Welcome to The Dialogue

The Dialogue provides a forum for those invested in BigLaw firms to add their voices to the remaking conversation.

We encourage lawyers and others with a stake in the profession: clients, partners, and leaders of BigLaw firms, NewLaw participants, academics, law students, analysts, commentators, and others to join in.

There are no right or wrong views, diversity and differences are crucial to imagining the future.

Readers are invited to contribute their posts (subject to curation)  and comments.

Contact me at george.beaton@beatonglobal.com or call me +61 418 325 351.

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Signs of the times: The rise of managed legal services

This month I am delighted to welcome Catherine J. (CJ) Moynihan as a contributor to The Dialogue. As a senior director of legal management services at the Association of Corporate Counsel,  she is the subject matter expert on managing the legal function, legal spending, and the ACC Value Challenge. Catherine has many and special perspectives on changes in the legal services supply chain, especially those being driven by clients.

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New players driving value for legal departments

New players driving value for legal departments was written by Mark Cohen and Liam Brown and originally appeared in Canadian Corporate Counsel Association magazine. As I read it, the key point Mark and Liam make is that the NewLaw players, while still tiny in market share, are teaching clients new tricks. And this spells big opportunity – or trouble if they’re asleep at the wheel – for BigLaw incumbents.  

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Herbert Smith Freehills sets out its legal AI vision

In Artificial Lawyer, Richard Tromans reports that Herbert Smith Freehills (HSF) has set out its approach to the use of legal AI in a major report published on September 14, 2017. HSF joins a growing number of law firms to now publicly embrace the use of AI and to actively engage with clients to find out what services they want to be supported by machine learning and natural language processing (NLP) technology.

The report is in part a sort of ‘beginner’s guide’ educational work to explain to readers what legal AI is all about, but also more interestingly sets out HSF’s own views on what legal AI will do for the legal sector and how the firm is approaching the subject.

Clients’ views on legal AI

The firm has also published feedback from its clients on how they see the adoption of AI among their legal advisers. And this is perhaps the best bit of the report.

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“We’ll have a chat at the end” – a $20B black hole

We lawyers detest talking about our fees with our clients, yet analysis suggests this is leaving a $20B black hole in the revenue of BigLaw firms.

Richard Burcher’s firm, Validatum, has worked with over 300 law firms in 18 countries and if there is one common denominator he observes, it is a shared perspective that the price conversation is the most unpalatable and stressful aspect of the lawyer/client relationship.

We will do anything we can to avoid it and for many years, until regulation intervened, we could get away without much of a pricing conversation at the outset or at best, a very vague and abstruse one that kept all our options open.

Most Western legal jurisdictions now have regulatory regimes that require a comprehensive level of engagement with clients around cost at the outset of the matter. Consequently, there has been improvement, although rightly or wrongly, many still hold the view that lawyers approach to pricing remains unacceptably opaque.

Notwithstanding the progress that has been made towards price transparency (the numbers) and pricing transparency (the methodology), the profession continues to let itself down in relation to the ongoing pricing conversation. Pricing should never leave the table as a topic but unfortunatel,y the price conversation is often seen as a box to be checked at the outset and not something that needs to be revisited on a regular basis.

So how is it that we have come to make an art form out of procrastination when we know that this abdication of responsibility is the genesis of the sort of dynamics that we are all familiar with…

(a) shock and awe when you get a time print out at the end of the job (“good grief, that got away from us!”),

(b) difficult conversations with clients (“I’m sorry to be the bearer of bad tidings but…”),

(c) difficult conversations internally (“look I know we said we were going to clamp down on this sort of thing but this really is a good client of mine and we need to take a view on the write-off…”)

(d) “Hey, I’ve got a solution. We have £20,000 on the clock over what we told the client so let’s split the difference and knock off £10,000?”

And there you have it. The largest single reason why the default setting for most firms is broad satisfaction with a realisation rate of 85% to 90%.

