Chaos in the castle

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Posted in: Innovation

One of my favourite expressions about innovation is that few revolutions have ever started inside the castle. (I changed it from “no revolutions” after someone pointed out that Mikhail Gorbachev was a pretty clear exception.) The idea behind the expression is that the people who benefit most from the status quo are also the ones most inclined and best positioned to maintain it — as well as the ones least likely to notice when real change is fomenting.

So it’s noteworthy when you start seeing revolutionary flags inside the castle grounds. This thought was going through my head — along with a Tom Petty song (no bad thing) — when reading this item at Legal Blog Watch about the new “Legal Rebels” project now underway. According to its website:

Dozens of lawyers nationwide aren’t waiting for change. Day by day, they’re remaking their corners of the profession. These mavericks are finding new ways to practice law, represent their clients, adjudicate cases and train the next generation of lawyers. Most are leveraging the power of the Internet to help them work better, faster and different. The Legal Rebels project will profile these innovators and describe the changes they are making.

Legal Rebels even comes with its own manifesto, which unfortunately for me appears to be only for Americans. But that’s understandable, because Legal Rebels is an initiative of the ABA Journal. I actually think it’s a very cool idea and a great magazine feature (interactive and wikified, no less) — I kind of wish I’d thought of it for my own magazine, though the InnovAction Awards (which will be announced next week) have occupied me on that score.

But what’s interesting is that Legal Rebels came from the Journal, which LBW refers to as “one of the most mainstream of all legal industry publications.” And that’s not the only example of subversive conduct by leading legal periodicals: The American Lawyer, which has so much influence over the largest US law firms that they’re referred to as the AmLaw 100, publishes in its AmLaw Daily e-zine a regular column by Paul Lippe, founder of Legal OnRamp. It’s called “Welcome to the Future” and it tracks the insurgency underway in the legal services marketplace; the newest column talks about the impending collapse of the BigLaw summer student program.  (The AmLaw Daily also just brought us an article by a Cooley Godward partner with the pointed title “Change or Die.”) Not to be outdone, the National Law Journal asks whether law schools are at a tipping point.

When the pillars of American legal journalism are promoting innovation and cataclysmic change, something’s going on.  But it’s not just the legal media — legal marketplace heresy is breaking out all over the profession’s elite and sacrosanct institutions.  Evan Chesler, presiding partner at Cravath, Swaine & Moore LLP, famously called for the end of the billable hour late last year. Harvard law student Daniel Thies has written a powerful paper about “practical legal education and the new job market.” British Lords talk about being “inundated” by private equity companies looking to invest in law firms. Bar associations, elite law schools and exclusive legal organizations are sponsoring conferences and symposia on the upheaval of the present and the new world of the future.

All of this looks remarkable to those of us agitating from the outside — we’re used to hearing the radicals in the streets, not inside the castle grounds. But as Paul Lippe has pointed out elsewhere, what’s most remarkable about this revolution is that no one’s manning the battlements or guarding the portcullis. No one’s stepping up publicly to defend the status quo of hourly billing and compensation, up-or-out partnership tracks, overworked and underchallenged associates, and so on. That’s because there really isn’t any good defence for them; they’re irrational. What they have been, up until now, is incredibly profitable for law firms. But as their profitability wanes, so does any illusion that they can be justified.

Revolutions fail all the time — they run out of steam, or they’re ground down by entrenched interests, or both. I don’t see either of those things happening in the law right now, and I don’t see this revolution slowing down.

2009 Futures Conference

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Posted in: Innovation

As you might know, I’m a Fellow of the College of Law Practice Management and attend its annual meeting every fall (not least for the bestowing of InnovAction Awards, the winners of which will be announced soon — see the College’s blog for an ongoing roll call of this year’s nominees). The College’s annual meeting always produces discussions and debates of the highest order from among its members, who include legal industry luminaries from around the world. This year, though, the College has gone a dramatic step further, and I think you should know about what it has planned.

From September 25-26, 2009, in Denver, Colorado, the College is hosting the inaugural edition of the Futures Conference, a dynamic, interactive event in which leaders and visionaries of the legal profession lay out the future course of this industry. In presentations, workshops and small-group discussions, delegates will have the chance to hear from and exchange views with the profession’s most innovative law practice management minds and benefit from the extraordinary insights that will result. I’m expecting it to be an amazing experience, and if you have the opportunity, I’d strongly encourage you to attend.

Keynote presentations will be made by Ward Bower of Altman Weil, Bruce MacEwen of Adam Smith Esq., and Harry Trueheart, Chairman of Nixon Peabody LLP. Conference speakers include Andy Adkins of the Legal Technology Institute, Ross Fishman of Fishman Marketing, Ann Lee Gibson of Ann Lee Gibson Consulting, Mark Greene, CMO of  Nixon Peabody, David Hambourger, CIO of Seyfarth Shaw LLP, Sally Fiona King, Regional COO of Clifford Chance, Carol Phillips, Director of Administration for the West Coast Offices of Sidley Austin LLP, Dan Pinnington of LawPRO,  and John Tredennick of  Catalyst Repository Systems, among others. And that’s on top of the College members themselves in attendance, leaders in the law in their own right.

All of which is to say, it figures to be a tremendous event — even (and especially) in challenging times like this, the Futures Conference makes a great case to be on your must-attend list. I’ll be there — let me know if you will be too.

Momentum

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Posted in: Billing, Innovation, New Lawyers, Outsourcing

Momentum is one of those things everyone talks about but nobody can ever precisely define or quantify. It’s that sense that things are turning around or gathering speed in a certain direction, usually for the better — with a corollary borrowed from physics that the larger the object and the greater its velocity, the more powerful the result. Skeptics dismiss it — baseball managers like to say that “momentum is tomorrow’s starting pitcher” — but I think there’s something to it, especially right now in the corporate legal marketplace. You can feel the pendulum swinging, the weight shifting — you can sense a gathering wind in the sails of change.

