supplies home with her, she’d be fired on the spot. And rightly so. And so should you be, for whatever quiet “perk” you talk yourself into “earning.”
  5. “It’ll look bad if you don’t go along.” If you don’t go along to the strip joint with the client. Don’t go along with the jokes about the new temp. Don’t go along with the senior partner’s temper tantrums. Don’t go along with the pressure to “review” that client memo for a few extra hours. You’re making the rest of them look bad when you don’t go along. But maybe, just maybe, that’s their problem, not yours.

Nobody is going to push you to soft-pedal potential money-laundering on your first day. That’s not how it works. It works by wearing down your defences on the smallest things, the littlest corners cut, the slightest concessions made. “Indeed, the safest road to Hell is the gradual one,” wrote Screwtape, “the gentle slope, soft underfoot, without sudden turnings, without milestones, without signposts.”

Wisdom from the other Mr. Keyzer.

You’ll be told to be practical, be realistic, to grow up already. If you listen, if you decide you want the lies to be true, then eventually you won’t need to be pressured to have a polite, informative conversation with a scoundrel about money laundering. You’ll do it yourself, naturally, without a second thought. And one day you’ll find yourself on the phone, saying that a certain proposition makes you, to be honest, feel a little weird, but.

This is not just for people in BigLaw. This is for everyone in every size law firm or law department, anywhere in the world. Your time will come. Your standards will be tested. Your loyalty or pragmatism or intelligence will be questioned. And you will feel such reluctance, such disinclination, to be the glaring exception. You will want to believe all the rationalizations offered to you. You will want the lies to be true because it’s easier that way. You will even find words like I’m not worried about the moral issue here on the tip of your tongue.

When (not if) that day comes, pause and listen for that voice. It’s the one that’s whispering, This isn’t right and I shouldn’t be doing it. Listen to it, consider what it has to say, take it seriously. And if you find, as is usually the case, that the voice has a point, then do not allow the next word out of your mouth to be But. Do not undercut your conscience when it’s come through for you at crunch time. Make the next thing you say be So or Therefore or It’s not for me, my standards are higher.

You’re a lawyer. Even if nobody else around you seems ready to live up to that privilege, make sure you do. Your conscience deserves it. Your profession needs it. And your career might hang on it.

The price of collaboration

(I’m trying something new here: Two posts on closely related topics, released simultaneously, rather than one massive post. For those of you born before 1992, think of it as a double-album release.)

If you can keep the human touch, there’ll be better days ahead.

At the end of the companion post to this one, “The reality of collaboration,” I proposed that the key to collaboration, in a legal relationship as in any other, is that you have to show up to the relationship every day, and you have to work really hard at it. Like a friendship or a marriage, each side has to take seriously not just the commitment to enter a special relationship, but also the hard work required to sustain and grow it.

But maybe most importantly, each side has to recognize that the collaboration, the partnership, is going to change you. If you try to hold back, to have an arm’s-length, surface-level collaboration, I don’t think it’s going to fly. If a corporate law department and a law firm enter into a collaborative relationship, and 18 months later both the department and the firm are basically the same entities they were before, then I think the effort is failing. Real partnership has a real price.

Jae Um puts it very well in her analysis of Microsoft’s Trusted Advisor Forum: “This recognition of what partnership costs is important, from both [the] buyer and seller of legal services. … I continue to see too many law departments and law firms slap the tax that comes with BFF-ship on far too many relationships that don’t offer BFF-level benefits. And just as pretend-BFF-ship demands social and emotional costs, pretend-partnerships lead to unwarranted costs for everyone involved.”

What do the costs of true partnership look like in the legal market? Well, I think that a law department that wants a truly collaborative relationship with an outside law firm has to really believe in that firm, to invest itself in it — not just as a source of expertise and knowledge, but as an organization with complementary values and admirable people. And by investing itself in that firm, the law department must be willing to adapt its own structure and capabilities (to the extent feasible for a corporate division) in response to what the firm offers and provides, to trust in the firm and rely on it, even to incorporate the firm’s patterns and structures to a limited degree.

Even in an overcrowded marketplace, very few law firms (or legal services suppliers) are going to meet those thresholds for any individual client. But that’s the kind of outcome the search for collaboration inevitably leads you towards, and it can be achieved — Microsoft and Perkins Coie are an excellent example.

For law firms, though, the cost could be even higher. Crafting a true partnership with a corporate client means the firm needs to know the client inside and out — to understand its purpose, goals, priorities, strategies, markets, products, customers, rivals, competitive advantages, regulatory environment, compliance pressures, and on and on. It needs to assemble and analyze deep reservoirs of data about the client and its world, and to build and maintain strong relationships with its leaders, all in order to not just solve the client’s problems, but also to anticipate and minimize its troubles and risks and help it to achieve its core business objectives.

This will require the law firm to expend a tremendous amount of effort, energy and bandwidth on the client — but all these resources are finite. What you devote to one client is what you cannot dedicate to another. The cost to law firms of a serious client collaboration would very likely include a reduced capacity to serve other clients, because not every client can be your BFF and you need to choose where to direct your singular devotion. When considering the intensity of what major clients are going to ask of their primary outside counsel in future, the degree of client-specific focus a law firm will have to undertake in response might ultimately render it best suited to serve only that client, or a few others very much like it.

Now it’s true, as Ron Friedmann points out, that if a law firm narrows its focus to one or a very few clients, it might paradoxically end up reducing its value, because clients rely on their firms for intel and insight garnered from a wide range of other clients in the same or affiliated industries. I’ve certainly heard from clients that they value outside counsel precisely because these firms interact with so many market stakeholders that they get the industry “lay of the land” more comprehensively than the client can.

The challenge, though, is that as clients push firms to “know our business deeply” and “be our collaborative partners,” the firms could wind up being dominated by these clients, making it harder to strike that balance of general market knowledge and specific client insight. I’ve heard law firms’ managing partners talk about the need to scale back the ranks of their clients and focus most on the highest-value, top-performing ones — push the “80% of our work from 20% of our clients” ratios up towards 90 and 10. That has undeniable benefits for the firm. But it also has costs. And clients have to appreciate that they can’t ask the same law firm to be both “our trusted collaborative partner” and “our eyes and ears out there in the industry.”

Good collaborations can get everyone’s attention.

Now, look: None of the foregoing commentary, in this or its companion post, is intended to disparage and reduce collaboration efforts between law department and law firms. I think these efforts are great, for the same reason I think friendships are better than acquaintances and marriage is better than hooking up. Better and deeper human relationships are always a worthwhile goal, and the same general logic applies to business entities that can develop strong bonds of mutual reliability and success. The commercial legal market would be a significantly better place if more companies followed Microsoft’s lead to establish and maintain strong, demanding, grown-up relationships with a select number of outside legal providers.

But the market would also be a significantly different place if that came to pass. The notion of massive full-service law firms teeming with myriad disparate clients would start to give way as a new model firm emerges — one that specializes not in a practice area or even an industry sector, but in the strategic enablement and advancement of a single client’s (or a handful of clients’) goals.

In that scenario, the supply side of the market might coalesce into one group of providers that delivers a wide range of services to an extremely small handful of clients, and another group that delivers a very narrow and specific type of legal service to a wide range of clients (and I can assure you that law companies and ALSPs are very interested in that kind of approach).

