I recently attended a conference that included both law firms and clients. One of the clients had a slide showing his company’s savings by bringing work in-house. It was the classic approach of comparing billing rates for law firm lawyers to hourly compensation rates of equivalent level in-house lawyers. Even though this lawyer was not a client of my firm, I still held my tongue on critiquing his math, since that would have been bad-form.
So I am doing it here.
That math is a poor representation of the situation. It is not very thoughtful and a bit lazy. But hey – I’m sure it looks good for the CFO. Here’s what it initially leaves out:
- Benefits (medical, dental, vision, life insurance, etc.), which add about 40% to the hourly comp number.
- Basic Overhead (offices, phones, computers, etc), which probably doubles the comp number
- CLE requirements costs
- And probably a few other costs I am forgetting
This approach also ignores a number of other costs that should be there, but aren’t. At a law firm, lawyers have a significant amount of support (f.k.a. overhead) that allows for more efficient and effective work by the lawyers. But in-house teams can’t or don’t provide this. This includes:
- Library and research services
- Knowledge Management
- Professional Development
- Legal Project Management
- Legal specific technologies
- Support from Finance
- Presentation support (e.g. trial support)
- E-Discovery support
- And on and on …
Think about all of the operational support a firm provides its lawyers that an in-house team can’t and you will realize that lawyers without this support will be far less efficient and effective. And think about all of the newer investments in innovation that firms are now making and will be making in the near-term. This all means the cheaper hourly rate comes at quite a cost.
Finally – a very important resource these in-house lawyers loose is the support, oversight and mentoring of seasoned partners. Clients prefer to hire associates away from firms at the 5-7 year mark precisely because they have been learning from these same partners. So they indirectly acknowledge this is very high-value stuff.
Basically clients hiring trained lawyers from large firms are buying a very nice car with a full tank of gas, but not giving much thought to who will be taking care of this car (that has no warranty) going forward. And then they brag about how owning is much cheaper than renting.
Admittedly, law firms also have a profit margin. But they receive this when they earn it.
My prediction is that we are reaching the peak of the trend of client bringing work in-house. This has historically been a cynical trend and with the predicted recession approaching, having large head-counts will lead to other problems for in-house departments.
On top of all of this is one of my other rants. This same client went on about how rates for senior associates were way too high, given their skill level. Having recently rebuilt a house, I find this a bad place to give your attention. Instead of focusing on the cost of inputs, you are far better off talking about scope, outcome and total cost. A focus on input costs may well drive you to compare hourly costs such as this client did, leading them to think they are getting more for their dollar when they may not be. Clients who want to truly get more for their money will be far better off partnering with the law firms to develop innovative ways to accomplish this.
- Alex Zhang – Law Library Director and Professor of Practice at Washington and Lee University School of Law
- Stacey Gordon Sterling -Law Library Director and Professor of law – Alexander Blewett III School of Law at the University of Montana
- Katie Ott – Reference Librarian – Robert Crown Law Library at Stanford University
- Sarah Slinger – Reference Librarian and Lecturer at Law – University of Miami Law Library
We have discussed the concept of the T-Shaped Lawyer on previous episodes, but we jump into a new concept this week called the Delta Model. Alyson Carrel from Northwestern Law School joins returning guest Cat Moon from Vanderbilt Law School’s Program on Law and Innovation to discuss this intriguing idea of helping lawyers understand the pyramid of skills surrounding understanding the law, business & operations, and personal effectiveness.
We suggest taking a look at this primer from Carrel, Moon, and other members of the Delta Model working group (Natalie Runyon, Shellie Reid, and Gabe Teninbaum) from Bill Henderson’s blog, Legal Evolution. This model of three principles, along with the ability to shift the center of importance for each skill set, helps explain, and guide the overall needs of the legal industry. Carrel and Moon give us an insider’s view of the model and explain why this concept will help with the holistic training of law students as well as practicing attorneys.