Exhibit A, which you’ve surely read about by now, is the decision by international mining giant Rio Tinto to send $100 million worth of legal work annually to a team of lawyers in India. This is not back-office administrative work of the type that, say, Clifford Chance has been sending overseas. This is associate-level legal work like document review and contract drafting, and you can call it “commodity” work if you like, but there’s tons of it and it keeps many large firms profitable. It represents $100 million that Rio paid its outside law firms last year but won’t pay this year or, probably, ever again. With an offshoring project of this size and scale, Rio is obliterating the “legal work” distinction that many firms have long believed insulated them from the effects of outsourcing.  And it won’t stop there, as Richard Susskind notes in a commentary for the Times:

People often assume that outsourcing and the options are applicable only to high-volume, low-value legal work. The Rio Tinto deal confirms this is wrong. There is no legal job whose complexity and value elevates it entirely beyond market forces. The reality is that significant parts of even the biggest transactions and disputes are repetitive and routine; and in-house lawyers will be delighted that these can be packaged out to less costly providers.

Rio Tinto’s move is bad news for traditional law firms in two ways. First, the outsourced Indian lawyers are doing this work for one-seventh the cost of traditional outside counsel. Think about that: firms have lately been offering their clients rate discounts of up to 10% and feeling magnanimous about the sacrifice, and here comes CPA Global doing the same work for 85% less. That’s a stunning cost savings, and it doesn’t just change law firms’ playing field, it destroys it: it reduces any proffered “rate discount” to  irrelevance. Rio Tinto has served notice to its outside counsel that the price bar for this type of work  has been reset at a radically lower level, permanently. It should go without saying that traditional law firms can’t compete for that work at that price, not as they’re currently structured.

But maybe more importantly, Rio Tinto’s move feels like a momentum shifter. Its own sheer size as a client, and the mammoth scale of the outsourcing commitment it’s making, should have enough critical mass to really get things moving within a legal marketplace that, despite recent upheavals, has yet to make real, radical alterations to its business. Rio is not the first law department to send legal work offshore, far from it — but it’s a very visible example of what Seth Godin called Guy #3 , the participant whose entry breaks the ice and gives everyone else “permission” or cover to join.

Rio is sending a message to other law departments that legal work can be exported en masse to India without GCs having to automatically fear for their jobs. And it’s sending a message to law firms that the game has changed — a message some firms have received. Just a couple of days after Rio’s move, large UK firm Pinsent Masons announced it’s sending litigation work to lawyers in South Africa, while competitor Simmons & Simmons is preparing to send its own legal work to India, Australia or South Africa. This quote from Simmons managing partner Mark Dawkins is gold: “We’re not going to defend a business model that clients don’t want to have to pay for.” It’s really as simple as that — it always has been — and the reality on the ground is now starting to reflect that.

What’s really interesting, though, is that this momentum isn’t restricted to outsourcing — look around the legal marketplace and you can start to feel real momentum shifts in numerous places.

Consider firms’ treatment of new associates: after peaking  at $160,000, starting associate salaries have been in retreat for a few months now, to no one’s surprise. What was surprising was last month’s decision by Philadelphia-based firm Drinker Biddle to chop those salaries to $105,000 but add training and apprenticeship services for these new lawyers. “In some ways, we intend for your experience in your first six months to be a bit of a throwback to how lawyers ‘grew up’ in their firms literally only a few decades ago, before the rise of the billable hour,” the firm wrote to its incoming associates. Within a month, Cincinnati firm Frost Brown Todd followed suit. (Defenders of the articling year at Canadian law firms are probably feeling pretty good right now.)

And then, just a few days ago, large international firm Howrey LLP played the Rio role and announced it was cutting associates’ pay but increasing their training. Howrey has a track record of paying attention to how its lawyers learn (and, interestingly enough, in outsourcing to India too) — its Howrey Virtual University has been providing coordinated firm-wide web-based lawyer training since 2005. Howrey managing partner Robert Ruyak’s words are also noteworthy: “The old model is broken. You’re bringing on these extremely bright individuals and letting them waste their careers buried in documents where they aren’t really learning the practical skills it takes to be a lawyer.“ The comment board at Above The Law, which invariably trashes any law firm decision that doesn’t involve more pay and less work, reacted positively to Howrey’s move overall — nearly 70% of poll respondents said they’d take the deal if it was offered to them. My guess is that right now, many large law firms are watching Howrey closely and treating it as their advance scout — like Rio, Howrey is a substantial player whose participation can and should tip the balance toward change.

There are other examples. Look at the recent frenzy of reports of law firms pricing their work at “fixed fees” — we’ve heard about flat-fee or fixed-fee initiatives underway at traditional firms like Alston & Bird, Lightfoot Franklin & White, Kirkland & Ellis, Simmons & Simmons (there they are again) and Morrison & Foerster, to name a few. Law firms generally still don’t understand fixed fees — here are some excellent critiques of their mindset and methodology from Tim Corcoran, Patrick J. Lamb and Jay Shepherd — and “alternative fees” are by and large still that, alternative.

But now along comes respected midsize firm Saul Ewing, creating a “cost certainty commitment” that standardizes fixed-fee arrangements with clients. Again, what’s unique here isn’t so much the offering as the prominent, high-profile way in which it’s being rolled out — the key to building momentum is to be seen to build momentum. From the Legal Intelligencer article: “Altman Weil’s Pamela Woldow said Saul Ewing’s cost certainty commitment is certainly unique. She said she isn’t aware of any other firm that has created such a program and made such a public, formal commitment by putting it on its website.” All of these moves — Rio Tinto’s, Howrey’s, Saul Ewing’s — are significant largely because of the signal they’re sending, quite intentionally, to the other members of the marketplace that things have changed.

Going first, and doing so conspicuously, is incredibly important to change in the law. It’s conventional wisdom to blame lawyers’ reluctance to innovate on the fact that they hate being first movers, that they much prefer to stand back and let someone else make the initial move. And that’s true as far as it goes, maybe even more so  for in-house lawyers than for private practitioners.  But the corollary to that is that lawyers also don’t like being the last ones to join the club. Ron Friedmann explains this very well by using “a discontinuous step-shaped function” to describe lawyers’ willingness to change:

Consider adoption in the legal market of e-mail, document management, marketing, lateral moves, or mergers. For each, there seemed to be only a few firms doing it and then, quite suddenly, many or all were. The “step function” reflects lawyer decision making: the first few adopters change slowly, gingerly, and quietly. Everyone wants to follow so once you have a dozen adopters, “the coast is clear” and the rest rush in.

