Design your own law firm: A Law21 lawyer survey

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Posted in: Leadership, Management, Purpose

Not for the first time, and probably not the last, I find myself reading reports from the legal marketplace and wondering why lawyers are asleep at the switch.

The latest head-scratcher comes courtesy of Altman Weil and its fifth annual Law Firms in Transition Survey of 238 US law firms. Importantly, only one-third of the respondents were within the AmLaw 200 — we’re not talking about the giants here, but about firms whose lawyer complements range from 50 into the hundreds, and whose clients likely include some national companies, a lot of regional businesses, SMEs, and individuals. Here are a few highlights from the Am Law Daily report:

  • 80% of respondents think the move towards non-hourly billing will continue — but only 29% had made significant changes to their own pricing practices.
  • 96% believe the focus on improved practice efficiency has become entrenched — but only 45% had made significant changes to improve efficiency.
  • 67% think smaller annual rate increases are also a permanent change — but between 21% and 40% of all fees at all firms are still simply being discounted.
  • And despite all the foregoing, when asked to cite the greatest challenge they expect to face over the next two years, the #1 response (15.2%) was “increasing revenue.” Coming in at #8 (5.6%) was “delivering value to clients,” while the afore-mentioned “improving efficiency” — which, remember, 96% think is here to stay — finished at #11, with  2.8%.

Near as I can tell, many of these respondents must believe that permanent, radical change in the market is something that’s happening to other people. The disconnect between “This is really happening” and “We’re doing something about it” remains perplexingly wide.

Now here are the results of another survey, one that didn’t get quite so much attention, but whose implications are far more chilling. The UK’s Legal Services Board released the results of an incredibly comprehensive survey of small businesses — an astonishing 9,703 of them, ranging from solo entrepreneurs to companies with up to 50 employees. (Although the countries are different, the two survey populations suggest a high degree of overlap between the law firms and the clients in each.) Here are some of the findings:

  • 38% had experienced a “significant” legal problem in the past year, almost half of which had a tangible financial impact — a total market value of £100 billion when scaled up across all small businesses.
  • 91% of respondents took action to respond to their problems — but most either handled it themselves or got help from family and friends.
  • Of the minority who sought formal advice, only about 40% went to members of the legal profession — the rest sought out accountant, trade associations and the like, especially for tax issues.
  • Bottom line: Legal service providers were involved in just 16% of these matters. That means that roughly £84 billion worth of potential small business legal services are being resolved without the legal profession.

Oh, and here’s the kicker: When asked to assess the statement that “lawyers provide a cost-effective means to resolve legal issues,” only 13% agreed.

So I find myself wondering: faced with reliable, overwhelming, and readily available data that shows a near-complete misalignment between them and their markets, why are law firms doing so little in response? Why are firms, even while openly admitting that many essential marketplace fundamentals have permanently shifted, moving so slowly, it at all, to address these changes? I’ve previously suggested the confidence of the dinosaurs as a culprit, but I think there’s something more at work here.

When I talk with lawyers in law firms about these issues, I’m sometimes struck by the impression of powerlessness that I get. Lawyers, including partners, seem to almost shrug, as if to say, “Yes, but what can I do?” The structure and culture of the firm are presented as an unalterable reality, a mix of good and bad that’s just the way it is. The firm delivers profits, prestige, and security — albeit ever-decreasing amounts of each — but it’s also hidebound, reactionary, and highly vulnerable to change. But what are you gonna do? Priorities have been set and choices have been made, and we have to live with the results.

There are times, when confronting this malaise, that I feel like responding, with some force: “Yes, but you own the firm! It’s yours; you’re the equity owners. Nobody else is in a position to make the firm something different and better than what it is. The associates, the staff, the clients — they might not much like the state of affairs either, but it’s not their show; they consider both the firm’s successes and its shortcomings to be entirely your responsibility. If you’re not in charge, who is?”

What I would really, truly like is for more partners to accept full responsibility for their firms — to recognize the need for decisive action to adjust the firm’s bearings, to take that action, and to fully own the changes that follow. I’d like to see them act as the owners they are, not as the passive sideline observers many of them seem to have become.

To that end, I’ve decided to try introducing a third questionnaire into this mix — my own. I’ve created a very short survey — only three questions — at SurveyMonkey, and I’m making it available to anyone who wants to take it. It’s directed towards lawyers in law firms, and I hope they constitute the majority of respondents, but anyone in the legal industry is invited to take part as well.

The title of the survey is: Design Your Own Law Firm. And that’s exactly what you’re invited to do. The survey provides you with 10 features of a law firm, gives you 100 points to distribute among those 10 features any way you like, and asks you to use those limited resources to design the kind of law firm you want to be part of. Here’s a preview of the 10 features, listed in alphabetical order (they’re randomized in the actual survey):

  • Affordability: The firm’s services are priced for maximum client accessibility.
  • Client Service: Clients reward the firm’s efforts to provide extraordinary service.
  • Community Leadership: The firm is widely praised for its active community efforts.
  • Diverse Workforce: The firm is more race- and gender-diverse than its peers.
  • Elite Reputation: The firm is considered among the very top tier in its market(s).
  • Funded Pensions: The firm ensures post-retirement income for both lawyers and staff.
  • Good Workplace: A positive, collegial atmosphere produces collaboration and referrals.
  • New Lawyer Development: Junior lawyers receive superb training, mentoring and work.
  • Partner Profit: Equity owners derive highest levels of annual revenue from the firm.
  • Prestigious Clientele: High-profile or respected clients frequently retain the firm.

Here’s the link to the survey — it’s open today, May 23, and will stay open for either one week or until I have enough responses to draw some conclusions. Please take the survey — Note: print out your choices before pressing “Done,” so that you retain a copy — and forward it to your friends and colleagues. Be honest with your answers: give the responses you really feel, not the ones you think you “ought to” give.

I’m very interested in finding out how — when given several good options, but only a limited amount of resources — lawyers prioritize the structure and culture of a law firm. And I’m hopeful, maybe even optimistic, that by going through this process, lawyers will realize that they really do have the power to make their firms the way they want them to be.

Here’s your chance to be the architect of your law firm. You’re responsible for its priorities. What will you create?

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

 

Vulture culture

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Posted in: Big Firms, Management

Tackling this subject, I admit, may simply be an excuse to achieve a long-held goal of using an Alan Parsons Project album as a post title. (Next up: finding a way to smuggle in a Supertramp reference.) But in truth, I was pointed in this direction by a couple of recent developments that revisited the well-worn topic of “law firm culture.”

The first was the most recent Citi/Hildebrandt Client Advisory, which confirmed the increasingly evident fact that for midsize and large law firms, Winter’s Here. Among the report’s contents was this warning:

“Law firms discount or ignore firm culture at their peril … the leaders of a firm whose partners pride themselves on their dedication to public service, a culture of collegiality and tolerance, and a commitment to share profits in a fair and transparent manner should acknowledge the importance of this culture to the firm’s success so far.”

I would be hard-pressed to find a sizeable law firm that demonstrably fits this description in reality, not just in its partners’ imagination. As Steven Harper points out, almost everything about large firms’ strategy and behaviour over the past several years can be described in precisely the opposite terms.

Law firm “culture” isn’t that hard to define, really. Culture is what people at the firm actually do every day. In harsher terms, it’s what people get away with. Culture is what actually happens. A law firm’s culture is the daily manifestation of its performance expectations and behavioural norms — what is encouraged and what is tolerated. So it’s not a matter of law firms “ignoring” culture — every firm has a culture, and most firms’ cultures are remarkably and depressingly similar. It’s a matter of recognizing that the culture that a law firm develops and sustains has an impact on productivity, retention and morale — in many cases, a catastrophic one.

