Just as I thought! Book review of Remaking Law Firms

I recently remarked to a colleague that just because I’m biased doesn’t mean I’m not right. Double negatives aside (or not), it’s been really interesting to watch the reaction to the remarkable Remaking Law Firms: Why and How by George Beaton and Imme Kaschner.

I don’t come by 0my confidence or my bias capriciously. In fact, I’ve given more study, thought and attention to the subject of the ongoing changes in the legal services industry than just about anything else. Sad really. I used to focus on meaningful things like 1970’s professional indoor lacrosse stats and rare B-side Springsteen bootlegs from his Steel Mill days.

For the last few years, I’ve found myself at conferences, networking and traveling long distances, just to get a sense of what real changes are happening, failing, flourishing and spinning in hyperbolic free fall. Regrettably, there is a lot of foolish marketing poppycock in legal services which often makes it difficult to determine reality from distortion or more pragmatically, where to place your bets of time, attention and most importantly, effort. Where should you work? Who should you hire? What should you buy? What should you make?

At first, it was mostly self-serving research as I tried to get a sense of where things are going so I could carve out my next few decades to match my professional interests (notice I didn’t say present skills) and do something that lawyers don’t often have the chance to do—take control of my professional activities. I also wanted to know where to place my chips because I’m prepared to suffer through and learn skills I don’t presently have in pursuit of a non-traditional path. Adult learners, and perhaps lawyers especially, give up too easily in acquiring new skills, but for me, nothing could be as horribly uncomfortable and painful as law school. This go-round, I intend to acquire useful skills in exchange for my densely discomforting and persistent state of confusion, frustration and self-flagellation. In the language of Seth Godin, I’m willing to push through the dip. I stretch every day, although more figuratively than literally much to the chagrin of the physiotherapist charged with reinvigorating my midlife back issues emanating from 15 years of soft-handed sedentary “knowledge work” in legal services.

As I remarked with microphone in hand at an event a few years ago, I’ve become addicted to this stuff – although to my surprise at the time – I used another word. That’s the addiction talking.

I’ve got a lot of experience with this stuff, so in typical lawyer fashion, you might find me saying, trust me, I know what I’m talking about. Unlike those seeking legal advice, however, if you don’t believe me, I encourage you to find out for yourself by reading this entirely informative and compelling book.

Empirical Review of the Landscape

What sets George and Imme apart in their efforts is the empirical approach taken to research and leverage other people’s voices. It’s a technique which George perfected in his prior effort NewLaw NewRules: Conversation About the Future of the Legal Services Industry which was essentially a thread book of curated comments emanating from his blog post The Rise and Rise of the NewLaw Business Model. Both works are great examples of crowd-sourcing insight and experience. This go-round, the Remaking Law Firms fodder was provided by in-depth interviews with 40 contributors from across the globe.

The very production method for both works is rooted in what ultimately becomes the themes of the writing itself and my own world view. To wit, collaboration and mix and match of pluggable parts in an otherwise unruly ecosystem is what ultimately drives tangible and highly useful outcomes. That’s where legal is going and the beat to which law firms need to be hip. Yes, I am acutely aware that law firms and hip don’t belong in the same sentence. The point is that in order to remake themselves, law firms need to be one of the dancers in the production, and not the soloists.

The book is thorough, relevant, persuasive and less about fanciful prognostication than other similar treatments of the subject matter. I’m still waiting on my jet pack having consumed prior “future of legal industry” posts, books, conferences, art films and haikus.

The future is here, it’s just not evenly distributed and George and Imme have done a great service in pulling together information about current developments across the globe and from different parts of the legal services sector. They show the distribution as a whole.

Having met and enjoyed George’s company in both New York and Toronto—I didn’t expect to be surprised or disagree with much of what he might have to say. Both he and Imme operate out of Australia which affords a sense of observational and analytical detachment relative to the larger markets of the U.S., Asia and EMEA for a wide-angled perspective. Given that I’m based in Toronto, that’s also entirely relatable, although I do find an amusing level of provincialism in my home market.