“Gradually and then suddenly,” as Hemingway once put it — lawyers hate being  the first to change, but equally they don’t want to be the last ones left out in the cold. Law firms constantly monitor each other and the legal marketplace to see what’s going on, who’s doing what, and whether there’s anything big happening they should be part of. They’re watching for the “prominent first movers” Rees Morrison talked about in the Rio Tinto context. Once they feel that enough people have jumped into the water and declared it safe — once the reputational and financial risks of change have been taken and minimized by others — then they’re ready to leap, and if they sense a rush of movement among their competitors, they’ll even push each other out of the way to be the next ones in line.

I think that’s where we are today. In all sorts of ways, in many different aspects of the legal profession, first movers are forging ahead and dictating a new energy and direction, while the great silent vastness behind them watches closely and prepares to shift and follow. Momentum — mass times velocity — is an incredibly powerful force; we’re about to see it channeled through the legal services marketplace.

The UK crucible

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Posted in: Competition, Governance, Innovation

North American lawyers have been fretting lately about the effects of this recession and what it means for their future. But the recession is only an amplifier or accelerator of change, not its source, and it doesn’t tell us much about the shape of things to come. If you  really want to know what the future looks like, peer across the Atlantic at the revolution now firmly and irreversibly underway in the United Kingdom. But be prepared before you look — otherwise, you might feel like the valedictorian in Say Anything: “I’ve glimpsed our future. And all I can say is … go back.”

* Last month, the Legal Services Board (the new overall regulator of all UK legal services providers) issued a discussion paper asking for lawyers’ input on what Alternative Business Structures (ABSs) should look like. An ABS allows traditional legal services to be delivered through a vehicle other than the traditional partnership of lawyers — most famously by non-lawyer financing or ownership — and constitutes the keystone change to law firm structure envisioned by the Clementi Report and subsequent Legal Services Act. Responses to the paper are due within two months; ABSs themselves are scheduled to be unleashed in just two years. This excerpt from the paper’s executive summary should make the Board’s mandate and outlook very clear:

For centuries, legislation and professional regulatory rules have tightly restricted the management, ownership and financing of organisations that are permitted to offer legal services. Although the UK’s legal services sector is internationally competitive and highly regarded, these regulatory restrictions have stopped it from realising its full potential. Regulation has limited innovation and competition in the way that legal services are delivered. It has constrained consumer choice and restrained normal market pressures on law practices to deliver their services efficiently and effectively. Regulation has gone beyond what is rightly necessary to protect citizens from the unethical practices of a tiny minority to a framework which has restricted businesses and consumers alike. At the heart of the new regulatory environment for legal services is a process for scaling back these restrictions.

* Earlier this month, the Solicitors Regulation Authority (the lawyer governance body spun off from the Law Society earlier this decade) issued its own complementary consultation paper on ABSs. Here’s a summary posted by leading UK consultant Nick Jarrett-Kerr at Linkedin’s Legal Innovation Group:

“[T]he SRA lists 11 possible models for [ABSs] and asks for comment. They include the current [Legal Disciplinary Practice] model (mainly lawyers, but with some non-lawyer managers), two models of totally externally-owned law firm, the [Multi-Disciplinary Practice], the co-op model (externally owned, providing funeral services, etc., as well as legal), PE investment model, floated company, “hub & spoke” (where a non-licensed hub such as an administration company provides back- and middle-office services to law firms who make up the spoke), the Australian Integrated Legal Holdings model of consolidated ring-fenced firms, not-for-profit firms, and in-house teams.”

* Small-firm and sole-practice lawyers are not taking these developments lightly. The introduction of the ABS model “demonstrates utter contempt for the consumer of legal services,” QualitySolicitors.Com CEO Craig Holt told the BBC. “The solicitor profession faces being all but wiped out by a government seemingly intent on robbing the public of access to good quality, local legal advice.” Mr. Holt’s organization pressed its point at a protest last week outside a UK supermarket chain that, as the current saying goes, could soon be selling legal services along with tins of beans.

* Whatever the merits of their position, lawyers opposed to these changes have legitimate reasons to be anxious. More than 16,000 legal jobs disappeared from the UK in 2008 and 10,000 more are expected to go within the next two years. The prognosis for these unemployed practitioners is ugly: Lawyers who fall out of work have little hope of finding new jobs, with vacancies for associate solicitors down by 95 per cent this year, recruiters said. “It’s the worst year ever, by some margin,” Nick Root, founding partner of Taylor Root, a leading recruitment agency, said. “Those people who are being let go will not get another job.”

And there’s more. Linklaters’ managing partner Simon Davies: “[B]ecause of the changes brought about by the developments of the past year or so, much of that work will never come back – or at least not in the foreseeable future.” Stikeman Elliott’s London managing partner Derek Linfield: “This is like nothing any of us have seen, and no one has any idea how this is going to end up.”

* North Americans might not realize that the recession is hitting the UK and Europe harder than the US and Canada. But the changes to legal practice prompted by the downturn will last well into the recovery. Here are two to get used to. First, the UK government is instituting a reserve auction system for criminal legal aid work that will essentially award legal aid contracts to the lowest bidder in the name of “efficiency,” with predictable effects on the defence bar. Meanwhile, putting a major scare into big firms, gigantic Anglo-Australian mining company Rio Tinto has announced it’s outsourcing large chunks of its legal work to a dozen lawyers with CPA Global in Delhi. Rio aims to cut $100 million from its annual legal budget in the process and free up its internal lawyers for more complex work — and it expects its outside counsel to play along. (More on this in a separate post next week.)