I guess what I’m saying, to bring this special two-part episode back to its beginnings, is that partnership and its benefits are worthy goals of collaboration, but remember: Partnership will change you. Both law departments and law firms need to be aware of what true collaboration between the buyers and sellers of legal services would look like, what it would require from both participants — and what it might do to the legal market as we’ve always known it. The full-service, multi-client law firm is a fixture in our collective imagination of this industry, and it has a lot of merit. But it is, I believe, inherently resistant to collaborative partnerships with clients. In a market dominated by that kind of supplier, client-firm collaboration will be the exception, not the rule.

But if we strive to make such partnerships the rule rather than the exception — or if we see the emergence and growth of new providers that are only too happy to devote themselves blissfully to deep collaboration with their clients — than we could start to reimagine the legal market in some very interesting, and potentially transformative, ways.

The reality of collaboration

So I was recently asked to write a paper about ways in which law firms and corporate law departments could collaborate more. My thesis is going to be: Are you sure that’s what you want? Are you certain you know what you’re asking for?

Most of what’s been written on collaboration in the legal industry simply deploys the word as if we all agree on its meaning, and in any event, usually addresses internal collaboration within law firms, or supply-side collaboration between firms and other service providers. Examples of true collaboration between a legal buyer and legal seller are rare, and I think there’s a reason for that.

When clients yearn wistfully for greater collaboration with their outside counsel, they usually identify their goal as building a partnership with the law firm. But “partnership” implies a deep, long-term relationship between client and firm, one that reaches beyond merely tactical matters to address and fulfill fundamental client needs. The word “partner” suggests (as it does when used within a law firm) a high degree of trust and commitment, a sense of shared goals and mutual dependence. Implicit in this desire for partnership is an assumption that the standard firm-client relationship is coldly transactional, and that a collaborative relationship could deliver more value.

Note: Dysfunctional partnerships are seldom hilariously wacky.

But value for whom? If collaboration really is about partnership, then that enhanced value must be experienced by both participants. So our first question is whether the parties to the collaboration share the same understanding of “value.” Because if your partner in collaboration is not generating any value for itself, then you’re not really collaborating — you’re just shaking down your supplier (or your customer, as the case may be) for a better deal. 

From the client perspective, enhanced value in legal services might include the following factors and be measured by the following metrics:

  • Lower outside legal spend → saves money
  • More predictable outside legal spend → improves budgeting
  • Preventative risk identification and management → less litigation
  • More productive internal legal operations → increases efficiency
  • Fewer points of contact with a law firm → increases ease and consistency of service
  • Greater diversity within law firm personnel → fulfills corporate values
  • Greater alignment of value of task with value of provider → saves money
  • Free CLE provided by the law firm → enhances in-house skills

There are certainly other examples, up to and including the grand prize: a demonstrable contribution by the legal function to the company’s profitability, market share, or brand strength. These are all ways in which a corporate law department would consider its value to have been enhanced by a deeper relationship with a law firm.

Now, here’s a list of factors with which a potential law firm collaborator would likely define and measure enhanced value:

  • More money from clients → more profits for partners

I’m not trying to be cynical here. But I’ve dealt with a lot of law firms in my time, and the overriding value in the typical law firm really can be expressed in that one line. And the problem is that very few of the ways in which corporate law departments define “value” include giving law firms more money.

So we have a built-in disconnect. When a client comes to a law firm and talks about collaboration and partnership, what the law firm invariably thinks is, “This is a great opportunity for us to grow our business with this client.” Then, when the client starts pulling out some of these examples, there’s a startled silence as the firm thinks, “Oh. That’s what they mean by collaboration.” And the whole endeavour is kneecapped from the start.

The problem is that law firms aren’t normal businesses, and they’re not motivated by the kinds of things that drive normal businesses. Greater client collaboration might very well give the firm steady work in the coming years and first choice of high-end files and a more competitive position within the client’s industry, and so forth. But unless the whole effort increases individual partners’ profits this year, or at worst next, the firm will be cool to the idea. And if the collaborative effort actually reduces partners’ profits this year or next year, then the firm is not going to get on board this train.

To date, there’s really been only one type of collaborative initiative that has seemed to satisfy both client and firm objectives, and that’s convergence: The client narrows its panel of outside law firms, either increasing the amount of work the surviving firms obtain or, at worst, preserving the same amount of work in what otherwise would be a loss of the client and a revenue bloodbath for the firm.

But as research increasingly shows, convergence has not delivered the value that clients had hoped to achieve.

  • AdvanceLaw and its GC Thought Leaders Experiment has found that “clients with panels do not see meaningful differences in outside counsel performance for their matters (on quality, cost-efficiency, responsiveness, solutions focus, and the like) as compared to clients without panels.”
  • Casey Flaherty has written that he’s “long believed most convergence initiatives waste considerable time for limited benefit … convergence remains an excellent opportunity to leverage volume to reduce unit cost. Unfortunately, that is about as far as most corporate law departments take it.”
  • Dennis Kennedy recently argued that “convergence can, perhaps paradoxically, act as an innovation destroyer if not properly tended…. It’s hard work that requires constant attention. It’s easy to see how these programs can actually destroy innovation.”

Now, what AdvanceLaw (in a companion article), Casey, and Dennis all make clear is that convergence can deliver real benefits to the client and firm alike — but it requires careful planning, clear goals, frequent contact, and consistent follow-up, especially on the client’s part. These efforts all exact costs, from the client and the firm alike. So in many cases, it will be only very large law departments, and/or those with especially dedicated leadership, that can assume and manage those costs.

For an example of how to do convergence right — and of the effort required to achieve that goal — check out Microsoft’s Trusted Advisor Forum:

Microsoft asked its top external legal service providers to share two innovation stories at a Trusted Advisor Forum at its Redmond campus. In brief:

  • Tell us one way have you have gotten better in the last year
  • Tell us one way you will get better in the next year

The initiative flows directly from General Counsel Dev Stahlkopf. A few weeks after her elevation in April 2018, Stahlkopf set expectations with outside counsel during a relationship-partner lunch at Microsoft’s Corporate, External, and Legal Affairs Global Summit. One of her concluding slides read, “Our Ask of You: Partner with us to continuously improve and innovate.”

Yes, I’m channeling the ’70s today.

Read this essential analysis of the Forum by Jae Um at the Legal Evolution blog and you’ll appreciate the extensive thought, sophisticated strategy, and significant effort that Microsoft undertook to organize and execute this event. “Microsoft is doing something unusual here: sustained and intentional action underpinned by very rigorous thinking,” Jae concludes. “And the entire team at Microsoft is brave enough to do this with as much transparency and candour as practically possible.” But she also notes that many firms invited to the Forum struggled to meet Microsoft’s two requests (which is okay), while some firms simply declined the invitation to participate altogether (which is not).

And that’s the thing about collaboration: You have to show up to the relationship every day, and you have to work really hard at it, with goodwill and positivity, to get it right. Like a friendship or a marriage, each side has to take seriously not just the commitment to enter a special relationship, but also the hard work required to sustain and grow it.

That’s the reality of collaboration between clients and law firms — but neither clients nor firms might fully appreciate the costs of that reality. More on that issue in the companion post to this one, “The price of collaboration.”

The implications of crowdsourced justice

Early in 2017, when the US government decided to bar people from predominantly Muslim countries from entering the United States, more than a thousand lawyers responded to calls for urgent in-person assistance at airports, and websites were set up to coordinate legal advocacy efforts. In the spring of 2018, when the US government decided to detain asylum seekers on its southern border, severing children from their families and putting them in cages, legal advocacy groups again led efforts to fight these actions and drew hundreds of lawyers to the border to assist.