The Path of the Righteous (thanks Jules)

George and Imme dedicate the work “To the lawyers everywhere who strive to serve their clients ever better.”  Certainly, many lawyers would suggest that this is indeed at their core professional ethos and I’ve become nauseated from being subject to years of righteous sounding regulators, ethicists, pundits and lawyers who think they hold a unique monopoly on dedication to clients. So what’s with this ridiculous notion of charging by the hour rather than value? Similarly, this aversion to adopt technology, process, and models stripping away low value activities to more appropriate resources? Okay, so that’s just plain everyday lawyer bashing. The more salient point which is made by the authors is the striking insight that the deep-rooted ethos of lawyers towards professional perfectionism has the effect of compromising the value to end user commercial clients. If you’ve read this far, you must realize that the book is centered on those providers serving corporate and commercial clients rather than consumers and the general public at large. It’s the commercial market where I typically pay attention for a number of reasons, not the least of which, I can’t begin to imagine solving the broader societal issues of access to justice. But finding things that people or organizations will pay for? That’s always a doable do given a long enough timeline.

The occasional antagonistic debate about the necessity of finding new ways of serving commercial needs is giving way to nuanced discussions about the evolution of a legal services ecosystem. – Remaking Law Firms

This is very much in alignment with my world view as well as where I direct my professional life and the DNA of Elevate which serves both in-house and law firm markets tying together technology providers and domain expertise.

Long ago, I shed the notion of legal as a hallowed profession as early in my career, I managed dozens of claims at the same time and was essentially a highly functioning process manager—steering counter-parties in a certain direction until ultimately there was nowhere else to go but to negotiate a settlement or present a case. My clients usually negotiated from a position of strength on the facts as is often the case when representing lending institutions. Serving commercial clients, it was also my job to let them know to stop pursuing weak claims or pick a comfortable amount to spend to defer ultimately losing based on an early assessment of the case. The only way any of my matters would go to trial is if the other side was foolish, well resourced and sometimes willing to spend more than the quantum at issue. I’m not sure that ever made me a great lawyer in the sense of being able to argue from a position of weakness, but it certainly made me a very solid business person who could maximize return and minimize risk on a portfolio of cases. Perhaps the biggest regret of my career is that I haven’t worked on contingency in those situations.

There is a well-crafted taxonomy of legal service providers and I recall George canvassing input from those of us among his network. This makes for a perfect snapshot and companion to an industry landscape provided by Professor William Henderson in his 2013 periodical piece From Big Law to Lean Law.

Remaking Law Firms also covers the de rigueur  topics of artificial intelligence, expert systems and machine learning in legal service delivery, and of course this is to be expected. I am also quite interested in the aspects of digitization to the industry, which I believe has not even really started in a material way. I make this observation from my day to day work of having to wrestle Microsoft Word documents away from lawyers — even for forms and checklists as part of a wider process which could be managed more effectively and give rise to greater efficiency and analytics through electronic means. Additionally, firms struggle more than one might imagine with solutions using electronic signatures, which are actually only the scratching of the surface when it comes to digital document processing. I’ve witnessed GC’s and IT departments hamstringing these practical efforts which emboldens pirates among the practice groups, usually those serving startups and emerging companies, to bypass the firm’s policies of reluctance.

Innovation is Not Slashing Jobs and Sharing Desks

There are also references to the loss of jobs held by long-term employees, particularly staff positions in the restructuring of law firms. This is certainly expected, and lawyers, including equity partners are not immune. However, what bothers me in this shakeup is the suggestion that firms, or indeed any business, is somehow exhibiting behaviour of sage innovation and change management worthy of full page business press photo spreads lauding the executives for this enlightened act.

Job losses are going to continue to happen, but they are a reflection of a legacy of poor management rather than a sudden epiphany and execution of good decisions.  

The Australian and U.K. experiences also offer a number of data points pertaining to deregulation of lawyer owned business and Alternative Business Structures (ABS). Not surprisingly, the authors offer many compelling examples of value creation in the market where it did not previously exist. Among the more intriguing is British Telecom’s perfection of their own internal processing of motor claims. They now provide legal services to corporate customers, not only in the motor claims market, but prospectively also for public liability litigation and employment law services. Thinking of my Xerox experiences, I would have gladly processed lease recovery claims for multiple companies and it would have added to the profit centred legal activities I was pleased to already deliver to my employer. But alas, my Ontario colleagues and the Law Society of Upper Canada have not seen the light. I’ve given up talking about the subject of ABS, but not from a state of learned helplessness. It’s just that I believe wider market forces will prevail in any event. Is your Uber experience comparable to regular taxi services?

With past practice as a business professor, it is not surprising that George applies frameworks including Michael Porter and the Five Forces Analysis. While there isn’t a business grad alive that would be unable to discuss Porter, believe it or not, being a concept related to business, it’s not taught in law school. As pointed out in the book, Stephen Mason did a great job applying the framework to law in 1997. It’s very interesting to consider the current state of the legal industry with this lens as the threat of new entrants, substitutes, competing peers and other pressures are more prevalent among the incumbents than any other time in history. And I dig it! The shroud of specialness afforded to lawyers has long been misplaced.