Not everything coming to pass in the UK will migrate to the New World — but a lot of it will, and the changes that do occur are likely to stick. Expect some form of regulatory reform in the US and Canada within the coming decade, law firms forced by regulators or clients to redefine themselves and their business models, more lawyers losing full-time jobs and fewer full-time lawyers hired to replace them, lawyers figuring less and less prominently in the provision of publicly funded legal services, and nastier competition between remaining lawyers for fewer client dollars. Love it, like it, fear it or hate it, but don’t ignore it or pretend it couldn’t happen here — there’s not much here so unique to the UK that it can’t be exported worldwide.

The UK legal profession is entering a trial by fire, a crucible from which it should emerge smaller, leaner, more entrepreneurial by necessity and more captive to the demands of the client marketplace. Take a good look at that crucible, because it’s coming soon to a law practice near you.

To the class of 2012

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Posted in: Innovation, Law School

….and so once again, best wishes from all of us on the faculty to you, the class of 2012, as your journey through law school begins.

Before I yield the microphone, I have some news to share both with you and with my colleagues: that little lottery ticket I bought on a lark at the corner store last month turned out to be the sole winner of the $6.7 million jackpot. When the dean returns to her office, she’ll find my graceful letter of retirement on her desk.

And so, as this is my last official function here, and as I happen to be at the podium, I thought I would share with you, the class of 2012, my unfiltered thoughts about the legal education you’ve signed up for and the legal profession you’ve begun the process of entering.

Many of you have already approached me and other faculty members to ask about the job market for law graduates – as well you might, since every day brings news of fresh casualties from the Great De-leveraging. This is undoubtedly your primary concern ¬– a far cry from my first day of law classes 19 years ago, when our chief interest lay in finding out what downtown club was hosting the latest orientation event. We didn’t start thinking about jobs until our second year; I’d be surprised if anyone here hadn’t thought about jobs by your second day.

Of course, in my first year – it really wasn’t that long ago, you know — the classrooms weren’t named after law firms, and the career services office was a locked and unstaffed storeroom full of firm brochures halfway down a basement corridor. Most of the faculty considered employment for graduates a subject beneath their attention – at least, employment other than as a law professor or judge. This was to be expected, since few of them had more than a passing acquaintance with life at the private bar, and more than a handful had philosophical objections to market-based economies in general.

That’s all changed now, of course. For better or for worse – and I can find you advocates for both sides – the evolving consensus is that law schools should make at least some effort to help you secure jobs and/or to ensure you possess some skills and knowledge geared towards private law practice. The career services office is now in spacious quarters on the main floor and staffed with full-time paid professionals. On-campus interviews by law firms are an unremarkable fact of life. Practicing lawyers teach numerous courses – at some schools, in fact, these sessional lecturers outnumber the full-time faculty. No one could seriously question whether law schools have made an effort to accommodate your career interests.

But is it enough? Some people say we’ve only improved the extra-curriculars, and that the fundamental nature of the degree is still traditional to the point of being reactionary. Here in Ontario, the mandatory first-year curriculum hasn’t changed in more than 50 years – you’re going to learn the same subjects this year as your predecessors did when JFK was the president down south. We still teach you the underlying principles of law and make you read judicial decisions about the application of these principles to various legal problems – and we still don’t give you the opportunity to apply those principles yourselves. Aside from a few procedure and ethics courses, most schools don’t give you much of a glimpse into the life of a practicing lawyer. Call it a J.D. or an LL.B., but your average law degree remains more a liberal arts education than a graduate or professional instruction, and certainly is not preparation to practise law.

Or is it too much? Spend enough time as a law school professor, and the drift away from actual pedagogy and towards market-readiness training seems irrefutable. I’m not naïve enough to believe that you or your predecessors ever enrolled in law school for the sheer joy of learning Land Transactions or Business Associations. But the drive to generate nothing but the highest grades in order to generate the most job offers has now become relentless. Too many students now make the pursuit of an A the primary if not the only purpose of taking a law course.  If many faculty members have been too slow to recognize the professional purposes of a law degree, many students – and the law firms that eventually hire them – have been too quick to turn law school into a jurisprudential version of the college football season and draft, with too much attention focused on what comes after graduation, not before.

The increasingly uncomfortable truth, unfortunately, is that we law schools are stuck between these two extremes. To a growing extent, we are losing our sense of direction and purpose: neither fish nor fowl, neither institute of higher learning nor professional training college. I fear, in trying to be both, we have ended up being neither. Forced to hew to our longstanding structure by both faculty and tradition, but pulled hard the other way by the private bar and the realities of the legal marketplace, we have spent the last two decades missing an opportunity. With few exceptions, we have yet to take a stand and say, “This is what law school is for. This is the part we play in the legal community and our society.” What is the role of law schools in the 21st century? I don’t know, and I’m not sure most of my colleagues do either.

This is a serious problem for us, because these are times of great upheaval, and if we do not choose change, change will be chosen for us and applied to us. The private bar’s unhappiness with legal education has never been higher – and the bar’s presence in our daily lives and influence over our students’ attitudes have never been higher either. More law societies and state bars are re-examining their bar admissions processes, and I foresee a growing belief that if law schools will not give the bar the sort of new lawyer training it wants, the bar will provide that training on its own and bypass law schools altogether.

But this is also a serious problem for you, because you will graduate into a 21st-century profession with which you will be largely unfamiliar and for which you will be largely unprepared. To the extent we here at law school are well versed with the practicing bar, it is with a 20th-century practice model, one based on:

• exclusive control by lawyers over the selling of legal services,
• technology as a tool for the completion of tasks by lawyers, rather than as a means of performing those tasks alone,
• uninformed clients who exist in either a fiduciary or adversarial position with lawyers, and
• work recorded and billed, and lawyers rewarded, by the hour.

Each of these pillars of the legal profession we’ve always known is now buckling, along with many others (and that’s not to mention potential changes to ethics standards such as client conflicts of interest and non-lawyer ownership of firms). The nature of the practice of law is changing, and none of us here know what it’s changing into. What’s worse, neither do the people who’ll be administering your bar passage or the people who’ll be hiring you. There’s never been so much uncertainty around what the nature of a lawyer’s professional life will be like – and yet your legal education will be remarkably similar to the one I received in 1990. I’m not sure whether there’s anything we can do about that – but I sure do wish we would try.