Photo credit: Patrick T. Fallon, Reuters

Setting aside for the moment the legality (or, depending on your perspective, the monstrous immorality) of these decisions, I want to focus on two kinds of responses that they generated. The first was the flood of lawyers who freely gave (and still give) their time, efforts, and skills to defend the rights and interests of the vulnerable people ensnared by these policies. Speaking for myself, at least, these lawyers renewed a lot of my faith in this profession.

But the second kind of response was, in its own way, more interesting: the galvanization of widespread financial support. The ACLU and other organizations reported huge surges in donations in the wake of the travel ban and the legal advocacy response to it. RAICES, the group that led the effort to help asylum seekers from Mexico and Central America and to reunite separated families, was the beneficiary of a Facebook-based effort that reportedly generated $20 million in pledges. I retweeted and amplified the call for “airport lawyers” in 2017 and made a monetary donation to RAICES in 2018, and I was far from the only one.

What we saw in these two incidents and responses were the first major examples of what’s becoming known as “crowdsourced justice.” These advocacy efforts were not financed by government legal aid programs or through formal “fundraising” efforts by the organizations involved — they were informally financed, either by the organizations in the moment or by concerned third parties from the grassroots, and they received donations from people in every walk of life, not just lawyers.

Crowdfunding has been with us for several years now, generating money for everything from high-tech startups to artistic projects to emergency health care, so it’s probably not surprising that it has finally come to the law. Its attractions are evident: At a time when legal aid funding seems to be slowly draining away in many jurisdictions — Americans spend more annually on Halloween costumes for their pets than on legal aid, to give you one notorious example — crowdfunded justice offers people a chance to personally support legal causes that touch their hearts or inflame their consciences. If you can get a thousand sympathetic strangers to chip in a small amount towards your legal expenses, you have at least a fighting chance of getting the justice you feel you deserve.

Along with the obvious benefits of crowdfunded justice come some less obvious concerns. For instance, is it ethical for a lawyer to take on a case when the client has crowdsourced her legal fees? Mark Palmer of the Illinois Supreme Court Commission on Professionalism produced this deep dive into that question for Attorney At Work and came up with some guidelines. “It would be advisable for the crowdfunding client,” he notes, “to inform contributors that their donated funds are non-refundable, that they will not receive confidential information about the client’s matter, and that they may not interfere with or otherwise exert control over the lawyer’s work.” 

Crowdfunding justice, of course, also touches on the old raw nerves of champerty and maintenance, the longstanding and justified concern that a stranger to a legal issue or dispute could benefit financially from helping to finance one side or another. It’s one of the reasons why some people opposed the emergence of third-party litigation financing, although as that nascent industry has generated massive profits, one hears that objection less frequently. (My own objections to litigation financing haven’t much changed since I first raised them more than a decade ago.)

Photo credit: Hans-Maximo Musielik/Associated Press

Regardless of your views on litigation financing, however, you’d probably agree that there’s a difference between helping to finance a legal action in order to generate a profit for yourself, and helping to finance a legal action in order to achieve some social or policy objective or to support a worthy cause whose protagonist can’t afford legal assistance. If someone starts a GoFundMe to help them pay a lawyer to get through family court or to stop the deportation of asylum seekers, donating to that fund is an act of charity that will provide no financial reward to the donor. So I don’t think that crowdfunding a legal matter raises traditional ethical concerns around third-party involvement in lawsuits.

But I also think that crowdfunded justice does raise a different and perhaps more problematic concern — if and as it flourishes, it’s going to accelerate the ongoing privatization of the justice system.

This is not a new issue, of course. It’s well understood by both lawyers and clients that there are really two routes towards achieving an outcome through the litigation process:

  1. Using the slow, expensive, and increasingly broken-down public legal system (bringing your matter to government-run courts and tribunals, ideally but less frequently with the help of privately hired lawyers, and hoping your resources and stamina hold out until resolution); and
  2. Opting out of the public system and using the faster, more effective, and perhaps more expensive private legal system (bringing your matter to arbitrators and mediators, many of whom are former judges, for customized service and a quick resolution).

Much as is already the case with education and health care, the public system for legal remedies is the one you’ll avoid if you can afford to. If need be, you go to the court to get your consensual private resolution approved and entered into the public record, but that’s the only time you come near a courthouse. All other things being equal, I suppose, you’d be happy to use the public system if it were reasonably fast and efficient; but since it’s not, why waste your time in the slow lane when you can take the express route?

So as I say, that kind of privatization is hardly new. But what we’re seeing these days is the increasing role of the private sector — and the shrinking role of the public sector — in the funding of legal and justice matters.

Among the most important recent developments in the access-to-justice space was last autumn’s entry of Pew Charitable Trusts and its very deep pockets into the A2J picture. “The Pew Charitable Trusts,” wrote Bob Ambrogi for Above The Law, “an independent nonprofit with over $6 billion in assets, announced that it will now tackle the use of technology to modernize the civil legal justice system, meet unmet legal needs, and make courts more efficient.” In Governing magazine, Pew’s Executive Vice-President and Chief Program Officer Susan K. Urahn wrote more extensively:

We will work to increase access to free online legal tools, develop new platforms to help people interact with the courts and conduct data-driven evaluations of how these tools perform. The initiative will also identify policies that can improve outcomes for people involved in civil litigation, and will build partnerships with other stakeholders, policymakers and the private sector to modernize the civil legal system.

If state and local government leaders look closely at the challenges facing the civil legal system, the need for innovation becomes clear. Leaders from all three branches of government have the opportunity to modernize our legal system and truly provide equal justice under law for all Americans.

Now, to be absolutely clear, I think this is a tremendously positive development. Ms. Urahn’s assessment of the breakdowns plaguing the legal system are spot on, and the initiatives that Pew intends to support exemplify exactly the kind of fresh thinking and innovative approaches that we need. But having said all that, I also have to point out that this very worthy initiative is the work of a private foundation, not a government. Pew will pay to develop tools, platforms, evaluations, policies, and partnerships “to modernize the civil legal system.” I’m old enough to remember when that was the sort of thing governments did. 

Nowadays, conversely, governments seem to be looking for things they can stop doing, or at least that they can stop paying for, and they will happily offload something as expensive and wickedly complex as modernizing the civil legal system. It’s hard not to see the parallel, or at least the irony, that as the state of Alaska launches a Legal Navigator pilot project, developed and funded in part by Microsoft, to help people with their civil legal needs, the Alaska government’s 2020 budget eliminates all state funding for the Alaska Legal Services Corporation, the state’s only comprehensive provider of free civil legal services to low-income citizens.

Again, I want to emphasize that the Legal Navigator pilot program in Alaska and Hawaii, sponsored by Microsoft, Pro Bono Net, and the Legal Services Corporation, is unreservedly a very good thing. But programs like this should be complementing and amplifying government efforts to maintain and continuously improve the justice system. They should not be seen as a signal for governments to exit this space and abandon their responsibilities to that system and the people it was built to help.

I’m really glad that Pew Charitable Trusts and Microsoft, among other private entities, are getting involved in fixing the justice system. But that is not their day job. Eventually, they will turn to other activities, as they should, and will governments then carry on their good work and keep the momentum going? Or will they continue to defund legal aid, or close courthouses, or shut down pro bono assistance programs, or turn control of more prisons over to private corporations

And keep in mind, however deep the pockets of these benevolent institutions, they pale in comparison to the financing capacity of hundreds of millions of internet-connected individuals who are becoming accustomed to crowdfunding worthy public initiatives. Again, back in the day, the concept of everyday people contributing money to support and advance public objectives and the greater good was called “taxation.” But now, even the founder of a British legal crowdsourcing site feels compelled to remind governments that “crowdfunding should not be seen as an alternative to a properly funded legal aid system.” And she’s right. But her country’s government, which has been systematically destroying Britain’s public legal infrastructure, evidently disagrees.