I think of this in terms of the baby boomer programmer who thinks they should be granted deference by junior colleagues based on years of industry experience. Often, the reality is that the boomers are out of date on any meaningful code, language, platform or technology of interest that is needed to solve current problems. Past experience doesn’t give entitlement when the knowledge is not a fit for the context. In the legal services industry, law firms, lawyers and their business models have left many problems unaddressed. I’m not just talking about the 85% of the population not getting their legal needs met by lawyers. Even in the commercial context which is the focus of RML, it is not just a passing observation from my own experience, it’s something I hear a lot from those that control huge budgets to address corporate legal needs. They are very unhappy with their supplier law firms and ready to embrace alternatives.

Not Enough is Not Enough

There is also focus on the seminal work of professional services theorist David Maister and the subject of Profits Per Partner which has strongly held sway as a measure of success of law firm performance. I am all for profits, but the idea that these profits belong to one “class” of participant has always struck me as decidedly odd. In any event, as outlined, the levers of those measures have been squeezed harder as a result of the 2008 global financial crisis. In the Canadian context, while it is arguable that there was a considerable amount of sheltering from that storm in comparison to other markets, the effects are still being felt as large firms are now turning their mind to significant layoffs of both staff and lawyers even as recently as this year.

Interestingly, at the very moment I first met George in New York at the Reinvent Law Conference, Heenan Blaikie announced its collapse. In my view, the partners closed shop as they were looking at their current and future situation and realized that the very levers discussed by Maister and in RML were not going to generate enough sustainable profit. The levers of the lemon were squeezed and while the secretion was still profitable, it was not potable for the foreseeable future.

BigLaw Competition Includes Clients

The chapter on clients of the future also resonates with my personal experience. Susan Hackett posits best:

“Question: Who is the top competition for these traditional law firms? Answer: Their clients who are more more capable of doing it with contractors or specialized LPOs or consultants, as well as their own trained staff. This does not mean that they do not hire law firms anymore.”

While firms are in the mix, and never going away, reference to partnership no longer refers simply to the business model of lawyers.  Rather, the approach is one of an ecosystem where clients expect co-opetition and a marrying of different inputs among internal and external suppliers which are both large and small.

I suppose another big reason why I enjoyed RML is that extensive reference and deference is granted to the ascendancy of alternative providers and their enormous growth potential as every in-house department or law firm is examining their internal processes, particularly as relates to lower complexity work.

Among the cavalcade of contributors, Karl Chapman of Riverview openly ponders as I’ve heard him state before, what other industry has a supply chain that actually drives clients to take work back, and do it themselves because it’s cheaper faster and more effective? The classic make or buy decision is hitting legal, not just when it comes to utilizing technology, but also whether to hire law firms at all.

That was also my experience at Xerox where the overall spend decreased, but the monetary outcomes increased from the dollars invested by simply doing more of the work in-house — or in partnership with the servicing law firm. Where there were parts of the file that fit my wheelhouse — I did the work and managed the rest. At the time, I did not know this was a revolutionary act!

I am looking forward to Karl and Professor Henderson joining an event in Toronto on September 20th that is being presented by LegalX and Thomson Reuters. As an ABS centred in the U.K. that is now taking on work within the U.S. market — Karl has a particularly intriguing point of view on legal businesses driven by professionals that are not lawyers. He is not a lawyer and make no apologies.

The work that I personally do today at Elevate and through LegalX involves bringing together inputs which in some cases involves smaller players taking the lead, even where large enterprise is in the mix. As Julie Meyer sets out over at Entrepreneurship Country, particularly where digitization is part of the equation, the David’s and Goliath’s don’t need to compete.

Goliath enterprises should use their distribution and customer base as a highway for the new “digital David’s” who are building the cars of the new era. “Ecosystem Economics™” is the new industrial paradigm.  – Julie Meyer

It’s no longer a sole sourced world and to me, that is a good thing. Well coordinated collaboration among a few players, regardless of organizational size, can result in really interesting outcomes with greater value creation, efficiency and effectiveness. Captive service centres might be housed within a corporation, law firm or third party legal services operators with their own delivery centres (Elevate). There is an ecosystem of large and small vendors operating collaboratively throughout.