“Collegiality” deserves a closer look, because almost every law firm insists that it maintains a “collegial” atmosphere. Stephen Mayson accurately points out that at most law firms, this is nonsense, driven by a misunderstanding of what “collegial” means:

Typically, partners are confusing collegiality with friendliness and sociability. Collegiate organisations make decisions in the long-term best interests of the firm, they are collaborative, and no individual is more important than the firm. What I hear described, though – most often in firms that claim to be collegiate – is an environment where personal and local interests are usually pursued in preference to the firm’s objectives. Work-hogging, and a refusal to cross-sell, are prevalent, fed by a personal billing and client origination culture. These firms are often low-trust partnerships, where it is not unusual for high billers to hold the firm to ransom or to throw their toys out of the pram when it looks as though they might not get their own way. This is collegiality?

It is not. But it is the culture of the typical law firm — the behaviours that are encouraged or tolerated.

The second development arose from my attendance at the Feeney Lecture at the University of Ottawa Law School, delivered this year by Mitch Kowalski on the subject of the changing legal marketplace. I was struck by the consistent and even predictable reactions from panellists and audience members to Mitch’s portrait of the legal profession’s future, which included a prominent role for “non-lawyer” owners and service providers.

Among the objections was the classic concern that law firms run by “shareholders” or in a “corporate manner” would see their standards and professionalism fatally compromised, and that — wait for it — the “collegial” nature and professional “culture” of law firms would be lost. See the foregoing paragraphs, especially Stephen Mayson’s diagnosis, and tell me precisely what it is that’s at risk here. Tell me how equity partners are any different, for all practical purposes, from non-lawyer equity shareholders. Tell me how the “de-equitization” of “underperforming” partners now being carried out by hundreds of lawyer-owned law firms across North America and Europe is an exemplar of professionalism and collegiality.

I would like to suggest that our positive (if not vibrantly self-admiring) vision of “law firm culture” belongs more to the realm of myth than to reality. There is nothing about an enterprise owned, operated and populated by lawyers that makes it markedly better than any other enterprise, and quite a bit that makes it noticeably worse.  The sooner we shake off our misconceptions in this regard, the sooner we can address, in an honest and grown-up way, what will happen when lawyers are no longer the only (or even the dominant) decision-makers in private legal enterprise. Miguel Pereira and Fergus Payne argue persuasively that law firms possessing an “ABS culture” will be focused primarily on financial performance — a state of affairs that is, in reality, no different than how today’s lawyer-owned law firms approach things. We’d be well-advised to remove the plank from our own eye before hunting for specks in anyone else’s.

Culture is important to law firms, but not in the way lawyers think. We cite “culture” as a bulwark against the unprofessional and uncollegial forces of the corporate, non-lawyer world, as a filter that differentiates us from the crowd. In reality, it seems to me, the tendencies we think we’re locking out with “culture” are often the very things we’re actually locking in.

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

The lawyer vs. the law firm

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Posted in: Big Firms, Globalization, Management

So I’ve been thinking a lot about law firm mergers lately (especially between large Canadian firms and their much larger international counterparts). That in turn has led me to think about cross-selling, why it’s so important to the success of these newly merged firms (and others), and about the relative failure of firms to make cross-selling work. And these in turn have led me to my final post of the year, in which I usually try to assess the state of the legal market and what we can expect in the coming year.

At the end of 2009, I recommended we get ready for the rise of the client. As 2010 drew to  a close, I talked about the emergence of a truly competitive market for legal services. And as 2011 rattled off this mortal coil, lawyers’ increasingly precarious position in the market left me feeling generally apocalyptic. I don’t have anything quite so Armageddon-esque to suggest this year — Mayans notwithstanding, I feel pretty safe in predicting we’ll all wake up on Dec. 22. But I can forecast that a fundamental conflict at the heart of the private legal market will start to be addressed this year: the core, critical, and maybe irresolvable conflict between a law firm and its lawyers.

Mergers

Let’s arrive at that conclusion by the same route I took to get there, and start with mergers.

Law firm mergers are odd beasts: they rarely have the same causes or produce the same effects as in the corporate world. When businesses merge, the general idea is to combine production facilities and reduce inefficiencies to lower costs while eliminating a competitor from the landscape. When law firms join together, however, they generally don’t conduct layoffs (quite the opposite — they usually boast about their larger workforce), they don’t reduce inefficiencies (more commonly, their inefficiency grows), and the lawyers with whom they’ve merged are encouraged to do more business, not less. Combining two law firms is a little like bringing together two big Lego towers to form a much larger one by adding a few bridging pieces.

So if firms neither seek nor obtain the streamlining benefits of merging, why are they merging in the first place? I posed that question in my article “Why Are You Growing?” in the most recent “Strategic Growth” edition of the Edge International Review, and I couldn’t find a very persuasive answer. I suggested, in fact, that at more than a few firms, merging isn’t so much an outgrowth of strategy as a replacement for it.

I went on to dispute the idea, buried deep among the assumptions inherent in law firm mergers, that when it comes to lawyers, “more is better.” Getting bigger, I observed, isn’t really the point of law firm growth. Becoming more effective, more valuable and more profitable is the point — and when you’re dealing with lawyers, adding more of them could actually interfere with those objectives, because lawyers are hard to manage in any firm and virtually impossible to manage in massive ones.

Cross-Selling

Which brings me to cross-selling (and to some observations borne out of an online conversation with Toby Brown).

One advantage frequently put forward in defence of global law firm mergers is the prospect of more business generated through cross-selling. With more partners in more offices in more key regions, the theory goes, there will be more opportunity for partners to reach out and generate new work from new partners in new offices, and to return the favour in kind.

It’s an excellent theory, undermined only by a larger practical problem: lawyers rarely cross-sell. In any firm “midsize” or larger — and I’ve now come to define that as any firm where you can’t fit all the lawyers into a workable cocktail party — most partners do not successfully cross-sell, and many don’t really try that hard. In most of these law firms, individual lawyers — not the firm itself — control client relationships. Therefore, a client will be referred internally only if his or her lawyer chooses to make that happen. Quite often, the lawyer does not.

Lawyers, as we know, guard their clients jealously, even from colleagues in their own practice groups. They will make no referral, and especially no long-distance referral, if they so much as suspect that the attorney or practice group to whom the client would be referred might fumble the ball, overbill the client, or otherwise make the referring lawyer look bad and potentially threaten the client relationship.

Now, you can certainly blame partner compensation systems in part for this problem, if they fail to appropriately reward cross-selling, although that’s the least of the sins to lay at their feet. Fundamentally, however, lawyers’ reluctance to cross-sell their partners can be traced to the breakdown of internal relationships and internal trust among a firm’s lawyers — or maybe more accurately, the failure of trusting relationships to develop in the first place.

Even in firms of 30 or 40 lawyers, these elements can be found wanting; but in a firm of hundreds or even thousands of lawyers, in multiple cities, on several continents, that challenge can and does graduate from Herculean to Sisyphean. In firms that big, you simply don’t know most of your “partners,” and you likely never will. Absent a high degree of familiarity and trust, the risks vastly outweigh the rewards for the potential cross-seller. (My Edge colleagues  and  have written articles addressing some of these issues, by the way.)

Unfortunately, however, it’s not as simple as “fixing” trust and relationships within a large or newly merged firm, assuming that you could. The problem goes deeper than that, and it goes back to one of those buried assumptions about law firms. As a rule, the individual lawyer, not the firm, gets to decide whether or not the client can deal with another lawyer; basically, the client gets referred internally if the lawyer who controls the client feels like it.

When you stop and think about it, that’s kind of strange.

The Lawyer vs. The Law Firm

When you walk into a clothing store, the first salesperson who greets you (even if he works on commission) will happily pass you over to a colleague to answer questions, receive advice, or otherwise be part of the transaction. At a car dealership, the first salesperson with whom you deal (and I can guarantee she’s getting a commission) will be willing to do the same. They’re not doing this because they’re warm-hearted communitarians; they’re doing it because they work for the company, and the company considers that you are its customer, not the salesperson’s. And the company is correct to believe this. The salesperson’s individual interests in your time and attention do not trump those of the company.