Everything we’ve long assumed to be true about the way the legal system works is in flux, right now. California’s new task force could revolutionize legal services regulation in the United States, with Utah suddenly coming very fast behind it. British Columbia has pioneered a successful online dispute resolution system that reduces the role of judges and flat-out discourages the use of lawyers. The New York Times is publishing opinion pieces that correctly state that access to justice does not have to mean access to a lawyer. We are standing on the fulcrum of extraordinary change, and the decisions we make at this moment of systemic instability and dynamism will have consequences for decades to come.

But whoever provides legal assistance to people in need of legal remedies, and wherever and however those remedies are addressed and fulfilled, we must ask: Who should pay to support the system that enables it all? Who finances and bears ultimate responsibility for designing, operating, and improving the justice system?

I can’t speak for anyone else, but I say it’s the job of government, to be carried out by our elected representatives. We can all chip in to help worthy causes. We should all support corporations and foundations that practise good organizational citizenship. But not for one moment should we accept the notion that justice for all can be accomplished through funding by only some.

Law firms’ shopping mall problem

The last time I went to a shopping mall was a week before Christmas. I had several people for whom I needed to acquire gifts (I’m an inveterate last-minute shopper), and I wanted to cover as little distance in as little time as I feasibly could to achieve that goal. The mall offered me convenient access to many different stores under one roof. But what’s interesting is that the mall itself did not sell me any goods or services of its own, other than two hours of parking. Everything I bought was from its tenants.

Empty shopping malls = seriously creepy.

Joshua Kubicki argues persuasively that the same model applies to law firms. (Not a flattering analogy, given the state of malls in 2019, but a pretty apt one.) In his essay “The Emerging Competitive Frontier in BigLaw is Practice Venturing,” Joshua contends that a large law firm’s myriad practice and industry groups are, effectively, standalone service businesses housed within a single platform that really only exists to host these businesses. The law firm’s true “customers” are not the firm’s clients, but its equity partners:

The firm is providing an ecosystem in which buyers (clients) and sellers (partners) can more easily connect and transact business. The firm itself is not producing or making anything other than facilitating exchanges of value between these two interdependent groups. While clients of the lawyers are paying a fee-for-service, the customers of the law firm, the equity partners, are paying for access to a business platform, much like store owners pay to be part of a shopping mall.  

This seems like a good model for understanding some of the most vexing problems in law firm management. For example, look at all the difficulties firms have encountered with cross-selling across their practice and industry groups.

In theory, proximity to other legal specialists  with deep client portfolios should be a business development gold mine. In practice, however, firms struggle to cross-sell because few lawyers are willing to risk referring “their” clients to their colleagues in other practice areas. But once you consider that these individuals aren’t “colleagues” so much as co-tenants running separate affiliated businesses in the same location, the problem becomes easier to understand. Baskin Robbins has little interest in referring its customers to The Gap one level down. 

So if the firm’s only clients are the equity partners in its various business units, what does it provide to those clients? Joshua identifies five benefits firms sell to their equity-partner customers: risk pooling (to combat practice cyclicality), shared services, branding, access to other specialties, and a funnel for new talent. There’s enough real value in these benefits to justify an individual practice group’s (read: standalone business’s) decision to remain within the firm. Or at least, there used to be.

Joshua relates how the immigration law practice at Epstein Becker pulled up stakes recently and moved out — but not to another full-service firm. The lawyers and staff moved en masse to Berry Appleman Leiden, a specialist immigration firm. Joshua surmises that the equity holders within the immigration practice were finding the benefits of the broad full-service platform less appealing at a time when immigration practice requires serious investments in technology and process improvement to stay competitive. Since Epstein Becker seemed happy to facilitate this move, the firm appears to agree that parting ways was the best option.

Joshua’s article goes on to make a number of other insightful points, but I want to dwell on the implications of this one. Because it’s not only immigration law practices that will need significant customization to their business model to stay afloat in a more demanding and competitive market.

The same would apply, for example, to labour and employment law groups: They will struggle to compete with specialty shops like Littler Mendelson and Ogletree Deakins, which turn a profit on increasingly low-margin work by running their operations very efficiently and building systems to collect client data and turn it into a value-added service. The same would apply to IP groups facing off against specialty boutiques, insurance law practices taking on insurance-focused giants, and so on. Litigation practices will need e-discovery and outcome prediction capacities. Corporate law groups will require investments in due diligence AI and contract management and analysis software.

Every individual practice group within the firm, in other words, will eventually require some specialized application or technician or relationship that will have value primarily or only to that group. It’s one thing for partners to underwrite the firm-wide costs of marketing personnel and law libraries and IT functionality, because these are features that deliver more or less the same benefits to all groups. But when individual practice and industry groups (the mini-businesses) engage in what Joshua calls “practice venturing,” things can take a sudden turn.

Practice venturing is designing a new business model through the process of discovering, testing, validating, and launching (and perhaps buying or selling) a new strategy and value proposition, a new market or customer segment, and a new business model. …  It is about reengineering a practice to better address client needs and opportunities. When done completely, often something new that departs from the traditional legal service model is created.

Practice venturing does bend (and sometimes breaks) the law firm business model …  [T]o succeed at practice venturing, the groups not only need to focus on validating their changing business, but also have to focus on organization adoption of their changing business. This creates stress, dissonance, confusion, and often outright hostility toward the practice group.

The law firm can make only so many concessions to its individual “tenants” before its other customers (the other equity partners) start asking why they’re paying for so many features that have no relevance to their own work.

In time, evolving client demand and competitive circumstances could eventually require each specialized legal business inside the law firm “mall” to figure out what structure and model will make it most competitive and profitable in its market. If the law firm can’t find a way to accommodate those structures and models within the firm, then the group, like Epstein Becker’s immigration practice, will migrate elsewhere to find what it needs.

Lots of space in this firm.

If this theory holds up, then there’s some serious turbulence on the way for those full-service law firms that are what we always suspected them of being: hotels for lawyers, malls for practice groups, farmer’s markets for legal services. They lack any real operational direction or managerial sophistication, and they are owned by people who don’t really value either one of these things. It’s probably not going to end well.

The winners, by contrast, figure to be those firms that are both culturally cohesive and operationally agile. The cohesion allows the firm to have a more mature and sophisticated relationship with its equity partners than simply landlord and tenant, and to persuade the partners that spending money to improve the competitiveness of one business unit will generate more profits and opportunities for everyone in the firm. The agility will allow it to assemble and plug into the firm’s infrastructure the specialized pieces that each business unit needs without bringing the whole platform down in a heap. 

Can we envision any firms with this combination of cohesion and flexibility that could make these kinds of adaptations? I think so. Here are a few headlines from the legal press that have turned up just in the last few months:

Subsidiary businesses, technology nurseries, data analysis applications, and lower-cost spinoffs are some real-world examples of what law firms can accomplish when they acknowledge and respond to growing competitive pressures on specific markets, practices, or industry groups. Some of these new initiatives will pay immediate dividends across the firm, which makes partner buy-in easier; but some of them — and I suspect in future, more of them — will have narrower applications whose immediate benefits will be clear only to certain segments of the firm. That’s when the real test of the firm’s leadership and cohesion begins. 