My fervent parting wish, in fact, is that law schools would take the lead in figuring out what tomorrow’s legal profession will look like, so that we can prepare tomorrow’s legal professionals to lead it. There are some very honourable exceptions to this, but as a general rule, law schools have kept a low profile in, or even absented themselves from, the important discussions and debates taking place right now about the future of law. Lawyers, law firms and lawyers’ organizations are doing most of the talking, and although we are constantly referenced in these discussions, we seem disinclined to take a central role. We must appreciate that the result of our failure to secure a place in these conversations will be that the decisions that flow from them will be applied to us, not by us.

But that is our problem, not yours. Your challenge is to prepare yourselves as best you can for a future profession that is still taking shape – to anticipate “unknown unknowns,” as the expression goes. You can’t know the final form of things to come, but you can discern the principles that will shape it: professionalism, collaboration, innovation, and above all, client service. So start now: get in the habit of cooperating with your classmates, join social networks with a lawyerly focus, follow the profession’s innovators through blogs and podcasts, and wring as much information as you can between classes from your sessional lecturers about the experience of the lawyer grind – and, yes, from your veteran faculty members, too: they’ve seen it all come and go, and they have wisdom you can only guess at.

Use these resources, and as many others as you can pull together, during your time here. Understand, above all, that your life at law school – the courses, the interviews, the grades, all of that – is not the only or a sufficient aspect of your legal education. It’s one piece of the puzzle, and you need to find the others. The days when a law degree was all you needed to be a lawyer, if they ever existed, are gone now. Your preparation for a legal career – a career that will be different from that of anyone who’s gone before you — is now your responsibility. Don’t look back three years from now and say, “Law school didn’t prepare me for a legal career.” Like it or not, we can’t do that anymore. Like it or not, that’s your job – and it starts right now.

As does my retirement. Drinks in the law lounge are on me.

Join “Legal Innovation” at LinkedIn

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Posted in: Innovation, Law21

As I’ve mentioned before, I’m serving as Chair this year of the InnovAction Awards, an annual presentation by the College of Law Practice Management (which, by the way, has announced the September dates for its high-powered Futures Conference).  The InnovAction Awards recognize and promote law firms, legal departments, and other providers of legal services that are blazing new trails in how lawyers conduct their business and serve their clients. It’s been a tremendous success, and I strongly encourage you to look to your own and your colleagues’ practices to see if you have an initiative that meets the InnovAction criteria.

Anyway, as part of the promotional process for the Awards, I created a “Legal Innovation” group at LinkedIn. The purpose is twofold: to raise awareness of the Awards and encourage people to submit entries, and to help lead the accelerating conversation within the legal profession around innovation.  Here’s the group profile:

Innovation is finally breaking into the mainstream of law practice. A combination of technological advances, competitive pressures, and client demands have led to a tipping point for innovation in legal services. This group is dedicated to furthering the cause of legal innovation. We build enthusiasm for doing things differently and better in the law. We talk about how legal innovation can be encouraged in law firms and law departments. And we identify examples of legal innovation for others to follow.

Membership is open to all legal professionals (and their clients) everywhere who care about making the profession better through a willingness to innovate. The College of Law Practice Management’s InnovAction Awards, which recognize exceptional innovation in legal practice and client service, helped launch this group.

Please consider this an invitation to all Law21 readers to come join the more than 200 lawyers, clients, consultants, and law practice professionals who’ve already become part of what looks to be a really interesting and dynamic community. Applications to join require approval, but I’ll get to them as quickly as I can, Monday through Friday. Thanks, and look forward to seeing you at LinkedIn!

How to solve the legal employment crisis

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Posted in: Innovation, Recession, Talent

The cover story in last week’s Economist got me thinking about the looming crisis in lawyer employment. “When jobs disappear” paints a bleak picture of a rising wave of unemployment worldwide that will hurt more and last longer than past employment crises. The credit crunch has forced companies to cut costs rapidly, while the massive deleveraging underway in most consumer economies means that the eventual recovery will proceed slower and will crest lower than we’ve become used to. But the key point is this:

[W]hen demand does revive, the composition of jobs will change. In a post-bubble world, indebted consumers will save more, and surplus economies, from China to Germany, will have to rely more on domestic spending. The booming industries of recent years, from construction to finance, will not bounce back. Millions of people, from Wall Street bankers to Chinese migrants, will need to find wholly different lines of work.

In its editorial leader, the magazine drives the point home further:

[M]any of yesterday’s jobs, from Spanish bricklayer to Wall Street trader, are not coming back. People will have to shift out of old occupations and into new ones.

We’ve been bingeing on reports of law firm layoffs for a few months now, and there’s every reason to think those reports will continue through 2009. But we haven’t spent as much time looking at the big picture: there is a growing population of lawyers whose jobs are gone for good, and a larger group of lawyers whose underlying business models are fast becoming obsolete.

Many of the junior associate and staff positions cut in the past several months won’t be filled again. We’ve always known that low-level associates billed out at a handsome profit by midsize and large firms would survive only as long as clients continued to tolerate the law firm business model and its rank inefficiencies. During the recession, clients just won’t be able to afford that; when the recession finally eases, they won’t be willing to afford it, hardened by the lessons meted out in the financial wilderness. Similarly, legal support staff still carry out many automatable and outsourceable tasks. By the time the recession ends, those tasks simply won’t justify a person sitting in an office or cubicle adjacent to a lawyer.

You could actually argue that there hasn’t been a “market” for many of these positions, in the sense of a financial justification or imperative, for some years now. Firms could be as inefficient in their workflow as they liked, because they could always pass the cost of that inefficiency on to the client, who would put up with it for reasons unknown. But the recession is bringing all that to an abrupt halt, and firms suddenly are having to either rectify those inefficiencies or absorb their cost. The results are plain to see on the unemployment line, which figures to get longer before it’s all over.

That’s all bad enough. But the same fate awaits other legal jobs still to disappear, including some held by senior associates, partners, and even solo and small-firm lawyers. There will still be a market demand for these positions after the recession. But the level of demand will be lower because the economy figures to putter along below its recent peak for as much as a decade, so fewer such lawyers will be needed. Moreover, the nature of what the market demands of these positions will be so different from what it is now that many lawyers will be unable to meet it.