“But,” you and every lawyer reading this will instantly respond, “law firms are not clothing stores. In a law firm, the partner works for herself, she’s an independent equity owner, and she might well have pulled in the client herself, and she’s the one whose services will be delivered to the client and on whom liability will rest. She should have every right to dictate what happens to the client with whom she deals.”

And that, to my way of thinking, is the problem. Because a law firm in which this is the dominant cultural belief is not a business. It is not a functional commercial enterprise in any sense with which we are familiar. It is, to be blunt, nothing. It’s a warehouse where lawyers share rent, utilities, and a library, but not risks, rewards, or professional aspirations. It’s a farmer’s market; a neighbourhood yard sale; a souk. Some lawyers still feel like debating the old saw, “Is law a profession or a business?” I’ll tell you this: the typical law firm described above is neither a profession nor a business. It’s a cheap knockoff of both that behaves like neither.

And it cannot stand. Not when so many other real, actual, conforming-to-the-laws-of-enterprise companies are entering this marketplace. In real businesses, the interests of individual product makers or service providers are aligned with and subsumed into the greater interests of the company. In real businesses, personal success and market validation are integrated with the success and validation of the company. In real businesses, the salespeople don’t own the customers. 

This is more than a bug or an inconvenience or a profitability hiccup for law firms: it’s an existential challenge. It goes to the heart of why a law firm even exists in the first place — what purpose the firm serves in and for the market. And it’s creating serious stress at some of law firms’ most vulnerable points. The strain is already showing.

The Pressure Points

Look again at cross-selling. Law firms need robust cross-selling, because it’s almost the only source of organic growth that flows from a partnership format (as opposed to a lawyer’s own individual efforts). Without cross-selling, lawyers must develop business alone, on their own initiative — raising the fundamental question of why they’re even in a partnership in the first place. A law firm needs its lawyers to cross-sell, but it can’t force them to do so, and lawyers consider their clients to be part of their personal inventory. When it comes to cross-selling, therefore, a law firm and its lawyers are locked in an ongoing struggle for control of the client relationship — but for the firm, it’s always been a losing battle, because extremely few firms have built anything approaching a collaborative business environment to enable client sharing. There’s no collaboration at a farmer’s market.

Look again at mergers. In Canada, all the talk is about the decisions by Fraser Milner Casgrain and Norton Rose Canada to accept mergers with global firms that have a large US presence. This has never happened before, because most midsize and large Canadian firms receive huge inflows of referral business from multiple US firms, and tying the knot with one US firm means cutting off all those other streams for conflicts reasons. But let’s press that assumption harder: What will happen to a firm that loses all those referrals? The referral work will likely go elsewhere, yes. The lawyers who received that work will likely leave too. The firm will be smaller. But it will also be more focused, more specialized, more globally integrated — and quite possibly, more profitable for the remaining partners. Because, again, being big is not the point. Being effective, valuable and profitable is.

A law firm that pursues a merger which will surely result in a near-term loss of both referral work and lawyers has made a fundamental decision: the collective interests of the enterprise supersede those of some of its individual partners. The firm is saying: “We accept that this course of action will cause conflicts problems for many partners, some of them insurmountable, and that we may lose those partners and their revenue. But we have a core business objective: to serve X clients in Y markets through the provision of Z services, and that can best be achieved through this merger.” That is not only a gauntlet flung in the face of many powerful lawyers: it is a statement of rebellion against the cultural assumption that lawyers control clients. It’s an assertion of institutional identity and independence by the law firm.

Not many law firms have the wherewithal to try this and succeed. But assertions like these will become more common, because they are becoming more necessary. This conflict has always simmered beneath the surface of law firms, submerged from sight, except when the occasional skirmish erupted above the waterline. But now the entire fight is coming out into the open. Legal services has become a dynamic, competitive, global market, and the main reason so many law firms are struggling within this new market is that they cannot respond institutionally. They are held back by their lawyers, hamstrung by their souk culture, unable to muster enough collective gravity and momentum to make critical decisions. But they’re trying, more than they ever have before. Law firms in the future absolutely must become more streamlined, systematized, managed, automated, and centralized in order to compete — but that’s not what many of their lawyers want. So who wins, the firm or its lawyers? That’s the coming battle.

There is no shortage of conventional wisdom with which to object, starting with the old standby that “Clients hire lawyers, not firms.” And that might well have been true, much of the time, for many years. But I’m coming to conclude that clients acted that way primarily, and possibly only, because that’s how lawyers trained them to act. There has only ever been one source of outside legal services: the law firm. Most law firms have only ever been driven by one strategic imperative: the interests of their most powerful partners. Clients choose lawyers in no small part because that’s what lawyers want them to do. But give clients an actual choice of providers that approach business and client relationships differently — which our incoming competitors will deliver, in spades — and you have the opportunity to create a brand new playing field with a potentially whole new set of rules.

The Outcome

The lawyer vs. the law firm is a fight that’s been spoiling for years, and it seems to me that starting in 2013, it’s on. Once that battle is finally joined and completed, I can see only two likely scenarios for law firms that experience it.

1. The full-service law firm partnership will collapse. There will be insufficient reason for a broad array of lawyers to band together in a partnership when that model provides them with very few business benefits. If your “partners” will cross-sell or refer to you only on a whim, why are they your partners? The large, “full-service,” multi-jurisdictional law partnership will shudder and start to break apart; small, local, intensely interlocked practice groups will peel off and become the new basic unit of private legal enterprise. That result is where all the foregoing pressures are leading right now — if firms cannot gather enough internal cohesion to establish a business-first, practitioner-second culture, then the centrifugal forces that have been slowly pulling law firms apart for years will finish the job.

2. The law firm partner will lose his or her position as the driver of internal legal business. As apocalyptic as that first option above might sound, this would be the truly revolutionary outcome. Law firms require generous cross-selling and enlightened referrals; lawyers control both and resist both; ergo, cross-selling and referrals must be taken out of the hands of individual lawyers, because otherwise the continued viability of the firm is threatened. Under this scenario, the firm wins the war and becomes the primary or even sole driving force behind its business decisions; the cost will be high, measured in an outflow of lost work and departing laterals, and the loss of blood might be more than some patients can survive. But in the larger picture, the cult of the corner partner begins to die off, and a new cultural imperative emerges to govern law firm behaviour.

Unsustainable situations can’t be sustained forever. Conflicts at some point have to be resolved, and there is no bigger conflict within law firms than this one. If law firms are not strong enough institutionally to wrest control of client business from individual partners and distribute referral and cross-selling opportunities in a more strategic fashion, then they lose their primary reason for existence. If lawyers are not strong enough to retain primary control over their sources of legal work, then they stop becoming independent legal entrepreneurs and become the functional equivalent of mere employees.

Either the center will hold, or it won’t. That’s the question; in 2013, law firms will start to learn their answer.

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

The “non-lawyer” gap in law firms: narrowing or widening?

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Posted in: Big Firms, Management

I’ve had the opportunity to speak with several groups of law firm professionals this summer, principally in presentations to the Private Law Libraries Summit at the American Association of Law Libraries and the International Legal Technology Association’s annual conference. In these venues, I’ve spoken to and heard from law librarians, knowledge managers, IT professionals, training and recruitment specialists, HR chiefs, and other “non-lawyers” who keep law firms ticking along while the lawyers are out bringing in revenue.

These people, as you’ll know if you’ve spent much time with them, are smart, highly credentialed (sometimes more so than the lawyers for whom they work) and very good at getting things done. Yet they’re frequently frustrated by their inability to get lawyers to notice them, acknowledge their priorities, and act on them. They keep running into the same familiar responses (sometimes explicit, more often implicit) from lawyers:

  • “I don’t really understand what you do.”
  • “I don’t highly value what you do.”
  • “We can’t afford to do that right now.”
  • “You don’t bring in revenue; you’re just a cost center.”
  • “You’re not a lawyer.”