One last thought: The main reason why I go to malls so rarely, of course, is that I shop more frequently at the world’s biggest and most convenient mall at Amazon.com. There are still some purchases for which I need direct experience with the product and in-person service from an expert — shoes, clothes, maybe a “genius” at the Apple Store. But for most everything else, including a growing array of big-ticket items, I just go online. Law firms should think about that, too.

Starting from scratch

Suppose that, tomorrow, you needed to create a business that provides legal services — but law firms had never been invented, and you didn’t have that reference point to use as a template. Being a sensible and forward-thinking person, you might come up with an entity that featured many of the following characteristics:

  • A privately owned corporation, perhaps with significant initial venture capital and the possibility of an IPO down the line, to assure yourself of operating and investment funds.
  • A focus on markets where incumbent providers (lawyers) are scarce and where potential customers are therefore underserved and plentiful (say, consumers and small businesses).
  • A range of affordable legal document assembly tools, accessible online 24/7, that can deliver extremely high-margin solutions to the basic legal needs of your customers.
  • A network of reliable local lawyers to whom your customers’ more complex legal matters can be referred, and for whom your brand and market reach constitute a powerful marketing force.

In other words, you might wind up creating something like LegalZoom

Now suppose that, tomorrow, you needed to create an entity that resolves legal disputes, but courts had never been invented and you didn’t have them to use as a template. You might come up with an entity that featured many of the following characteristics:

  • It recognizes that what people desire most in dispute resolution is speed and affordability, and so it would prioritize these two objectives on par with any other consideration. 
  • It accepts that the best way to help people access dispute resolution is to meet them where they are, and so it would be native to and entirely contained within an online environment.
  • It acknowledges that relatively few disputes truly require lawyers to resolve and even fewer really need judges, and so it discourages or does away with the use of either.
  • It understands that continuous improvement is the key to any effective service, and so it engages in an ongoing process of intense user feedback and system enhancements. 

In other words, you might wind up creating something like the Civil Resolution Tribunal in British Columbia (or the HMCTS Public Law Project in Great Britain).

And suppose that, tomorrow, you needed to create a way to provide legal assistance to low-income people, but legal aid had never been invented and you didn’t have that to use as a template. Once again, you might come up with an entity that featured many of the following characteristics:

  • Solutions begin with and are centred around the root causes of the problem, because legal matters are only one dimension of the multi-faceted “life matters” that people encounter.
  • Legal services are co-designed with and collaboratively directed by partners in the community where the people live, rather than designed and delivered solely by a single heroic outside lawyer. 
  • Legal assistance is channeled through those community partners that have strong relationships with community members, rather than through one-off fixes provided to individual clients.
  • Legal services are provided between 4 pm and 10 pm, because that’s when most individuals with jobs, kids, or parents to take care of actually have the time available to seek legal help.

In other words, you might wind up creating something like the Community Activism Law Alliance in Chicago.

Take a moment to consider that none of these three foregoing entities was created by a legal organization, a law firm, or a court — and in fact, one of them is an international success despite opposition from and prosecution by the legal profession for most of its existence.

Now, it’s likely that if you were to take on those three design challenges above, the entities you’d come up with would differ in various ways from my three examples. But I’m also pretty sure of this: 

  • If you’d never heard of law firms, and you needed a way to deliver legal solutions, you wouldn’t invent a business owned and operated solely by lawyers that sold their effort, used little technology, and had no access to non-lawyer capital.
  • If you’d never heard of courts, and you needed a way to resolve disputes, you wouldn’t construct ornate buildings in downtown cores that are 70% idle space, can only be used effectively by lawyers, and are unbelievably slow and costly. 

    Is this really what you’d build tomorrow to resolve legal disputes?

  • If you’d never heard of legal aid, and you needed a way to give poor people access to legal services, you wouldn’t come up with a system by which governments pay people from the first place to take problems to other people in the second place to find a solution. 

When you look at the traditional institutions of the legal services market — and not just law firms, courts, and legal aid, but also law schools and legal regulators — hardly any of them are what we would invent today if we needed to solve the problems they’re meant to address. If we had to start from scratch in all these areas, we would:

  • understand in detail the goal(s) we’re trying to achieve,
  • design around the end user or service recipient,
  • use only the tools and resources we truly need,
  • prioritize speed, accessibility, and affordability, and 
  • constantly improve through assessment and user feedback.

As we all know, the traditional institutions of the legal profession and the legal services market have become slow, costly, inefficient, and inconvenient. Many people and a whole lot of money have been deployed trying to make these institutions faster, affordable, efficient, and convenient. These efforts, for the most part, have fallen short or failed altogether, as these institutions have also proven remarkably impervious to reform and innovation.

But maybe we’re going about this all wrong.

Rather than trying to fix law firms, reform courts, and save legal aid, we could recognize that maybe these institutions were meant to function (and did function, very effectively) in a different set of social and economic conditions than we have today. And maybe, as a result, we should instead strive to identify, build, legitimize, and support other ways of delivering legal solutions and resolving disputes promptly, affordably, and accessibly. 

I’m not saying we should dissolve law firms, shut down courts, and defund legal aid. I’m saying that we need to supplement these old means of providing legal services with new ones that are better adapted to the world we live in, not the one our parents or grandparents lived in. Create more channels. Open more pathways to solutions. Give other options a shot.

Could we have legal services without law firms, dispute resolution without courts, legal help for the poor without legal aid? Many lawyers would say that’s unthinkable. But we buy books without bookstores, get music without record stores, see movies without theatres — and not that long ago, these were all unthinkable too. 

But Amazon, iTunes, and Netflix didn’t destroy bookstores, record stores, and movie theatres. All these business are still out there — a lot fewer than there used to be, sure, but no more than the market requires. And they are catering to people who want a different and richer experience than simply buying and consuming content online. The new options haven’t eradicated the old ones — they’ve allowed the old ones to find their core customer base, and given everyone else much more choice and convenience than they ever imagined they could enjoy. 

Not dead yet.

Would you give up Amazon, iTunes, and Netflix — and all the choice, convenience, and accessibility they’ve given you — so that we could revive bookstores, record stores, and movie theatres? I think it’s unlikely. Well, someday down the line, someone will ask the equally inane question: Would you give up LegalZoom so that we could have more law firms? Would you give up online dispute resolution so that we can open more courthouses? Would you give up community legal networks so that we could return to the golden age of the perennially underfunded legal aid certificate? 

We need more LegalZooms, more CRTs, and more CALAs. We need to authorize them, fund them, and support them. They’re not going to replace law firms, courts, and legal aid; they’re going to relieve these older institutions of the burden of trying to be everything to everyone in every circumstance — the burden of monopoly. Fighting to preserve that monopoly will go down in history as the least sensible and enlightened thing the legal profession ever did.

It’s time we stopped fighting. It’s time to set aside our preconceived ideas and conventional wisdom about what our legal institutions ought to look like. It’s time for us to start from scratch. 

After the millionaires

Earlier this week, I was gifted with the opportunity to join Mark Cohen and Mitch Kowalski on a webinar panel addressing a course in law firm management for international exchange students at the Bucerius Center on the Legal Profession in Hamburg, Germany. I had the enviable task of opening the panel with remarks around the theme, “What’s ‘broken’ with the classical way of doing things in law?”

In case it’s of any interest to you, especially if you’re just entering the legal profession or on the cusp thereof, I thought I’d pass along my speaking notes, lightly embellished with other observations I offered during the subsequent Q&A period.

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Richard Susskind has come up with many observations about why it’s so hard to bring about change in law firms. His most famous observation is one you’ve probably already heard: “It’s very difficult to tell a roomful of millionaires that their business model is wrong.”