During the recession, we’re all going to learn to do more with less. Cost-saving efficiency and “good-enough” quality will be the twin standards by which purchases of all kinds will be made, including legal services. Lawyers have never needed to be efficient and they’ve always preferred an exhaustive answer to an adequate one; they’re not going to adjust easily, and some won’t adjust at all. Clients also will need their lawyers to focus more on high-value services that demand advisory skills and judgment, and less on than repetitive tasks that require boxes to be ticked off and i’s to be dotted. That’s going to be more than a business model challenge; that’s a new way for many legal professionals to view themselves and their functions, and again, some simply won’t  have the wherewithal to meet the new expectations.

So there are two separate problems that need imminent addressing:

1. A legal employment crisis. Before it’s all over, tens of thousands of lawyers and legal support professionals will have lost their jobs and will have little prospect of finding replacement positions (the Economist reports that the chances of an unemployed American worker finding another job soon are the lowest since records started being kept 50 years ago). Younger lawyers are deep in debt and short on experience; older lawyers have families to support in the teeth of an economic meltdown and are too highly specialized to be easily retrainable and transferable to other professions or industries. What will they do?

And more importantly for the profession, who will help them do it? Governments are preparing aid and retraining packages for workers in manufacturing and other hobbled industries; who’s doing the same thing for lawyers whose careers have been cut down by the financial crisis and the recession it spawned? Whose job is it to do that? Law societies and state bars exist to govern the profession, not to care for its members. Bar associations look out for lawyers, but they are strapped for resources, and not every lawyer is a member. Law schools lose interest in their students shortly after graduation. Who will help meet the unemployed lawyer crisis?

2. A legal training crisis. As heart-wrenching as the fate of jobless lawyers is, an arguably bigger problem is arising profession-wide: the adjustment to a new type of legal career. Technology, globalization, and extra-professional competition have already damaged or even eviscerated many types of legal careers. It doesn’t take long to count all the residential real estate lawyers in jurisdictions where title insurance has taken hold, or the thriving general practices anywhere (but especially in small towns). Estates and family lawyers were already feeling competitors’ breath on the back of their neck. But when the recession really takes hold, few legal positions will be safe: who, for instance, will be able to afford to go to trial? Pro se representation is now a growth industry.

The types of work for which lawyers will be in demand and from which they can make a living are changing, and no one really knows into what. But our law school, bar admission, and continuing education systems continue to grind along churning out lawyers suited for 20th-century practice. Practitioners have complained for years that law schools don’t prepare their students for practice; but the irony is that even if every law school changed overnight to become full-scale career preparation institutes, it still wouldn’t help that much. That’s because no one can say what market demands and consequent skills will be required of lawyers in the year 2015, 2025 or 2035. It’s a serious problem for education generally (the linked video is incredibly insightful), but no less an issue for the legal profession for that.

So we have an immediate problem — a growing crowd of lawyers whose jobs aren’t coming back and whose interests have no obvious advocate — and a mounting crisis — a fundamental change in the nature of legal services for which our profession seems largely unprepared. Are there any roads leading out of this morass? I think there’s at least one: opening up the deep and largely untapped potential of the latent legal market.

Several commentators have pointed out the unrealized market of millions of people who, as Richard Susskind memorably expresses it, need a fence at the top of a cliff, not an ambulance at the bottom. Preventive legal services — customized legal checkups and health regimens that anticipate and reduce the occurrence and impact of legal problems — is the way of the future for many lawyers. Whether online or in person, for corporations or individuals, bespoke or varying slightly from a standard construction, these kinds of services promise the dual benefit of using lawyers’ most valuable skills as well as helping achieve the larger social good of a more legally informed and prepared population. A legal problem may be solved in months or weeks; good legal health requires a lifetime of wise legal advice.

If you’re a person, organization or corporation looking to catch the next wave, here it is: open up an institute dedicated to retraining current lawyers and training prospective ones to provide preventive legal services to latent legal markets (here’s a great model). It’s not enough simply to teach lawyers to carry out their current practices more efficiently and effectively; we need to start training them in the ways of an entirely different type of legal business from that which now holds sway in the profession. We need lawyers who can not only see and analyze legal problems that have occurred, but who can anticipate and reduce the risk of problems that could or will occur if left untreated. We need fewer antibiotics and surgeries in the law; we need more flu shots, vaccines and diet-and-exercise regimens.

A legal profession centered around the prevention of problems first and the resolution of problems second would be a better, happier, healthier and more socially beneficial profession than the one we have now.  We’re facing both a drop in the demand for traditional legal services and the rise of a jobless lawyer population ready and willing to try something different. There may be no better time to give this approach a legitimate shot.

Peer pressure

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Posted in: Big Firms, Innovation

“If all your friends jumped off a bridge, would you do it too?” Every parent has uttered some variation on that line to a child who insists on doing something unwise, over-priced, or physically perilous simply because “everyone else is doing it.” Training children to resist peer pressure is one of the thankless but necessary tasks of parenthood, one we hope will pay off later in life with adults unafraid to assert their independence and chart their own paths.

Lawyers, unfortunately, don’t receive that kind of parental guidance — if anything, we’re over-encouraged to copy the example of our predecessors and to always rely on  precedent. And of course, the financial rewards of the traditional lawyer billing model are so obvious that lawyers have a lot of incentives not to blaze any new trails. Hence, the “mastodons” of which Sun GC Mike Dillon memorably wrote a couple of years ago — vast herds of massive beasts that stay tightly packed and lumber together in the most convenient direction. Generally speaking, law firms recruit, hire, compensate, bill and manage their affairs pretty much the same as other firms — a recipe for disaster in the corporate world, but a guarantee of continuity in the bubble-wrapped legal universe.

But with the recession grinding steadily on, and many firms forced to make increasing resort to staff, associate and even partner cuts, something interesting is emerging: the upside of peer pressure. Just as firms felt obliged to match their rivals’ associate salaries and bonuses in the boom, they now feel even more obliged to make equivalent provisions for those cast aside in the bust. Most large-firm severance packages cluster around the 2-3 months’ notice mark — and there’s a vocal community ready to track all those packages and publicly note any firm that deviates from the norm.