The first four of these objections can all be met and overcome, so long as the professional staff have enough time, energy and resilience, and if they can find a champion on the partnership committee (or better yet, with a key client) who will campaign for their interests. The “cost center” response is a tough nut to crack, but even that hurdle can be cleared if the professional’s work can be integrated into revenue-generating activities or quantified by calculating its replacement value to the firm. Most lawyers do appreciate the business side of their practice, if dimly, and can be led to a more illuminated perspective on it with time and patience.

That fifth objection, however, is usually the killer. It taps into lawyers’ deeply rooted cultural distinction between lawyers and “non-lawyers,” between those whose opinions merit a default level of respect and attention and those whose opinions do not. Virtually every lawyer falls into this pattern, even the good ones who treat “non-lawyers” thoughtfully and well. It’s a class distinction that’s bred in the bone: law students’ natural affinity for exclusivity and elitism is encouraged in law school and exacerbated by prolonged exposure to the practicing bar. As I’m fond of saying, this isn’t a bug in lawyers’ personalities: it’s a feature.

My view, slightly cynical as it might be, is that the “non-lawyer” distinction is the main reason why professional staff have such difficulties getting their work and their perspectives taken seriously. It explains why the same internal initiative, when championed by a lawyer, makes far more headway among the partners than when even the most highly experienced and credentialed non-lawyer makes the case. It echoes my own experiences: I’ve encountered lawyers who initially greet my opinions with skepticism or hostility suddenly warm to my perspective when they learn that I’m a lawyer. That shouldn’t matter — arguments should be judged on their merits, not on their source — but for many lawyers, it does.

These cultural blinders damage both law firms’ effectiveness and lawyers’ profitability. “Non-lawyer” professionals can do (and have done) amazing things in law firms, if the lawyers only let them. Sadly, another belief to which many lawyers subscribe is that they’re innately better qualified to make decisions about areas outside their expertise than are the professionals they hired to handle this work. I often marvel at the patience and professionalism of law firm staff who are repeatedly second-guessed and overruled by people less qualified than they are. “Non-lawyers” have been second-class citizens in most law firms almost from the day of their founding, and all the C-Suite titles bestowed upon “non-lawyer” professionals can never entirely forgive their original sin of lacking a law degree.

Before meeting with these groups over the summer, I had held out some hope that the situation might be improving, that lawyers who needed to focus on improving their profitability might become more willing to grant more resources and autonomy to their “non-lawyers.” However, after listening to what’s been happening in their workplaces, I’m starting to wonder if the opposite might be true.

I heard a number of non-lawyer professionals at ILTA ask about whether they should invest in a law degree — not to further their careers, but to protect them.  These people have seen growing encroachment on “non-lawyer” territory by unemployed and underemployed lawyers, and they believe that applicants for “non-lawyer” positions with J.D.s hold an enormous advantage over those without. Indeed, I spoke with one law firm partner whose firm plans to convert underutilized lawyers into full-time knowledge managers. It’s obviously a very small data set, but it suggests to me that law firms might finally be preparing to deal with lawyers’ neglect of non-lawyer issues. But not by getting their lawyers to take the non-lawyers more seriously — by placing lawyers into traditional “non-lawyer” positions.

This strategy, if it unfolds, would have several benefits from the firm’s perspective:

  • It would make good use of lawyers who otherwise don’t have enough work to keep them busy, a growing problem in many firms that have seen business go slack and hours fall off.
  • It would help postpone decisions about ending these lawyers’ careers with the firm — it’s much easier to fire a staff person than it is to lay off a lawyer, and you might need the lawyer again when business picks up.
  • It would bring a dose of “lawyer knowledge” to traditional “non-lawyer” roles (don’t underestimate the premium that lawyers place on legal knowledge as an all-purpose contributor of value).
  • It would ensure these positions and their priorities will be treated more seriously and more quickly by the partnership, because lawyers will naturally pay more attention to one of their own than to a “non-lawyer.”

Along with these anticipated benefits, of course, would come some downsides.

  • Lawyers are still more expensive than non-lawyers, so the firm would be paying more for these positions than it currently does (although still less than the lawyer would make if he or she were in practice).
  • Inside the “lawyer bias” can be found another bias, this one held by lawyers who generate revenue against lawyers who don’t (“You’re not a real lawyer,” etc.), which could continue to limit the degree to which partners take these issues seriously.
  • “Non-lawyers” provide unseen and unappreciated (by lawyers) diversity of thinking and perspectives to law firms — very few situations have been improved by increasing the population density of lawyers in the vicinity.
  • This stuff that the “non-lawyers” do? It’s actually not as easy to pick up as you might suppose it is.

I don’t think that sending lawyers in to do “non-lawyer” jobs would be the way to a more effective and profitable firm. I’d be far more inclined to make better use of the “non-lawyers” that firms currently employ: give them more resources, grant them more leeway, get them more training, and upgrade the quality and reach of their contributions to the firm. Most importantly, pay attention to what they have to say, and make it your default position to accept their recommendations if they’re sensible and practical. You hired these people; you might as well use them to the best of their abilities.

I don’t know if law firms are really heading in this direction — I’d welcome your own eyewitness reports from the field. But knowing lawyers and their tendency to believe they’re usually the best solution to most problems, it wouldn’t surprise me either. And it would be a mistake. “Non-lawyers” are poised to become the rule more than the exception in the legal services market; law firms should be finding ways to gather them close, not drive them away.

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

The dying cult of the corner partner

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Posted in: Big Firms, Management

Let’s start with an odd fact: the self-interest of a law firm is fundamentally opposed to the self-interest of its most powerful partners.

Here’s how I see it. The more influence a lawyer wields over a given client, the more stature, leverage and tactical advantage that lawyer gains within his or her firm; these benefits grow in proportion to the size of the client and its strategic importance to the firm. This partner’s influence naturally tends to undermine the firm’s security: the partner could bolt at any time, depriving the firm not only of a key client but also of the partner’s substantial contribution to the firm’s average PPP, which in this environment might actually be the greater threat. This creates a dysfunction in the relationship between a firm and its best lawyers: the more the lawyer succeeds, the less control the law firm has over its own destiny.

The firm recognizes this fact, of course, and it takes steps to mitigate the inherent risks of a powerful partner. It invests heavily in firm-wide marketing and “brand,” to ensure that its individual stars don’t shine more brightly than their corporate constellation. More importantly, it strives to create teams for critical clients, to attach multiple lawyers to these clients and to increase the “stickiness” of the relationships. I’ve written elsewhere that if you have an irreplaceable employee, your goal as a manager is to make that employee replaceable.

The partner, no fool either, recognizes these attempts and does everything possible to undermine them, most notably by hoarding the most significant work and key client interactions and by keeping more junior partners at a safe distance (tactics that dovetail nicely with lawyers’ natural proclivities anyway). This power struggle takes place every day in almost every sizable firm, often with neither side consciously realizing what it’s doing and why.

That struggle, however, usually leads to a long-foregone conclusion: the partner wins. And that’s mostly because of one of the legal industry’s most durable and reliable mantras: “Clients hire the lawyer, not the firm.”

The lawyer and the firm are always fighting over who gets to take the client to the dance; but in the end, the client invariably chooses the lawyer for its date. It’s not an entirely irrational choice. As I’ve catalogued before, law firms traditionally have been unable to guarantee the consistency of their service delivery, the reliability of their systems, or even the quality of their lawyers. And powerful partners are very good at creating industrial-strength personal bonds with clients. But there’s something else, something more pernicious, at work here: there’s the cult of the corner partner.

There is no more powerful person in a law firm (arguably, in the legal market itself) than the corner partner. You know the one I mean: extraordinary skills, extensive connections, huge book of business, intimidating presence, and (to put it politely) an outsized personality. Corner partners don’t have to occupy actual corner offices, of course: what distinguishes them is not their dual window views, but their status (real or perceived) as the sine qua non of the firm’s profitability and prestige.