I can attest to the truth of that statement, but there’s something important about it that we often overlook: The room is full of millionaires. And they’re millionaires for a reason: Their business model has been insanely successful.

Look at the AmLaw 100, the most profitable law firms in the United States. You have to go down to #75 on the 2018 list before you find a firm where the average equity partner took home less than US$1,000,000. That’s the average. At least half the partners in the top 74 firms took home more than that.

I like my job, I’m pretty good at it, and I’m one of a handful of people in the world who gets paid to do it. But I can tell you that I’m not making a million dollars this year and I don’t anticipate doing so anytime soon.

We now take you live to the AmLaw 100.

I think we need to grapple with these millionaires in the room and figure out what they mean for the legal innovation project. This isn’t just because of the obvious difficulty in persuading rich equity partners to abandon a business model that puts Porsches in their garage. It’s also because those Porsches themselves constitute a pretty good argument that the business model is actually right. It has made tens of thousands of lawyers amazingly rich. So what’s the problem?

From my point of view, the problem is twofold.

The first element of the problem is that the law firm business model has been amazingly successful and remunerative only for an exceptionally small number of lawyers. The great majority of private-practice lawyers work in firms of 20 lawyers or fewer, and most of them do not make a million dollars a year. Many of them earn in the low six figures, sure — but so do good electricians and senior civil servants. Quite a few lawyers earn less, sometimes much less, than $100,000 a year. And almost all lawyers, regardless of income, work really hard, sometimes as hard as the ultra-rich ones who are fortunate enough to have clients with very deep pockets.

The financial rewards of law practice are very unevenly distributed. That’s something law students aren’t often told, but it’s important to keep in mind as you start your careers. A few of you will win the fabulous compensation lottery. The rest of you will be over here with us, redeeming the cup-of-coffee consolation prize. The law firm business model is a runaway success only for a select few.

And rest assured, the millionaire lawyers have paid the personal price required to get there. I’ve known law firm partners who kept photos of their spouses and children on their desk, and thought to myself that they do that so they can remember what those people look like.

The second element of the problem, and I think the more significant one, is that the conditions that allowed many of these lawyers to become millionaires are starting to pass away. The traditional law firm model developed in a particular set of market circumstances. A new set of market conditions is now emerging, and the traditional firm is not really set up to deal with them.

This is an important point: It’s not that the law firm business model itself has suddenly stopped making sense. It’s never made that much sense, really. In most markets, working however you liked and charging whatever you wanted while passing on all your costs to your customers is not normally a winning proposition. But it works very well when you, as the supplier of services, enjoy:

  • exclusive access to the tools that allow people and businesses to accomplish their goals,
  • the exclusive right to sell these services, since you also have the right to regulate new competitors,
  • a client base that experiences extreme difficulty when trying to value your services, and
  • a client base lacking the knowledge, agency, and confidence to assert themselves with you.

In those circumstances, your biggest problem is not how to make money, but how to spend it all before the next truck full of it is dumped on your lawn.

But those circumstances are changing, and with them, the environment in which legal services are bought and sold is being gradually transformed. Call it “legal climate change,” if you like. The law firm business model is a lovely flower that developed and grew tall in the bright sunshine and gentle breeze of a long, lazy summer. But as they like to say in Westeros, winter is coming.

Here’s what’s the market for legal services has been experiencing over the past decade or so:

  • the emergence of new providers of legal services and solutions other than lawyers and law firms,
  • the decreasing relevance of regulatory restrictions against “non-lawyer” legal service provision,
  • the evolution of alternative fee approaches by which legal value can be identified, measured, and priced, and
  • the growth of clients’ confidence in asserting their rights as full participants in their legal solutions.

Lawyers and their law firms need an answer to these challenges. So far, they’ve found very few — mostly, I think, because they haven’t been looking all that hard. The millionaires aren’t looking, I can assure you. They have their eyes squarely focused on their own rapidly approaching finish lines, and they have no interest in accelerating the decline of the machine that prints money for them.

These lawyers are invariably older than average — in some cases, really old. And old people know better than most what the approach of winter feels like. They’re the ones who come up to me following my presentations and say, “I’m really glad I’m retiring in five years.” How delightful for them — I hope they enjoy their remaining years of practice and that lovely summer home in Tuscany they’ve had their eye on. But it doesn’t do much for the younger people they’re going to leave behind.

Soon enough, Richard Susskind’s problem will be solved in the simplest fashion possible: The millionaires will get up and leave the room themselves. Some will go willingly. More of them will go reluctantly, sometimes bitterly. A few of them, to be blunt about it, will be carried out — I’ve heard a number of lawyers “jokingly” say they intend to leave their firms feet-first. The millionaires will move on — though I wouldn’t count on them to be especially gracious about it.

But when that happens, it will leave the room, and the challenge, and the opportunity, to those they’ve left behind — to you. As you contemplate that inheritance, and mull over whether you even want it and what you would do with it if you did, I’d like to offer a few points of advice in closing.

  1. You don’t have to accept the model that’s been bequeathed to you. It was built by people with different values and priorities than you, in a different world than the ones you’re going to inhabit. Identify and retain the good and the valuable in that model. But be ready to jettison whatever lacks value to you or to your clients, and don’t second-guess yourself once you do.
  2. You should strive to incorporate other professionals and technicians into your new model, both internally (for productivity and quality) and externally (for client service and value). The future of legal services provision is multi-disciplinary. I don’t really care, to be honest, whether everyone in your room ends up a millionaire. But do not allow everyone in your room to be a lawyer.
  3. When building your new model and approach to selling legal services, start with clients. Go out and talk to people about their legal affairs, to business owners and managers about their legal challenges, and listen to the answers. Do not build your new models on the bones of the ones that came before you, or on the latest high-minded theory or management fad. Build them in response to the real needs of real people in the real world.

If you build legal services businesses that respond to current and future environments, to the needs of the clients in the markets that you want to serve, then what you build will be successful and sustainable. That’s all anyone can ask — and really, it’s all you’re ever going to need.

How compensation plans are wrecking law firms

The greatest threat to the survival and success of law firms today is not client empowerment, or Big 4 accountancies, or artificial intelligence, or even generational change. These and other trends will have a significant impact on law firms in the years to come — but none of them is actively working to undermine law firms’ productivity, hobble their strategic efforts, and compromise the health of their lawyers.

What’s killing law firms these days is their lawyer compensation systems.

Law firms incentivize their lawyers to act in ways that are counter-productive to lawyers’ happiness, clients’ satisfaction, and the firms’ effectiveness. They do this by rewarding lawyers for bringing client business into the firm and billing hours to the firm’s clients, and for hardly anything else. In the vast majority of firms that I’ve encountered (and in the mini-survey below), these two activities account for at least 75% of lawyer compensation; in more than half those firms, they account for 90% or more.

Small sample size, yes, but still….

Law firms seem to believe that by paying lawyers to do almost nothing beyond finding clients and billing work, they’re supercharging the firms’ productivity and profitability. I believe that instead, firms have unintentionally bred a host of negative behaviours — or at best, neutral behaviours with negative consequences — that poison law firm culture and sabotage client interests.

(Note that I’m not talking about the fact that law firms sell their work on an hourly basis. This isn’t about how law firms sell their services, but about how they pay their lawyers. Despite appearances, they’re not the same thing.)

Here are nine ways in which the priorities of law firm compensation systems are antithetical to sustainable law firm success.