Intangible Brands versus Hard Metrics

When it comes to truly global brands, I find myself doing my best to absorb the importance of brand names in professional services. However, I’ve always struggled with this concept and as set out in the book, a global footprint does not necessarily make for a common experience. Given his background in advertising, George is uniquely qualified to pontificate on the subject. For my money however, I’d bet on global brands with distinguishable products in legal services like Legal Zoom in the consumer and small business space. At the higher end of the market, I could not tell you the difference between DLA Piper, Dentons, Norton Rose or Baker McKenzie anymore than I can decipher between PWC, Deloitte, KPMG or Ernst & Young. What I do know is that I enjoy them as clients but would struggle as their direct employee.

The rise of the Association of Corporate Counsel, and CLOC is giving rise to a new type of professional legal operations manager as distinct from just good lawyers. Drawn from interviews with, among others, Steven Walker, the ACG and Region Counsel for the South Pacific for Hewlett Packard, the discussion features the increasing use of dashboards, metrics and analytics treating a company’s legal resources as precious assets that need to be applied conscientiously and in proportion to the risk/reward of the work.

Again, the hardening of my bias in reading these types of statements is affected by my reflections in terms of what Elevate currently produces, including tools and services geared toward bill review, panel selection, and project management platforms simultaneously visible by the in-house department AND the service providing law firms.

George and Imme are quick to point out the gap in the market for corporates that service very small departments (in my case at Xerox Canada, there were 4 lawyers servicing a $1B revenue operation). In other instances, corporates might have no legal department whatsoever — and this is a gap which I’ve observed in Canada given its branch-plant economy. It’s little wonder that Cognition (now Caravel) has flourished in this market. It would be folly to assume that a corporation that does not have its own legal department is too small for consideration from legal firms. I often think of the Wattpad’s of the world with huge valuations fuelled by a tiny employee base.  Large law firms have practices devoted to emerging companies, but aren’t as ready to risk their own time and effort in supporting them in the early days of cash constraint. The right supporting players, particularly with expertise in how to leverage and protect unique intellectual property, can be hugely invaluable for startups, but to pay thousands of dollars for that advice is simply not in the cards.

Speaking of startups, as I’ve come to support those that are servicing the legal vertical itself, I’ve found it odd to witness the confusion of large firms that think it’s a good pipeline for deal flow — rather than looking at it as an opportunity for co-creation of products and services. It’s not the same thing as joining the Association of Heavy Equipment Leasing Companies and providing a few talks to garner business. As Professor Henderson features in this work as well as his prior writing, it is good sense for law firms to begin shopping for legal startups, taking small positions and using their products, particularly as many legal tech startups will gain traction with global law firms.

Warming the Cockles of My Heart

This goes to the heart of the work that Aron and I do with LegalX and our conduit/catalyst service between startups and enterprise. However, there is a notable exception. The core audience of legal tech startups is not necessarily law firms. On the contrary, we’ve seen many instances of products that would serve not just an in-house corporate legal department, but perhaps even a relatively experienced business user who needs some simple answers. Key questions that might be addressed include, which provisions of this contract are in my favour, against my interest, have been negotiated before in my body of prior contracts or appear to be market acceptable or anomalous? Relevant issues around perennial tax concerns and the classification of contractor versus employee can involve machine learning synthesis of case law, regulatory frameworks and annotated bodies of work on the subject. The bulk of legal work and questions from commercial clients are not so uniquely positioned as to be incapable of being addressed in sufficient manner without the treatise of a law firm memo to client drafted from scratch. My Xerox experience was usually to give the answer the business needed, but tuck away the long division for my legal colleagues should the question arise again.

The material set out in Remaking Law Firms is not just a snapshot, look back or crystal ball gaze into the future. There are some thoughtful, practical and prescriptive elements including a self-assessment checklist to gauge change readiness of a subject law firm. Handy!

There’s No Place Like Home

It’s rather exciting to read a work that will be read globally but featuring some of the key contacts with whom I interact daily.   Both Mark Taminga and Rick Kathuria of GowlingWLG provide extensive commentary on two developments that have impacted me directly in my professional career.

For a number of years, I worked for a very well run firm operating from lower cost premises north of downtown Toronto. The firm specialized in, among other things, high volume mortgage enforcement (prior to 2008!) and business loan collections. I practiced as an associate among the firm’s 25 lawyers. The work was steady and voluminous. At the time, I was immensely impressed with the operation of the firm which was very efficient, utilized quality technology (I had a Blackberry well before they were fashionable and subsequently not so much) with experienced and effective supporting staff. I was but a mere wage earner, but I knew that this was a well-managed business able to operate with lower rates than the downtown BigLaw firms. As much as I love growth, working for a steady state revenue business was also a pleasure. If I thought I could land such a portfolio practice — I would definitely consider it.