No major firm decisions are taken without the input or acquiescence of corner partners; no new initiatives proceed without their approval and no member of the firm, up to and including the managing partner, survives a serious conflict with them. We sometimes call them “rainmakers,” but that sells them short: they’re more like the patriarchal (or matriarchal) overlords of the firm. Some are benevolent overlords, using their influence to ensure the long-term prosperity of the firm and its members; I don’t think it’s overly cynical to call such partners the exceptions rather than the rule.

Everyone buys into the cult of the corner partner, and this is nowhere more evident than in law firms’ single-minded preoccupation with, and frenzied pursuit of, lateral partner hires. Subscribing fully to the “Clients hire the lawyer” mantra, law firms clamber over one another in the mad scramble to poach partners with big books of business in key practices or industries, invariably with escalating promises of more and more money.

If its efforts are successful, the law firm trumpets its poaching expedition in a flurry of statements and press releases (in which the new corner partner can be expected to speak glowingly about the advantages of the new firm’s “larger platform”). This has been the primary growth strategy for hundreds of midsize and large law firms through North America for several years now. The resulting free-agent culture of the BigLaw bar, as well as the increasingly yawning spread between the annual incomes of a firm’s highest- and lowest-paid “partners,” are hardly surprising results.

But should this state of affairs change in any meaningful way — should the power of the corner partner begin to wane, should the cult lose some of its fervour — then the implications for law firms and the legal market would be immense. This week, Ron Friedmann gave us a thought-provoking post that quotes extensively from an analysis by Steve Nelson, managing principal of The McCormick Group, who believes that this very change might be upon us.:

There is a widening gap between the prospective portable billings that incoming laterals vouch for and the actual results that occur months after the laterals arrive. While some of this can be attributed to overly optimistic predictions by the laterals themselves, we believe that other factors are more significant. In particular, the old adage about “we don’t hire law firms, we hire lawyers,” often no longer applies. Instead, in an era where increased pressure is on corporate counsel to reduce outside legal spending, there has been an increased emphasis to consolidate legal providers who both know the client’s business and can offer increased efficiencies. So the ability of one partner (or sometimes even a group) to hold onto a significant amount of a client’s business in a particular discipline is diminishing each year.

It’s difficult to overstate how significant this development would be on the corporate legal market. Both lawyers’ personal career trajectories and law firms’ strategic growth plans have long revolved around the idea that the partner is king and the corner partner is emperor. But there’s growing evidence that the emperor is perhaps not actually as fully dressed as we had thought.

I’ve heard of multiple law firms expressing disappointment over the failure of ballyhooed lateral acquisitions to deliver the promised injections of business and profit. Often, the new partner’s expenses (including paying for the entourage that accompanied him or her from the old firm) cancel out the new revenue streams; the partner is a zero-sum acquisition. More problematically (but quite predictably), the new corner partners don’t cross-sell to, or grow the business books of, their new partners: they guard their client relationships just as jealously here as they did there. And it need hardly be added that new corner partners are an unstable resource: just as the best predictor of divorce is having been divorced before, the best predictor of a partner leaving a firm is that partner having bailed on a previous one.

But there’s more to it than just profit churn and instability: there’s also a growing loss of faith in the lateral acquisition model itself. The tipping point here might prove to be the failure of Dewey & LeBoeuf, a mega-firm built on a stack of lateral partners the way Yertle’s kingdom was built on a stack of turtles. We’ve only begun to see the damage Dewey’s fall will wreak on the traditional BigLaw model, but I suspect one of the first victims will be the cult of the corner partner. Lawyers and law firms are remarkably susceptible to fashions in strategy and management; but as soon as one of these trends becomes unfashionable, it can’t be abandoned fast enough. Law firms everywhere are now waking to a sudden thought: not only does corner partner poaching not accomplish much, it can be incredibly destabilizing. Once that thought crystallizes, look out.

What’s really interesting, though, is that this isn’t just about the fall of the corner partner; it’s also about the rise of the law firm.

A funny thing happened following the financial crisis: law firms realized they needed to get better at what they did if they wanted to survive and prosper. What’s more, they actually began following through on that realization. One of corner partners’ strongest advantages over their firms has always been that most firms were haphazardly structured and amateurishly managed, never more than the sum of their parts: the best partners always looked better by comparison. That is now changing.

  • Professionally trained managers now occupy more positions of influence in law firms.
  • Practice and industry groups operate with more precision and panache.
  • Associate training and partner competence has received more attention and resources.
  • Knowledge management has developed real engines of expertise circulation.
  • Legal project management has brought order and discipline to the legal production process.

Law firms, after many years and many false starts, are finally starting to get their act together. Not all of them, by any means, and mostly in fits and starts. But there is unmistakeably a change in the air. Law firms are taking themselves more seriously as corporate entities, and clients are taking notice. We are seeing the start of a shift in the balance of power between law firms and their most accomplished lawyers.

Obviously, it’s very early days for this phenomenon, and as always, anything could happen. The history of both lawyer behaviour and law firm management provides ample evidence for pessimism. And even if diminished and brought to heel, corner partners remain extremely formidable forces within their firms and the larger legal market; there will always be outstanding lawyers and they will always command more than their share of the sunshine.

But I do think the days of law firms dancing attendance on, and throwing borrowed money at, the latest free-agent power broker are drawing to a close. The focused, streamlined and systematized law firm is, gradually but inevitably, on the rise. The cult of the corner partner is in slow but irreversible decline, and much of our conventional wisdom about the legal market is going down with it.

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

Too many partners

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Posted in: Big Firms, Management

Law firms, facing a formidable array of external trends and pressures, are simultaneously experiencing a series of internal shocks and shakeups. The most prominent of these is an ongoing reconsideration of the role played by each member of the firm — a process of asking, “What function do you play in this enterprise, and could that function be performed differently?”

This process, which has been underway for a couple of years now, is behind the move of back-office and middle-office jobs to outsourcing companies (both offshore and onshore) and the transfer of associates’ jobs to LPOs, free-agent project lawyers, and innovative offerings like Axiom and Lawyers On Demand. (Some of these functions are also being replaced by technology, at a rate that will steadily increase in the next few years.)

The impact of these efforts is already clear, ranging from the emergence of new “capitals of law” outside the major financial centers to the steady decline in the partner-associate ratio (leverage is now just below 1-to-1 in the AmLaw 200). There’s nothing sinister about this: it’s the natural market-driven process by which labour shifts and reconstitutes itself to its most efficient and effective use.

But I suspect that the partners driving this process forward haven’t thought about where it’s inevitably going to wind up. When you’ve finished asking, “What’s the point of an IT department?” and “What’s the point of all these associates?” there’s really only one question left: “What is the point of a partner?”

Asking that question — and every firm is either asking it now or will have to ask it shortly — raises some uncomfortable issues. We know what function the payroll clerk performs, and we know her job can be done in Wheeling or Belfast. Ditto the paralegal, whose job can be outsourced to someone working from home in a small town in California. We know what the associate is for: either to be groomed for future partnership and leadership or (far more likely) to do highly leveraged work and generate partner profit until eliminated, voluntarily or otherwise.

Positions like these, whose role in the overall  scheme of things is clear, can be understood and moved around as needed. But what about partners? What are they for? I can think of three possibilities.

  • Do they bring in big business? (That is to say, enough business to sustain much more than just their own practice?) A small percentage of partners do, and they’re incredibly valuable. (A friend of mine in a big firm estimates that the best rainmakers are probably underpaid by a factor of 10.)
  • If they don’t bring in big business, are they superb client relationship maintainers? (And I mean superb.) Most great “relationship” partners are rainmakers covered by the first category, but this possibility should still be raised.
  • If they’re not critical to client relationships in either of the two preceding senses, are they tremendous managers? That is to say, are they highly valued and indispensable managers of the organization, its people, or its processes?