1. Lawyer effort > Client outcome. This is the clearest impact of disproportionately paying lawyers for billing hours. The lawyer’s financial priority — maximize personal time and effort — is disconnected from (and frequently in direct opposition to) the client’s priority, which is to address its issue quickly and affordably. A lawyer whose bonus (or salary, or continued employment) hinges on meeting a billable quota will subject a client matter to intense scrutiny and repeated review, well beyond what is necessary to ensure the competent execution of the matter. When you pay lawyers for hours rather than results, hours are what the client will get. This happens in virtually every law firm, every day, all over the world. It’s as close as you’ll get to a universal law firm experience.

2. Customer sales > Customer service. And this is the clearest impact of disproportionately paying lawyers for bringing in clients. Most law firms reward successful sales efforts by their lawyers, as they should. But these rewards are so outsized — in terms of money, prestige, and power — that they lead lawyers to prioritize finding clients over serving clients. The longer the period of “origination credit,” the worse this tendency becomes: Everyone wants to land clients, but hardly anyone is equally motivated to actually serve them. The myth of the rainmaker has captured lawyers’ imaginations; the humble “service partner,” equally as vital to the firm’s success, is undervalued. That’s why clients are very familiar with great sales efforts by lawyers, but much less familiar with great lawyer service.

3. Personal success > Firm success. I’m not arguing that “clients landed” and “hours billed” aren’t important to law firms’ success; obviously, they are. But most compensation systems don’t pay lawyers to do anything else, or they pay them in much smaller amounts. In most law firms, there are few if any financial rewards for managing people or processes, maintaining strong client relationships, marketing and promoting the firm and one’s colleagues, mentoring juniors, building the firm’s knowledge base, and countless other aspects of truly well-run and well-rounded legal services enterprises. Compensation systems see law firms as entities that require only clients and hours to survive; if that was ever true, it no longer is.

4. Financial gain > Personal well-being. The rates of depression, substance abuse, and even suicide within the legal profession are significantly higher than in other walks of life. Certainly, law is a stressful and demanding career no matter where you work. But compensation systems intentionally incentivize lawyers to work as hard and as long as they can. Virtually every law firm sets a minimum number of billable hours as a condition of employment; I don’t know of any that set a maximum, a cap on the number of hours that will be rewarded. The only limit to your earning power is how many hours of your life you’re willing to burn. Magnifying and exploiting lawyers’ weakness for individual achievement and financial gain is simply shameful.

5. Individual achievement > Collaborative activity. Law firms (almost) universally pay lawyers for their individual efforts rather than for group accomplishments. It’s the culmination of a lifetime of lawyer incentives, beginning in law school (compete against other students for top grades) and continuing through the associate years (compete against colleagues for top assignments and lanes on the partnership track). Law firm culture is notoriously competitive, a zero-sum game in which someone else’s gain will come at your expense. The numerous benefits of internal collaboration — for cross-selling, for quality control, for morale, and above all for client outcomes — never materialize, because firms don’t pay lawyers to collaborate. They pay them to work hard and achieve on their own.

6. Partner billing > Associate billing. I’ve never fully understood why partners are incentivized to bill hours; I always thought half the reason to become a partner was that you didn’t have to labour in the billable salt mines anymore. But because firms compensate partners for hours billed, partners are conflicted when assigning work: Give the task to an associate or keep it for yourself? Partners are motivated to choose the second option, especially in lean times, because they directly benefit financially. In the result, the junior doesn’t get enough work to stay busy and become more skilled, the firm doesn’t benefit from the profitability of associate leverage, and the client gets associate work performed at partner rates. Nobody — not even the overworked, under-challenged partner — truly benefits.

I’m sorry, but I’m not allowed to argue unless you pay me.

7. Billings > Collections. While we’re on the subject of the mystifying aspects of law firm compensation, let’s talk about the fact that most systems pay lawyers on the basis of the hours they’ve billed, not on the number of hours the firm actually collects. You’d think that law firms would at least line up compensation with revenue; but no, it’s enough in many firms merely to bill the hours, regardless of whether the client pays them. This incentivizes lawyers to bill beyond the client’s wants or needs, since the consequences of the inevitable writedowns won’t materialize for many months, if at all. Paying lawyers for their realized bills, not their issued bills, as Ivy Grey suggests, would be a simple first step towards rationality here.

8. Men > Women. There are myriad reasons why men continue to outnumber women in most law firms by about 65% to 35% — and in the equity partner ranks, by about 85% to 15% (and out-earn them, too). But chief among those reasons are law firm compensation systems — and related advancement and promotion systems — that pretend everyone is equally able to bill hours and bring in business. In a world where women still disproportionately bear the burden of child-raising and home management and are resented for being as aggressive and entrepreneurial as men, that pretence is insupportable.  As I’ve written before, the men who built, own and control the law firm benefit directly from time- and effort-based remuneration. It’s an unconscionable waste and abuse of (female) human capital.

9. Client isolation > Client peace of mind. Lawyers paid to bill hours are motivated to turn ordinary time into docketed time. The easiest way to do that is to pick up the phone when the client calls: Every minute spent listening to and answering a client query, no matter how trivial, can be converted to cash. Clients have responded logically, by not calling unless they absolutely must, because they know the meter goes on at the first moment of contact. Rather than be charged a huge hourly rate to ask a question, they’ll stay silent and anxious about the answer. Good lawyers don’t want anxious clients afraid to call them; but compensation systems don’t care. (And the corollary is even worse: When you pay lawyers for their efforts, you also train them to make no efforts unless they’re getting paid for it.)

Can law firm compensation be fixed? Only with immense difficulty, I suspect. If you’re touching a law firm’s compensation system, then you’ve made your way deep into the heart of the law firm machine, into the belly of the beast. If the law firm’s fundamental purpose is to generate short-term profits for its equity partners — and I’ve argued in blog form and in book form that at most law firms, it is — then you’re tinkering with the most important and sensitive aspects of the firm. I frequently refer to compensation as “the third rail” of law firm management: everyone is afraid to touch it. And as we’ve seen above, many people in law firms have a deeply vested interest in ensuring that it is not touched at all.

I am not, emphatically not, a compensation consultant. (Here’s someone who is.) But unless you’re starting an entirely new law firm from scratch — or you’re performing a tear-down and rebuild of an existing firm so complete that it amounts to a new start — I’m highly doubtful that you can change an entire compensation system in one go.

But I do think you can change just one element of it. And if you can manage to do that successfully, then in time, you can change another, and then another — until one day, like the proverbial shipwright who keeps replacing individual parts of the vessel, you’ll find that you’ve effectively produced a brand new ship.

Here are a few quick suggestions about that one initial element to change.

  • Place a hard cap on the number of annual billed hours for which any lawyer (especially an associate) will be rewarded. Beyond 1,300 or 1,800 or 2,150 hours (choose a number that works for your market and is consistent with strong but not superhuman effort), the lawyer can bill all she likes, but she won’t receive any greater bonuses or remuneration. If for no other reason than to save your lawyers from burnout, cap the incentives that make them work harder.
  • Place a much lower limit on the number of annual billed hours for which partners will be rewarded. The whole point of law firms is that work should be driven down (where appropriate) to lower-cost talent so that (a) their leveraged work can generate partner profits, (b) they can gain experience and become more skilled, and (c) partners can devote their time and energy to sales, service, management, and personal improvement. Stop rewarding partners for behaving like associates.
  • Tie a small (but annually rising) percentage of lawyer compensation to the results of client satisfaction surveys conducted during and after a client matter. Law firms say they want satisfied (if not delighted) clients. Well, you get what you pay for. Incorporate “client’s assessment of service and care” into the lawyer compensation formula, and be amazed at how quickly you develop a solicitous and service-oriented legal workforce.