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In the article, Innovation, Disruption, and Impact: Should We All Jump Aboard the Legal Tech Hype Train? by Peter Melicharek and Franziska Lehner, the authors talk about the need to unwind the PR from the actual technology in the legal industry. The primary benefit of technology is to assist in achieving results by eliminating mundane tasks, and assisting in getting to better legal results, faster, and cheaper. Continue Reading The Geek in Review Ep. 59 – Alyson Carrel and Cat Moon on The Delta Model
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If you are a current American Association of Law Libraries (AALL) member, and are in a leadership role, or looking to be in a leadership role, then this program is for you. Expand your leadership skills while networking with your peers. The AALL Leadership Academy is designed to prepare you with core leadership skills and tools to help you excel at your organization.
Leadership Academy – Apply Today
March 27-28, 2020
Oak Brook, IL
- Registration Fee: $699
- Open to current AALL members only
- Deadline: November 11, 2019
Become an effective leader by attending the 2020 AALL Leadership Academy. Discover how to expand your personal leadership style while networking with your peers. The AALL Leadership Academy is an intensive learning experience designed to prepare you with core leadership skills, strategies to handle leadership challenges and tools to grow your career as an effective leader. The next leadership academy will be held in 2022. Don’t miss out! The deadline to apply is November 11.
Wouldn’t it be cool if a law school and a business school could collaborate on issues of legal analytics, entrepreneurial opportunities in the law, and collaboration between the university and the local business and law firm industries? We talk with a couple of professors at Georgia Statue University (GSU) who are turning this ‘cool idea’ and making it a reality. Anne Tucker, Professor of Law, Legal Analytics & Innovation Initiative, and Ben Chapman, Executive Director, Legal Analytics and Innovation Initiative join us to discuss the details behind The Institute for Insight at GSU. The Institute brings together professors from different backgrounds of Engineering, Computer Science, and Statistics and with this type of cross-pollination with business and law, the professors are looking at applied analytics
This mashup of law, business, data science, risk management, statistics and more isn’t a purely academic endeavor for the Institute. Following in the tradition of GSU being an urban school, the Institute works with well known players in the Atlanta business and legal community to put the ideas into real-world situations. This gives the Institute’s professors and students the opportunity to work side-by-side with the business and legal leaders to help identify, study, analyze, and potentially solve issues facing the business and legal industry. This is one of the many values which Tucker and Chapman see for not just preparing students for the practice of law, but also for the business of law.
The past week I had the pleasure of presenting at the 13th Annual Ark Conference Competitive Intelligence in the Modern Law Firm. I am totally blown away that this one day conference is in its 13th year and still going strong. The quality of the presentations was outstanding. There were new and different speakers and sponsors (thanks to Legal Monitor and LAC Group) and all around it was a fantastic day. I am buoyed by the energy in the room, the passion for the profession and the commitment to the industry despite all of its many challenges.
Some of the key messages coming out of the conference (with my own commentary) were:
- Embrace data, data is everywhere and has transformative powers for competitive intelligence as well as for firms in general.
- Due Diligence and CI are similar, you can increase your awareness of both in the firm if you measure twice and cut once. Do the work once and share broadly across the firm about clients, and prospects for a variety of reasons, proactively and reactively.
- Inter-operability in this new data savvy world is critical. Get your systems talking to one another, find a Platform. Whether using AI, or data visualization getting Intel into the hands of decision makers is crucial to success. Capture attention, go on a charm offensive (HT to @CISteph for that great turn of phrase).
For my part, I cannot stress how much I truly believe now is the time for CI to shine in firms and push long standing conservative cultures forward. I’ve been doing this for close to 20 years and I have never felt more like CI in firms has finally matured in process, structure and delivery. CI as mix of art and science, data and HUMINT, and CI has the opportunity to sit at the centre of everything firms are doing in support of the practice and business of law as well as the culture shifts that are happening. CI can help firms plan and respond to all three of the major pressures in firms, from bottom up pressure of new associates with different priorities that the traditional law firm model, the top down client pricing pressures and technology assaulting firms from the sides, CI can ease the pressure by anticipating for the future, avoid surprises and providing a strategic way forward. As firms strive to be more balanced, more focused on wellness and diversity, CI should the centralized function to collaborate on data, gather HUMINT and implement technology that makes organizations coordinated, efficient, balanced, motivated and competitive. And course, CI can bring the human element to bear as Data Doesn’t Make Decisions. CI can and should be part of the cultural changes in firms that is paving the way for the firm and the industry of the future.