To my mind, at least, those three categories cover virtually all the justifications for inviting a lawyer into a law firm partnership. These are the key roles that make a firm profitable and successful — they constitute the essence of what “partner” status is supposed to describe. But by no means do all or most law firm partners today qualify under one of these headings. And if a “partner” doesn’t fall into one of those three categories, then what precisely is he or she doing in the partnership?

I suspect that a lot of “partners” in law firms today are in that position because the firm didn’t know what else to do with them, because the other partners liked them, and because times were good — in short, they were made partners because it pleased the firm to do so. Not a few younger lawyers in law firms have glared upwards at the people above them and groused, “How did they become partners?” And in more than a few cases, they’re right to wonder, because these lawyers aren’t partners so much as they’re superannuated associates who came along at the right time. It’s my belief that, speaking from a labour utilization perspective, these partners are not occupying the correct role, either for them or the firm. They need to be reassigned.

And they are. Earlier this year came a report about increased profits at AmLaw 100 firms achieved at least in part by thinning the ranks: 2% of partners de-equitized over the previous two years. that fully half the UK’s top 30 law firms are now either de-equitizing partners or considering doing so, a development predicted back in January by Hildebrandt and Citi Private Bank. In addition to steadily reducing the partnership ranks, firms are taking steps to ensure that future cohorts are smaller: Eversheds, for example, has gone so far as to create a brand new position (legal director) as an alternative to becoming partner.

There’s a growing belief among many firms that they invited too many people into the partnership over the past years and decades. Those firms are now starting the process of unwinding those errors. Record low realization rates being reported for some of the biggest US firms, as low as 85%, will only spur that development, because there’s nothing else left to cut and no one else left to reassign.

Nor is it likely that partner ranks will swell again in future, following some highly anticipated but nowhere-in-sight economic recovery. Partnership, as Stephen Mayson argues, is neither an appropriate nor a viable way to manage enterprises of the size and complexity of most law firms. The imminent arrival of Alternative Business Structures in the UK and the outside ownership they’ll bring with them should ensure that the partnership model will henceforth be reserved for smaller firms, as it was originally intended.

Law firms are in the process of reinventing themselves, but the easy work — cutting staff and laying off associates — is long past. Removing lawyers from the partnership is (or should be) an extremely difficult experience for all concerned, but as times continue to be tough and worse, the stronger members of the herd will not hesitate to cull the weaker. But most firms have yet to face up to the hardest part of all — re-engineering the firm’s workflow, delivery, pricing and compensation systems in order to compete in a new marketplace. That’s a bridge, I suspect, that few firms will find themselves willing or able to cross.

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

Measuring lawyer productivity

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Posted in: Management

Recently, Carolyn Elefant at Legal Blog Watch summarized an interesting debate over a question that many lawyers will soon be asking themselves. Let’s say your law practice succumbs to the logical and inevitable, stops routinely billing by the hour, and institutes other system(s) of pricing and selling your work. Query: do you still need to docket your time? There are two schools of thought: continue to track your time because it allows you to determine your costs and your lawyers’ profitability and because clients might demand an accounting of the time you spent; or, stop tracking your time because it’s entirely irrelevant to your profitability and it’s none of your clients’ business anyway.

I fall into the latter category, for the reasons provided by Allison Shields in a comment on Carolyn’s post…

Why would a client care about time records or how the work gets done as long as it’s done based upon agreed-upon specifications? Clients only really care about time and time records because they perceive that’s what they’re paying for – and lawyers back that up by claiming that what they sell is time, instead of focusing on the value and the services they provide to clients. Lawyers don’t sell time and clients don’t buy time.

…and Jay Shepherd in a separate post at his blog:

Now folks at other law firms will whine that they need to know how profitable an associate’s work is, and how profitable a particular matter or client is. Without tracking and billing for time, they can’t possibly tell.

Nonsense. Take an accounting class. Profit is revenue minus expenses. The question is whether the firm is profitable, not whether an associate or a client is profitable. The relevant question for a client is whether you’re delivering enough value to the client to justify the best price they would pay. The relevant question for an associate is whether he or she does good work for your clients.

The whining continues: But if we don’t track associates’ time, how do we know if they’re working? After your accounting class, take a management class. You know by managing your associates.

But there’s another important point here, voiced by Doug Cornelius in a further Blog Watch comment:

When you go to non-hourly billing, the time sheets are focused on the internal process and business analysis. You can focus on the efficiencies and inefficiencies of your operations. You can use this data to better target your fee and find ways to get it done better, faster and more efficiently. Putting more money in the lawyer’s pocket.

Generally, I agree with this, though I actually don’t think a traditional time sheet by itself would be the best way to track productivity and efficiency, for a couple of reasons. One, lawyers are notoriously inconsistent docketers — many time sheets are filled out at the end of the day or the week through recollection and guesswork, meaning lawyers overestimate (or, with surprising frequency, underestimate) the number of hours they spent on a given matter. And two, forcing a lawyer to record her time, even if the sheets aren’t used to support invoices, reinforces the importance of “time spent” and encourages the belief that time really is what the lawyer is selling.

But Doug is correct — law firms need ways to measure the productivity of their lawyers, the efficiency of their practices, and the overall effectiveness of their working  days. Firms need lawyer performance metrics — that is, they need to (a) identify a lawyer’s activities and accomplishments that contribute the most value to the firm, (b) come up with ways to effectively measure those activities and accomplishments, and (c) create systems and encourage habits by which a lawyer can improve her performance in these respects. Larger firms would create performance metrics for individual practice groups, or regional offices, not just for individual lawyers. (And firms of all sizes should start with the definitive discussion of performance metrics in the law, John Alber’s July 2005 “Delivering Actionable Information To Front-Line Lawyers”).

Jason Anderman took a good step in this direction with a recent blog post 3 True Outcomes: Sabermetrics for Lawyers? Using Michael Lewis’s baseball best-seller Moneyball as a resource, he kicked off a discussion of legal practice metrics by echoing the concept of the only “three true outcomes” (strikeout, walk, home run) over which a pitcher has complete control. He suggested identifying and measuring the only aspects of a given legal process over which a lawyer has complete control (for example, time spent on a first client meeting, time spent to deliver a first draft to the other side, and revision turnaround time) and gathering them together under a “cycle time” statistic. While he acknowledges there’s more to the process than timeliness — a negligent lawyer who barely reviews documents would have very good cycle time stats — he thinks, and I agree, that it would be a good start.

Jason’s post drummed up a lot of interest when it was featured at Legal OnRamp. From a litigator’s perspective, Patrick J. Lamb agreed that total cycle time from engagement to resolution of a matter would be relevant, and suggested interim steps such as how quickly documents were obtained and examined, how long it took to draft written discovery, and average time of depositions (while noting that these aren’t all under a lawyer’s complete control). Fred Bartlit added measures such as preparation and examination of a two-day expert damage witness and research and drafting of a motion to dismiss. But he also observed that the ultimate metric from any litigator’s (and client’s) perspective is victory — as important as lawyers’ productivity and efficiency are, they’re secondary to the outcome. (See Ronald Baker for more on client-focused productivity metrics.)

What all this illustrates is yet another aspect of law firm business that needs to be re-examined and adjusted in light of new marketplace realities: how to measure a lawyer’s value to the firm. Pretending that billable-hour totals can pass for a productivity metric (as some firms still believe) won’t work anymore — firms are going to have to identify reliable lawyer performance metrics and, more importantly, figure out ways to help their lawyers improve the performances that those metrics reflect. Time spent on a task can be an acceptable piece of the puzzle, so long as everyone understands it’s only a piece and not all that big.

Lawyer productivity metrics will have to move away from the effort-based measures of the past (e.g., hours billed) towards metrics that focus on accomplishment, usually measured against a series of predetermined criteria. Firms that have decided to move away from lockstep compensation for associates have already committed themselves to going down this path anyway. It’s yet another perfectly ordinary aspect of running a business that lawyers have shied away from, but just as there’s a process revolution coming to the law, a productivity revolution is now also well underway.