Firms that exceed the average, like Latham & Watkins, rescue or even improve their brand among recruits; firms that fall short can be excoriated. Take the example of DLA Piper’s London office, which managed to squeeze several years’ worth of bad publicity into a single week.  A series of memos and meetings following the firm’s decision to cut 140 staff and lawyers revealed a huge amount of internal animosity that still has the UK bar talking. In the wired age, the cost of looking cheap or insensitive in the eyes of the blawgosphere just isn’t worth the risk of pinching pennies.

But the positive effects of peer pressure can reach beyond severance packages. When Simpson Thacher & Bartlett hit upon the innovative idea of sending underemployed associates into public service work, it was only a matter of weeks before other firms copied the idea themselves. And Norton Rose’s decision to explore four-day work weeks in order to save jobs is already generating positive press — it’s likely only a matter of time before this one picks up  momentum too.

The upshot of these developments is that firms are being strongly motivated to do as well by their current and former employees as possible — the astounding level of animosity levelled at AIG executives these days should frighten any rational organization — and that can only be a good thing for both law firm workers and the overall level of workplace relations. But the really neat thing is that the herd mentality might actually help the larger cause of innovation and practice management reform in law firms. The need to be seen as actively and creatively responding to the crisis is pushing more firms to try new things and announce them publicly.

Take the example of lockstep compensation, a longstanding tradition that has merit in tightly focused, culturally solid firms, but has the effect elsewhere of rewarding lawyers simply on the basis of seniority. When Howrey LLP set out to overhaul its lockstep compensation system two years ago, the response from the profession was dismissive at best. Now, firms are jostling with each other to be the latest to institute merit-based pay and similar sins against the status quo. Not even partners are safe from the change in the herd’s mood — either from the prospect of potential explusion or from having to share the pain of the firm’s struggles.

Then there’s annual rate increases, a law firm tradition as reliable as the spring equinox. Even as recently as last fall, firms fully expected to issue their normal rate-increase notice to clients. Now, though, as Altman Weil’s Tom Clay puts it: “Nobody is that naive — or dumb.” In worst shape of all might be the almighty billable hour itself. When managing partners of top-rated firms talk to the New York Times about killing the billable hour, you know a paradigm is shifting.

And where paradigms go, law firms hasten to follow, even if it means facing up to some pretty radical changes in how they do business. Lawyers don’t like change, but they like isolation much less. As more and more lawyers and firms shuffle hastily towards new ground, it looks as if a watershed shift in private law practice —  a cross-over moment, a critical-mass point — is now only a matter of time. Where’s your nearest bridge?

This is not a drill

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Posted in: Innovation

I’ve experienced it, and maybe you have, too. In mid-flight, the seat-belt light comes on and the pilot announces that the airplane is entering an area of turbulence. Shortly afterward, various shakes and jolts start bumping you around, and while it can be unnerving, you knew it was coming and you’re not too concerned. Then, with no warning comes a WHAM, a sickening two- or three-second drop, as a particularly powerful air pocket rocks the plane. There’s a lurch in your stomach and you think for an instant: this could be really bad.

Yesterday, at least 800 jobs disappeared from law firms in the US and the UK — there may well have been more, because rumours of “stealth” or “performance” layoffs have been circulating for awhile. White & Case accounted for half those firings, divided equally between lawyers and staff — but remarkably, the firm also talked openly about a partnership cull too,  something I suggested last week was imminent. In addition, Morgan Lewis not only joined the layoff parade, but also postponed the start date for its incoming lawyers by one year, meaning the firm will have no first-year lawyer class in 2009.

These are just the most notable developments in one day from the largest firms — the mainstream legal media isn’t looking at what’s happening to small, mid-size and regional firms. But the lurch I talked about isn’t just from these numbers, or even from the thousands of layoffs that preceded them: it’s from a couple of hard realities hitting home. One, job losses in the legal profession are just getting started — this thing is picking up speed and no one knows where or how it will end. And two, “this thing” is a lot more than a recession.

Put those law firm numbers — vanishingly small in the greater scheme of things — in the context of some truly sobering economic news worldwide. Evidence is accumulating that our situation is leaving “recession” behind and is rapidly approaching something that requires adjectives like “Great.” But this isn’t a depression, capital-D or otherwise — it’s something altogether new. The New York Times identifies it as a fundamental reshaping of the economy in the US and other western countries, a shift into different types and means of  productivity.  Jeff Jarvis calls it a Great Restructuring: “It’s more than jobs lost and companies folding. It’s a new economy built on a new society that we are only just beginning to recognize if not understand.”

Many underlying beliefs about how economic value is generated are simply falling away, and we don’t yet know what will replace them — all we know is that it’ll be different from what we had before. That’s why many of the legal job losses we’re seeing, in firms of all sizes, aren’t temporary layoffs that will return when the recession ends. They’re eliminations — positions that won’t come back, because the underlying mechanics of value in legal services are changing and the new environment that emerges from this crisis won’t require them.

The first wave, as we’ve seen, is the beginning of the end of large groups of associates in law firms. But we’re also seeing transactional legal work transformed  by online document assembly, changing the face of smaller practices and tapping into new latent markets. We’re seeing law firm partners find competitive and personal benefits by becoming virtual lawyers. We’re seeing that large firms themselves require reconstruction at the business-model level, and some of the problems are so severe that the solution is not realignment or re-engineering, but replacement. And we can foresee major changes to lawyers’ regulatory environment and firms’ subsequent evolution into full corporate entities.

The frightening thing — or the exhilarating thing, depending on how you view it — is that nobody knows what’s going to happen next. This really is an unprecedented development. The legal industry has been through recessions before, and it has a pretty decent idea of how to cope with those. But there are no blueprints for a fundamental reordering of the rules of business — both our clients’ businesses and our own. The Wall Street Journal notes that the most significant employment crisis underway right now is in the professional sector, and that “we are totally unprepared for this phenomenon.”