The first step in this whole process, and maybe the most important step, is to break the longstanding law firm assumption that there is a direct and equal correlation between revenue and compensation. If you’re running a sole practice, that correlation makes perfect sense. But if you’re running any kind of multi-lawyer enterprise, then your goal is to maximize not individual revenue, but sustained enterprise profitability. That requires a completely different approach to, among other things, the types of behaviours and activities that you are motivating your lawyers to do and rewarding them for performing.

Some lawyers’ payments are simpler than others.

One lawyer might bring in lots of clients that don’t stick around or bill lots of hours that get written off, while another lawyer keeps people motivated and clients engaged with little fanfare. Which lawyer is creating more value for your firm, today and down the road? You need to know the right answer to that question — and then you need to adjust your firm’s compensation priorities accordingly.

One final thought, and a note of caution, on this whole subject.

There are limits to what you can or should ask a compensation system to do for your law firm. Because really, in very practical terms, a lawyer compensation system has exactly one purpose: to compensate lawyers. That’s it. Trying to use it to modify lawyer behaviour, or to signal strategic priorities, or to bring about cultural change, will work up to a point. But it’s like propping a chair up against a door to keep it closed: That’s not really what the chair is designed for, and it’s not going to do the job terribly effectively or long.

In a recent conversation, Felix Rackwitz of TPR Legal in Frankfurt pointed me to Herzberg’s Motivational Theory, which identifies salary as an extrinsic “hygiene” factor that doesn’t really drive employee satisfaction or motivation (although it can create dissatisfaction if managed poorly). If you want to positively affect employee behaviour, you should provide motivational factors like challenging work, personal recognition, growing responsibility, involvement in decision-making, and a sense of importance to the organization. (Here’s an article applying Herzberg’s model to law firms.) Law firms can’t always (or don’t always want to) provide these factors, so they ask compensation to play the motivational role instead. That’s more than it can realistically handle.

So when it comes to your law firm’s compensation system, I’d like to suggest these two pieces of advice:

1. Identify all the negative outcomes that your current system unwittingly generates — compromised clients, damaged lawyers, poor collaboration, lousy diversity, etc. — and strive to change the system to diminish if not eliminate them altogether. Running a law firm is hard enough in the best of circumstances; undermining both your clients and your lawyers with a self-sabotaging compensation system makes it far more difficult than it needs to be.

2. Identify all the positive incentives that your current system is supposed to create, and dial back your expectations of what can be accomplished this way. If you want to motivate your lawyers, give them interesting work, praise their accomplishments, involve them in organizational decisions, and so forth. Throwing money at them, trying to push them one way or another with the promise of more money (or the threat of less), likely won’t get you all that far.

Your firm’s compensation system doesn’t have to be the cause of all your problems, or the answer to all your woes. Maybe it can just be a good way to pay your lawyers without simultaneously wrecking your firm.

Partner succession and law firm ownership

What follows might look like a proposal to address law firm partner succession challenges. But it’s actually a thought experiment in regulatory policy for the legal profession.

As the Boomer generation of law firm partners continues to exit the demographic python, firms increasingly struggle with partner succession challenges. The unwillingness or inability of senior lawyers to transition their practices to younger colleagues has many contributing causes, including:

  • The partner’s refusal to begin winding down and transitioning his practice at its most profitable point,
  • The partner’s desire to sustain the power and privileges of his influential position within the firm,
  • The partner’s reluctance to face the looming end of a career that has given his life definition and value,
  • The partner’s unreadiness to “return to civilian life” after decades in a cloistered law firm environment, and
  • The partner’s misgivings about whether a junior colleague could replace him or serve his clients as well.

    They never want to go.

The degree to which any of these factors plays a role in the succession challenge varies from partner to partner. But I think the first factor in that list — the partner’s unwillingness to shrink and eventually cut off what is probably a substantial income derived from partnership — is common to virtually every case of “succession-itis.”

Once you leave the equity circle of a law firm, your entitlement to receive any share of that firm’s profits, regardless of how important your contribution to the firm’s success might have been, comes to a swift end. This, of course, is because legal regulators in most jurisdictions prohibit ownership of law firms by anyone who is not a lawyer (But see California.) Or, to be more precise, anyone who is not a practicing lawyer. And that brings me to the proposal: What if lawyers could maintain their equity in law firms after they retired from practice?

Suppose your jurisdiction amended its ethics rules such that a lawyer who holds equity in a law firm could maintain that equity, or some portion thereof, after she retired from practice. That lawyer would no longer face the prospect of an immediate end to her legal income stream, thereby removing a significant disincentive (although not the sole one) to her retirement. This continuing revenue could serve as a sort of “pension” for partners who otherwise must fund their own post-retirement income. Moreover, since this income would depend upon the ongoing success of the firm, the partner would be incentivized to properly transition her practice and clients to a competent younger lawyer, perhaps one whom she’s been grooming for years. If the firm flounders after she leaves because she did a poor job of practice transition, she would be jeopardizing her post-retirement income stream.

Now, regulators being regulators, they could and likely would create various limitations on this post-retirement equity position. They might rule that post-retirement equity requires X years of partnership in a firm before it kicks in, or that the equity share cannot be transferred and expires upon the partner’s death, or that the partner forfeits this share if she joins another legal services supplier or is appointed to a court or tribunal, or that the equity share would be capped at 65% of a practicing partner’s share, that sort of thing. We can play with the permutations and exceptions all day.

But I’m more interested in how the regulator would view the underlying premise of the proposal. Because while I think it’s very unlikely that this change to law firm ownership rules will occur anytime soon, it’s the policy challenges that I think are worth examining.

Upon what basis would a regulator turn down this proposal? What would be the objection to allowing retired lawyers to own equity in a firm? I suppose you could argue that a lawyer who no longer actively participates in the partnership should not be entitled to any income from the firm — but that’s hard to reconcile with the fact that a legal secretary who retires from the same firm is entitled to a pension funded from her own contributions of both hard work and money over many years. Why should a lawyer not have the right to receive an ongoing financial payout from a firm she helped to build into a success?

We’re not lawyers! We’re not worthy!

The potential objections around “non-lawyer” ownership are also interesting. Should a lawyer who retires from practice be considered a “non-lawyer,” the same as someone who never attended law school and practised law? Does the retired lawyer no longer meet the “character and integrity” tests that evidently separate people who are lawyers (worthy of law firm ownership) from people who are not (and therefore not worthy)? Unless we argue that lawyers lose their qualifying degree of character and integrity when they stop serving clients — and I don’t think any legal regulator wants to make that argument publicly — then I’m not sure of the policy position against this idea.

I’m not seriously proposing this change to the ethics rules, for what it’s worth — it likely would prove highly cumbersome to formulate and a huge hassle to regulate and enforce. (Although I’ll wager that, if such a proposal ever did make its way to a regulatory body, it would provoke keen interest from every lawyer over 60 on that body.) I’d much prefer comprehensive, principled reform of law firm ownership rules, rather than piecemeal exceptions that are, once again, all about the lawyers.

But I do think this thought experiment can focus our attention on the presumption behind the “only lawyers can own law firms” rule: that lawyers deserve to own law firms and “non-lawyers” do not. Why is that? What is it about lawyers — precisely and in detail — that qualifies them to own law firms? What is it about “non-lawyers” — precisely and in detail — that disqualifies them? What happens to a person when they leave the “lawyer” category and join the “non-lawyer” category? Are they downgraded somehow, and if so, in what respects, and why?

I don’t have good answers to any of these questions. But I’d be very interested in learning what the answers might be.