Trust and the marketing department

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Posted in: Management, Marketing

Timothy Corcoran’s excellent and essential new blog tracks and expands upon a provocative article at the AmLaw Daily called “How essential is a CMO?” As many large firms scale back their marketing spending or lose their Chief Marketing Officers, Tim finds both lawyers and marketers can share some blame. I was especially drawn to this dead-on observation:

BigLaw partners operate under the amusing notion that a flat governance model in which every partner is an equal owner with equal authority is somehow a rational business choice, when in fact it’s an inefficient, extraordinarily dilutive and disruptive structure that persists due to inertia.  To be clear, the partners can organize their sandbox however they want, but this scenario rewards senior marketers who have learned to please partners above advancing the financial interests of the firm.  Indeed, there are countless examples of experienced marketers from other disciplines stymied by the bizarre world of BigLaw.

As one CMO put it to me without irony, “Success in a large law firm is all about credibility, which means accepting that we don’t often do things the right way, we do them our partners’ way, but after about a year of serving their needs you should have built up enough credibility to gently make suggestions, most of which they’ll discard, but to survive you can’t try to do too much too quickly.”

Politics and personality do take on outsized importance in a large enterprise, such that the merits of any given initiative often take a back seat to figuring out which important people’s interests require catering or flattering. By effectively giving every partner veto power over business decisions, law firms make that situation a lot worse. Appeasement replaces innovation, expectations are lowered repeatedly, and pretty soon nobody has the heart to try anything new. It’s no way to run a business of any substantial size, and if non-lawyer ownership of law firms ever catches on worldwide, that might well be the beginning of the end for this model.

For the foreseeable future, though, the flat partnership structure is a fact of life.  But I tend to think the organizational model per se isn’t the problem so much as the fact that many lawyers seem incapable of letting other professionals do their jobs without interference or second-guessing.

Lawyers seem to come factory-shipped with the notion that they know better than you how to do things you’ve been trained to do. People who work with or for lawyers — secretaries, paralegals, marketers, recruiters, PD experts, consultants, and so on — can all relate eye-rolling stories of lawyers who really believe that their fleeting sentiments on a given subject merit equal consideration to what the trained professional in question has advised. It seems that only IT people escape this kind of treatment, probably because many lawyers are intimidated by anything more technological than a BlackBerry.

But marketing seems to get the worst of it. I’ve heard one business consultant, who has worked with professionals in numerous fields, say that nobody treats their own marketing people with as little respect as lawyers do. Many qualified law firm marketers are reduced to menial publicity tasks after yet another initiative of real substance has been stalled or buried. I’ve seen worthwhile legal marketing and branding campaigns snuffed out because one or two lawyers in the room didn’t like a particular tag line, image, or even colour scheme in an advertisement — even when it’s made clear that the campaigns are not directed to lawyers at all, but to clients.

Why are lawyers so prone to this kind of behaviour? Some of it certainly can be traced to the particular strain of arrogance that legal training seems to inculcate. Being a lawyer can operate as a kind of expertise multiplier, making a small knowledge base suddenly seem much larger. My English degree may be gathering dust in a closet somewhere, but I can at least remember Pope’s Essay on Criticism: “A little learning is a dangerous thing /Drink deep, or taste not the Pierian spring / There shallow draughts intoxicate the brain.”

But I think a lot of it comes down to trust — many lawyers are just plain reluctant to trust the opinions and instincts of people from outside the profession. One of the reasons lawyers invite a colleague into partnerships is that they trust the lawyer’s skills and acumen — a partner by definition is someone you trust without even thinking about it. I wonder if one of the reasons most ethics rules prohibit “non-lawyer” (a hateful phrase) admission to partnership is that lawyers can’t quite bring themselves to grant that same level of trust to those outside the bar. Yes, you’re qualified and diligent, experienced and savvy — but you’re not a lawyer, and that still matters for some reason. Few lawyers trust the merits of something they can’t authenticate through direct experience; most lawyers have never marketed; and marketing looks easy from the outside.

This is more than just an annoying quirk — this is a major obstacle to the efficient operation of legal enterprises of all sizes. If you’re constantly overruling or second-guessing or stymieing the best efforts of your qualified professional associates — if you just can’t accept that someone without a law degree knows more about a business management issue than you do — then you’re wasting time, missing opportunities and burning money. Law firms everywhere are doing all three, at a time when the importance of these professionals to the firm’s survival has never been greater.

Successful law firms have figured out that there are some things lawyers do very well and some things that other professionals do very well, and they delegate authority accordingly. Good lawyers do more than just hire a marketing or recruitment or strategic professional — they trust them enough to follow their advice and give them enough room to operate. Good lawyers have the  wisdom to accept that they don’t know everything and the confidence to yield control to those better qualified. Of course they consult with these professionals and raise concerns when they have them. But at the end of the day, there’s no substitute for trust and no disguising its absence.  If you don’t trust your professionals to do the jobs you hired them to do, everyone in the firm figures it out pretty quickly and behaves accordingly.

So the fundamental problem might not be that lawyers can torpedo or hijack a given initiative. The problem is that they do, often reflexively, without sufficient grounds. Few lawyers have the discipine and confidence to keep from wading into unfamiliar waters until they’re over their head. Law firm leaders need to keep improving trust between a firm’s lawyers and its other professionals, until the latter can maximize the firm’s value and effectiveness without having to constantly look over their shoulder at the former.

Get ready for the process era

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Posted in: Management

You know the old expression, “Life’s not a destination, it’s a journey”? I have to say, it’s never worked for me. I’m all about the destination — the journey is the time-consuming necessity between Point A and Point B that I’d dispense with if I could. I don’t have much interest in the scenic route — my itineraries are designed to provide the shortest distance and quickest trip (though I’ll make an exception to avoid ever having to go through Heathrow again). Similarly, I never liked having to “show my work” in math class, or to follow the standard procedures, or to get bogged down in anything that delays my arrival at a solution. Let’s just get to it already!

I’ll also be the first to admit that this isn’t a particularly healthy or sensible way to be. Scenic routes are, well, scenic — they deliver numerous physiological benefits and they’re, you know, nice to look at. Showing your work demonstrates you actually understand the formulas and how they’re applied. Everyone should go thr0ugh Heathrow once, just so they can tell their grandchildren scary stories one day. Nonetheless, I appear to be wired for the destination first and the journey second, and I’m finding that it’s very hard to change.

I have a theory that many lawyers are like that, too. We think our essential purpose is to solve problems, and we focus our energies on cutting through the clutter in order to reach that destination. But you know, clients think the clutter is kind of important: telling the story of how they got here is at least as important to them as finding out where to go next. This applies to both corporate clients — who wish their lawyers would take a big-picture view of their ongoing business realities, not just the legal matter at hand — and individual clients, who want to relate personal stories of complex and difficult life events, but whose lawyers often dismiss all the “background” in favour of summarizing the facts and reciting the applicable law.

So I think we could all stand to be better at holistic legal services — putting the client’s well-being on par with the legal issue he or she has brought, paying more attention to the process by which we address client concerns. Now, you might not buy that, thinking it’s too touchy-feely for a gunslinger like you. If so, then you ought to consider that process is about to become the most important feature of modern legal services delivery.

There’s a process revolution coming to the legal industry. For decades if not longer, law firms of all sizes have tackled client issues the same way: by creating a file and giving it to a lawyer to complete (although the dullest tasks sometimes made their way to secretaries and paralegals). The lawyer’s process was simple: (a) identify the legal problem and work out a legal solution, (b) using a pen, a legal pad, and whatever precedents are on hand, (c) taking as long as required and docketing time spent along the way. Clients invariably didn’t know enough to question this process, and in any event, many tools by which more efficiency could be introduced didn’t yet exist.