Who are those guys?

The surprise to me during my tenure was that the primary competition for our work was Gowlings, as it was then known, which was the largest firm in Canada by lawyer headcount. The type of work was not the ground breaking intellectual trophy-ware to which many BigLaw lawyers aspire. Gowlings was able to compete because of “the machine” that Mark helped build and orchestrate.  He describes this effort in RML as a “burger flipping” practice. It was the largest mortgage remedy practice in Canada and one to which most elite firms would turn up their nose. What I knew at the time, and is perhaps still the case, if you use good process and technology, the practice can be highly profitable. Mark was largely responsible for developing and cobbling together the technology including the data base and document assembly tools that helped drive the practice. Obviously Gowlings figured this out and managed to avoid “putting on airs” about the type of work. That this was 15 years ago is somewhat astonishing, but increasingly, these types of tools are starting to gain more importance in all manner of legal work.

With a shrinking pie of the top tier work that firms aspire to, if BigLaw doesn’t protect this other work, smaller or alternative players and in many instances, enterprises rather than law firms, will be able to satisfy demand. In some cases, in-house departments will be able to build these practices on their own — and the BT example is an interesting benchmark.

A second GowlingWLG aspect is directly tied to my current work. Rick Kathuria who now heads the Legal Project Management initiative of Gowlings Practical has developed the strategy and execution of the firm’s approach. The technology component is driven by Cael LPM, a product developed by Elevate, and co-created with Gowlings. On that front, I interact with Rick almost daily. Technology is but one piece and by no means sufficient and Pam Woldrow gets credit for the quote from her interview:

It is a mistake to bet the farm on technology.

For any market facing initiative, firm buy in and change agility of lawyers is often an elusive goal. Similarly, uptake on technology as part of the practicing lawyer’s workflow is tricky at the best of times. The approach taken by Rick, Mark and the team is well documented in RML and a key pillar I would recommend for any firm is to angle it from client demand. Secondly, just having a base level understanding among the lawyers is a big step and considerable victory.  In Rick’s words:

“Clients are really front and centre. Clients are asking for a project estimate. They are asking for a budget. They are asking for a fixed fee. Clients are asking our lawyers, “What have you got?” Our lawyers know enough to at least say ‘ We have something called Gowlings Practical. I do not know exactly how to do it myself, so I will call someone’.

As someone who has lead change both successfully (and alas, also not)—that approach is cogent. As the program matures, the lawyers can increasingly take up use of the tool themselves, and Mark and Rick, although both experts (Rick has written a text on the subject), have made sure the program is not replete with jargon or a mandatory obligation. Those among the lawyers that are eager can participate as fully as they please and the rest may follow when client demand hits a dull roar. The journey of Seyfarth’s success was also driven by client reaction triggering lawyers within the firm to ask for more of what they first ignored. That’s a winning formula—but it takes time.

I greatly appreciate the extensive treatment of pricing and fee arrangements which is a topic I brush up against, but never claim to have deep expertise — although much like the Gowlings Practical scenario — I know who to call! For those that have this interest, the book’s treatment provides an excellent synopsis of pricing considerations. Surprisingly, to lawyers, the data shows that technical expertise is not the most important consideration from the client perspective — rather — it’s ease of working with the law firm. My bias tells me that this is not an area where many firms thrive, particularly as related to their billing process.

The request for expertise beyond the legal advisory role of the lawyer is also a central theme of the book. Just as those in positions of pricing or LPM are often key players in client facing meetings, so too are support attorneys, process improvement specialists, technologists etc. who according to Bill Henderson may get as much as 80% of the air time in client pitches. From my own experience, those with carriage of practice innovation initiatives are also getting a seat at the table. With the rising importance of these emerging professionalized roles, will the law partners still rule the roost in terms of compensation? Hard to imagine equity partners giving profit sharing with other firm members.

Serving the Beginner’s Mind or the Biased Observer

EHIPASSIKO  – ‘SEE FOR YOURSELF’

Don’t let my hubris-laden assertion of bias (or direct experience) be your guide. See for yourself. If you are looking for a definitive map of the current legal services landscape, you are in luck. There is an absolute trove of material in this book to find your way and inform your own chosen path. – Namaste fellow travellers

Author

Just as I thought! Review of Remaking Law Firms is Jason’s second post on Dialogue.