Let’s look at the implications of this a little further. Obviously, the net write-off across a firm is never wholly attributable to the dynamics referred to above. But let’s say half of it (7.5%) is. The legal market in the UK is worth approximately £26 billion. That means that perhaps £2 billion is squandered in the fashion described.

A $20B black hole – or more!

Apply this same reasoning to the US market which is worth approximately US$260 billion and you’re talking something in the order of US$20 billion going down the gurgler for no good reason.

I’m sure there will be finance directors who take umbrage with some of my figures and assumptions. I certainly don’t pretend to have brought scientific rigour to the exercise but taking a broad brush view, I imagine we can all agree that we are talking a shed load of money.

Why have a difficult conversation now when we can have it later? This approach is delusional. The conversation isn’t going to go away. There is going to be a conversation and it beggars belief that anyone would seriously think that the conversation is going to go markedly better at the end than a timely intervention when, at an intellectual level anyway, most partners know a discussion should occur.

Nonetheless, our inner voice rationalises and justifies a deferral of the conversation with sage insights such as, “things are developing so quickly, there is just no time to deal with it now”, or how about “the client won’t appreciate being forced to have another pricing conversation mid deal. In fact, they’ll think I’m just taking advantage of them.”

And so, comes the punchline – “we’ll have a chat at the end!”. The problem is that even leaving aside for a moment the regulatory imperative to keep the client informed, the public relations and relationship upside of doing so, the fact that we know clients always appreciate an early heads-up on bad news and conversely hate unpleasant surprises, keeping our powder dry until the end isn’t smart from a negotiation perspective.

In short, renegotiating the price after the event with a client who has already had from you everything that they need, is never going to find you in a particularly robust position.

All of which screams the question, Why? We can wrap it up in all manner of packaging and justification but I am sorry to have to report that it is by and large nothing more than unmitigated cowardice.

If we are brutally honest with ourselves and we ask at a time and in a place that we would never share with our colleagues or anyone else why we are not having the conversation now, when we know we need to, the answer is simple and primal. Fear.

Fear of upsetting the client, fear of losing the client, fear that the client will say uncomplimentary things about us, fear that the client will no longer like and respect us, fear of how things will look internally, fear borne of our own lack of confidence and self-belief, fear borne of our belated recognition that we have done a sloppy job of scoping, fear borne of our suspicion that we may just not handle the conversation particularly well.

And so, we look for the line of least resistance. Say nothing when it needs to be said, have the conversation as late as possible and produce whatever financial mea culpa is required to make the problem go away.

As The Donald would say in erudite and eloquent fashion, ‘bad, very bad’.

 Author

Richard BurcherBased out of London, Richard Burcher’s consultancy Validatum ® is described as the foremost architect of legal services pricing practice internationally.

Richard is regarded as the leading niche consultancy of its kind in the world with a sole focus on legal services pricing; which he regards as the most challenging and rapidly evolving aspect of the lawyer/client relationship.

Richard is a major contributor to the chapter on pricing in Remaking Law Firms: Why & How, available from the American Bar Association and Amazon.

This post was first published on the Validatum blog.

 

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Conduit Law is returning to its roots

The Dialogue is not a news service. But the announcement from Toronto today that Conduit Law is returning to its roots warrants inclusion in these pages because, with what I assume to be the buy-back from Deloitte, it heralds another chapter in the evolution of the NewLaw business model.

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Embrace the Rebels

Publication of Embrace the Rebels marks Heather Suttie joining The Dialogue as a contributor. I am most grateful to Heather – indeed to all those who accept my invitation to contribute.

Embrace the Rebels is subtitled Law firms risk market erosion by ignoring the audacious in their ranks heralding Heather’s exhortation for BigLaw to recognize and enable one of their greatest assets – young professionals – to blossom. 

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Classic: Four lessons in the art of motivating change

Four lessons in the art of motivating change: Lawyers, pigeons and the change journey is by Stephen Poor, now Chairman Emeritus of Seyfarth Shaw. If change management in BigLaw was topical in a few years ago when Stephen wrote this, it’s even more important and pressing now.

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