Now, however, the tools are appearing — not just through technological advances, but also with the development of business process theory and the rise of logistics. There are now entire disciplines devoted to making manufacturing and service provision more efficient, from workflow analysis to project management to business process outsourcing to just-in-time delivery systems. Contrary to what many lawyers might believe, a substantial amount of what law firms do is susceptible to the application of workflow and logistics. (You think document review can’t be automated, due diligence can’t be systematized, legal knowledge can’t be distilled and packaged?) Modern clients, especially on the corporate side, understand these systems very well and believe quite sincerely that they can apply to what law firms sell.

Ron Friedmann touched on these points in a post at Strategic Legal Technology late last year:

I think most GCs are failing, however, to focus enough effort on process, on how lawyers practice law. [Early case assessment] and staffing controls go to the “how”. Where … are efforts to require matter budgets, application of best practices, automation, risk analysis with decision trees, document assembly, and proper use of KM systems? … Real costs savings mean changing the process, focusing on how lawyers practice. The profession needs to overcome its “I am an artiste” attitude and develop better ways of working.

In The End of Lawyers?, Richard Susskind talks about “decomposing and multisourcing” legal tasks, chopping them up  and directing each segment to the solution with the best combination of competence and cost-effectiveness. Lawyers simply aren’t wired to think this way, but systems analysts are:

Sometimes, by decomposing legal work and viewing it with the eye of a systems analyst rather than a lawyer, it will become apparent, in the jargon, that some “re-engineering” can occur.  This means that some fairly fundamental reconfiguration or reorganization of the tasks can be introduced which of itself might being greater efficiency. An analyst, looking at some legal work with a fresh mind, might pinpoint, for example, some opportunities for avoiding the duplication of tasks or might identify some tasks as redundant. From a systems and process analysis point of view, the lawyer sometimes cannot see the wood for the trees.

I was listening to Richard deliver the keynote address at the ABA TECHSHOW last month when it occurred to me how fundamental a change this will be within our profession. We’ve never needed to worry about process or efficiency before — we dictated the terms of the marketplace, so we could take as long as we liked to do our work and in whatever fashion pleased us. That’s coming to an end, and most law firms will face a huge challenge converting their business models to adapt. I twittered as much during Richard’s presentation: “Future legal business: process consultant for law firms. Lawyers will need help mapping out and re-engineering their practices.”

In the near future, it won’t be good enough for lawyers to ignore the journey and focus on the destination — we won’t be able to focus solely on the ends and let the means take care of themselves. The nature and quality of how we do our work will become at least as important as the work itself. That’s going to be very tough for us to wrap our heads around, but I don’t see any way we can avoid it.

Rightsizing

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Posted in: Management

The massive grocery superstore in my neighbourhood has something like 17 checkouts. Great, you might think — 17 lines, no waiting. But I do wait, often, behind two or three people usually, and it’s not because the store is bulging with shoppers at any given time. It’s because at least some of those checkouts are always unattended — in fact, in almost four years buying groceries there, even at Christmas and other high-volume times, I’ve never seen all 17 checkouts in use. I’m not sure I’ve seen more than 12, and I’ve often seen fewer than five. And invariably, I have to line up.

Then there’s the check-in counter at the airport. I always get my boarding pass at home or at the self-serve kiosk, but I still need to drop off my bags and get my claim ticket, so invariably there’s another line waiting for me. And no matter how heavy or light the passenger traffic, I see the same thing — only a handful of the check-in stations are ever occupied. It should go without saying that checking out of a supermarket and checking into a flight are the most critical points of contact these companies have with their customers.

I wonder if my grocery store or airline has ever done the math here. You have to figure the cost of paying a reasonably diligent 20-something to run eggs over a scanner for eight hours would be covered by one family’s grocery bill, or that the cost of a few counter shifts at the airport ought to be paid for by one executive-class ticket. Meanwhile, the capital these companies have invested in their idle workstations depreciates away — a cost ultimately borne by those customers shifting irritably on their feet as they wait in a nearby lineup.

But this isn’t a post about understaffing in the food and travel industries; it’s about the growing downside of overcapacity. These companies evidently felt compelled to create a bigger footprint than they actually required or intended to fill. Possibly they anticipated greater growth in prosperous times ahead (though I think we just came through as much prosperity as we’re going to see for awhile).  More likely, though, they just thought (as we all tend to do) that size is self-evidently good. Maybe they liked seeing all those workstations on the blueprints. Maybe they liked being able to attach “bigger than ever” to a project that bears their name.

Here’s the problem: “more than necessary” is out. I don’t just mean as a matter of aesthetics, the fear of being seen as extravagant in a time of restraint. I mean that as a business imperative, carrying more than you need to get the job done is not just inefficient, it’s now dangerous. Seth Godin puts it this way:

Many businesses that are in trouble are in trouble for a simple reason: they’re the wrong size. A newspaper that only had a few dozen employees would be doing great today. But they have hundreds or thousands of employees because that was an appropriate scale twenty years ago. …

It’s tempting to get bigger. But is bigger better? In many cases, it’s worse, particularly when you can leverage reliable systems that are cheaper and faster and more stable in the outside world. If you can make your product better by assembling it yourself, you should. But if that action makes it worse, why do it?

That last paragraph applies to pretty much everyone except lawyers. Many law firms are as big as they want to be, not as big as they need to be. They hire and acquire and expand because of the peculiar financial logic of legal services: the more people you have working for you, the more you can bill and the more money you can make. In other industries, the market sets the price and demand drives profitability; in the law, the seller sets the price and supply drives profitability. But as the basic rules of commerce finally start filtering into the legal services marketplace, that’s all starting to change.

The mega-firms now chopping thousands of jobs are, as I’ve said before, not conducting layoffs: they’re reducing their full-time employee complement indefinitely. These firms were overlawyered (and often overstaffed) relative to the value of the services they were performing — but it didn’t matter, because there were no effective market pressures to reduce costs. Now, these firms are having to seriously consider ways to automate basic tasks, and to delegate and outsource mid-level work, in the name of efficiency. They have to “leverage reliable systems that are cheaper and faster and more stable in the outside world.” Reducing unnecessary capacity is only the first step; getting more efficient is the next and more important one.

This applies to firms of all sizes, even solos, because it’s not just about whether you have too many lawyers on the payroll. It’s about whether you’ve struck the right balance between the services you’re delivering to the marketplace and the resources you’ve accumulated to deliver those services. It’s the rare law firm that has fewer resources than it needs to service its clients. More often, firms overextend themselves in terms of workers, salary, bonuses, equipment, decor, locations, practice areas — overbuilding their capacity because, at least in part, the costs of overcapacity have always been directly transferable to the client.

Overcapacity is bad from a financial perspective, but it might actually be worse from a marketing and client relationship angle. One effect of a multitude of workstations at the supermarket or airport is to create an expectation of convenient and rapid service. That’s why the failure to utilize those workstations  is doubly irritating to the customer: it’s not just poor service, but poorer service than the company evidently is capable of delivering. An unstaffed check-in or checkout sends the message: “You mean so little to us that we can’t be bothered to put someone at a station we’ve already built and paid for.”

Take a moment to look around your law practice for empty check-in counters and extraneous check-out lanes — acquisitions that have outlived whatever usefulness they once had, promises you’ve made to clients that you no longer intend to keep. If you say you practise w, x, y and z law, can clients get equally effective representation in each of them? If you give them your phone, fax, email and web coordinates, can they get fast information and responses on any of them? If you’re offering clients a host of newsletters, is their content actually worth the investment of clients’ time? If you’re making them wait in a million-dollar lobby, are they going to get million-dollar service?

Figure out the capacity disconnects in your practice —  from underemployed professionals to extravagant premises, from inefficient workflows to dusty websites and abandoned blogs.  And as soon as you identify them, fix them. Think of it as a new definition of “rightsizing” — as your chance to make your practice the size and shape it needs to be.