I don’t know what to tell you at this point. There’s not much you can do during the earthquake itself, beyond trying to keep your balance and hoping nothing large will collapse on top of you. Don’t rely on previous procedures to get  through this, but do rely on your professionalism and commitment to service. Invest in anything that will enhance your ability to collaborate with others. Stay as close to your clients as you can, and grope with them towards what new definitions of value and service in the law will look like — under no circumstances let them arrive at those conclusions on their own. And remember that we’re approaching a moment of maximum possibility in the law — you’re getting closer to being able to define the terms of exactly the legal career you want. Everything’s up for grabs — so grab something.

Note to regular readers: I’ll be out of town for several days and hope to return to blogging later next week.

It’s the InnovAction Awards, Charlie Brown

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Posted in: Innovation

This is an article I wrote for the February 2009 edition of the ABA’s Law Practice Today e-zine about innovation in the practice of law and the College of Law Practice Management’s InnovAction Awards, which I’m very happy to be chairing this year. The awards are now open and are accepting applications starting next week. Thanks to the ABA for promoting the Awards and for providing permission to reproduce this article.

In early December, I happened to catch a CBC Radio program about the making of A Charlie Brown Christmas, the holiday special first broadcast in 1965 and now considered a classic of the season. It struck me that the origins of the special, also touched upon in its Wikipedia entry, have something important to say to lawyers nearly 45 years later.

Charles Schulz and Bill Melendez had been looking to do an animated Peanuts program for TV, but couldn’t find a willing sponsor. Finally, Coca-Cola stepped forward to bankroll a Christmas special, but gave Melendez less money and less time to do it than they needed to get it right. Working rapidly under tight financial conditions, they put together A Charlie Brown Christmas in a matter of months and brought it to CBS executives. The execs were, in a word, horrified.

It wasn’t just the choppy nature of some scenes and obvious glitches (the first version featured Linus apparently flying through the air) that left the executives aghast, though. It was the fact that the special broke almost every rule in the TV book:

  • Almost all the characters were voiced by child actors rather than professionals, as was the standard practice at the time (Schulz and Melendez simply couldn’t afford grown-ups).
  • The jazz soundtrack supplied by Vince Guaraldi was unheard of – everyone knew that Christmas TV specials required sugary jingles and pop versions of classic carols.
  • “Did that kid just quote from the Bible?” Even in 1965, network suits were nervous about Bible readings on air.
  • But worst of all – by far – the special had no laugh track.  Audiences needed to be told when to laugh, and that was that.  (A laugh track version was created, but never aired and no longer exists).

The executives rejected A Charlie Brown Christmas.  Melendez, undeterred, sought out the president of the network, only to be told he had just left Los Angeles on a flight to New York. Melendez booked himself on the very next flight, flew across the country, tracked the president down and literally pleaded with him to run the special. Eventually, the network president gave in, but muttered that he was going to have to pre-empt an episode of The Munsters to put the special on the air.

You probably know the rest. A Charlie Brown Christmas aired on December 9, 1965, and was watched by almost half of the households in the United States.  The response from both the public and TV critics was universally, overwhelmingly positive. What’s most remarkable is that all the things the network executives hated about the special – the child actors, the jazz soundtrack, the Bible reading, the absence of a laugh track – were exactly the things viewers loved the most.

This is a classic, almost archetypal story about innovation.

  • It starts with a vision to do something different – not just to be different or novel, but to do it really well, better than it’s been done before.
  • The visioneers are short on resources, both time and money, and the finished product isn’t exactly what its creators hoped or planned it would be.
  • Nonetheless, the finished product still meets fierce resistance – not for its quality per se, but because it shatters the accepted rules by which these sorts of things have always been done.
  • Rejection is immediate, but the quest doesn’t end there: the innovators are persistent, relentless even, in pursuit of their vision, and they keep at it till it pays off.

I find it hard to believe that the legal profession in 2009 could be any more conservative, risk-averse or fearful of change than was the television industry in 1965. If a timeless success story like A Charlie Brown Christmas can emerge from that era and that context, lawyers should have every confidence that they can create similar innovations within the practice of law today.

We’re seeing examples of this everywhere: law firms that boast their rejection of the billable hour, evaluate and compensate their lawyers with sophisticated performance metrics, automate or outsource the most basic legal services and pass the savings on to clients, package their services into online programs their clients can access 24/7, gain employees, clients and publicity through social networking sites like Facebook, LinkedIn and Legal OnRamp, and so much more. Few people realize it, but we’re at the forefront of a golden age of innovation in the legal profession.

Some lawyers will shy away from innovation because of the recession. They’ll say this is no time for grand schemes or big ideas; better to burrow in, hunker down and keep doing what we’ve always been doing, only less of it. In fact, that’s a recipe for irrelevance and, in times like these, potential disaster: business as usual is part of what got us into this mess in the first place. Innovation takes courage, especially in tough times, but it pays off.

The rewards of innovation are well-known: first-mover advantage, increased market share and awareness, an enhanced reputation for creativity, and the ability to attract other like-minded innovators to your camp. But there are other rewards too: the recognition of your peers, publicity throughout the profession as a leading light with courage to spare. That’s where the College of Law Practice Management comes in.

The College is revving up for the 2009 InnovAction Awards. These awards, bestowed by an international panel of judges drawn from the ranks of the College’s renowned Fellows, pay tribute to law firms and legal departments that have implemented innovations in law practice, client service, law firm management and a host of other areas. These innovations create something that’s never been done before, or never been done quite this well before. And they help advance the law down the road towards becoming a truly innovative profession.

Past winners of an InnovAction Award range from giant firms like DLA Piper and Pillsbury Winthrop to smaller firms like Raskin Peter Rubin & Simon and the Law Chambers of Nicholas Critelli to worldwide firms like Wragge & Co. and Malleson Stephen Jacques. Your firm or department could be next.

Visit the InnovAction Award home page and download an entry form – you can nominate your own firm or someone else’s.  Tell us about your firm’s contribution to the wave of innovation sweeping the law.  Step up now, and get the recognition you deserve for being one of the legal profession’s premier innovators.

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