Innovation is hard.  Despite how easily the word gets tossed around, like a “bong at a frat party” as a friend likes to say, but to truly innovate, to truly change a process, a culture, a product is one of the most difficult things to do. 

Many legal industry pundits call for law firm innovation, and us non-lawyers have been called out as the gatekeepers of innovation because we are not moving mountains, challenging the status quo faster or with enough chutzpah.  There may be some truth to those claims, we do get frustrated, our ideas can be difficult to implement in the highly matrixed world of law firms and we can get stymied by politics.  Often we give up and retreat into the comfortable,  “we’ve tried that before” type excuses.  But we have to keep trying, use different approaches, find new language and keep repeating the cost benefit of not changing.  If we don’t innovate or transform what and how we do things, we may see more of our roles outsourced or vanish entirely as has been the trend. Today, I pulled out a report I created back in 2008 as an example of what firms could and should be doing for CI and practice strategy.  At the time, the report was shot down for a variety of reasons but as I resurrected it from my “precedents” folder today, and blew off the dust, I still saw its brilliance.  It would have been easy to walk away and not keep trying to innovate in the space given that set back. I was crushed to be honest and wondered why I was working in the industry when what I was hired to do was not welcomed with open arms.    The report was and still is a perfect example of CI innovation in firms. At the time, no one was talking about insights or big data.  But the report pulled together internal insights with external data, it combined form with function. It’s a beautiful report and it lives in my file cabinet to this day.  A pretty picture of what could be. 

I didn’t walk away from the legal industry or my craft, I kept at it and eight years later I have a well respected and culturally ingrained version of that would-be quarterly report going out daily in my firm.  The insights may not be as bold but the delivery is faster and tailored to the individual user.  It’s a baby Pheonix rising from the ashes.  There is still work to be done to truly innovate in the legal space, much of that innovation and change is culturally and client dependant.  But that doesn’t mean that we should give up, walk away or ignore the hard.  Embrace the hard, chip away at it day in and day out.  Instead of focusing on what we can’t do in our firms, finding that report today inspired me to think about what I have accomplished and to change the narrative.  We have to focus on what we can and do change, and keep pushing through the hard to make things happen.  Celebrate the small wins and open the proverbial gates that’s we are accused of keeping closed by finding ways to get through to challenging professionals and business owners, whether on a CI project, a profitability and pricing analysis or a library resource that can increase a firm’s efficacy.  Innovation is about changing a culture, about upending what is into what can be and sticking with it.  Innovation is hard. 

As I drove home tonight thinking about this post, Fleetwood Mac’s Landslide came on the radio and I had to smile.  Time does make you bolder. And time sometimes it is exactly what you need to innovate too.  Its time to be bold. 

 
I was recently asked my opinion on associate salary increases (no, really. It’s not like I have any compunction about foisting my unsolicited opinions on the world). I told the person I would get back to them. That was a couple of weeks ago. And I still don’t have anything resembling a coherent position. I am of many minds:

Tribal affinity. I was a BigLaw associate. I am still drowning in law-school debt. It is hard for me to begrudge associates their first raise in a decade. Inflation-adjusted salaries for associates at top firms have increased about 25% since 1986 (while the cost of living in New York, where the elite firms who started the avalanche are located, increased substantially more). Profits per partner, meanwhile, are up 225% in inflation-adjusted terms over the same period. Making associate salaries the symbol of law-firm profligacy is like foreign aid serving as the rallying cry for fiscal conservatism.

Tribal affinity II. Except it really is a potent symbol. I was also an in-house counsel who occasionally encountered a junior associate of limited value (not their fault) and thought to myself, “This person makes more money than me.” I admit it, I’m petty. Going in-house was a conscious choice. But I’m not alone in my resentment:

The newspaper also spoke with an unnamed chief litigation officer for a Fortune 100 company who also questioned the need for the pay raise. The chief litigation officer said a lawyer in the company’s litigation department with 20 years of experience doesn’t make $180,000. “Why would we ever think a first-year associate is worth that?” the lawyer said.

Quite a way to remind clients of all they fund beyond the mature domain expertise they actually value. It was a move guaranteed to engender client backlash and further fuel some threatening trends in client/firm relations. But firms still fell all over themselves to keep up with Cravath.

Keeping up with Cravath. Cravath, Wachtell, et al. I have cognitive dissonance because I don’t really think of them as part of the general BigLaw market despite the fact that I recognize their role in driving that market (Cravath salary scale, Cravath bonus scale…). I’ve never found fault with the idea that there are elite lawyers and elite firms who are sought after to handle price-insensitive work. Such work exists. Clients pay a premium for it. Cravath, Wachtell, and a few others are undeniably in that class and are in many ways immune from most of the forces I drone on about.

But work is finite, especially price-insensitive work. And clients are getting more discerning about what they put in the price-insensitive bucket. It’s easy to understand why the AmLaw 5 firm thinks they need to keep up with Cravath. But it is hard to understand why the AmLaw 95 firm thinks the same

Or is it. The game is follow the leader. AmLaw 5 is competing with Cravath. AmLaw 10 is competing with AmLaw 5. AmLaw 20 is competing with AmLaw 10. And so it goes down the line. AmLaw 95 is not trying to keep pace with Cravath, they are keeping pace with AmLaw 85.


Keeping up with Cravath II. And while a few law firm partners may be almost as venal and petty as me, it probably isn’t pure ego.

There is client chatter about the New Normal. But many successful partners have not encountered it yet. They still operate in a world where law is a credence good. How much associates are paid is among the many status signifiers (impressive zip codes, lobby art, watermarked business cards) that communicate, “Don’t worry. We got you. No one ever got fired for hiring [prestigious firm].” Not paying associates the going rate might be seen as evidence of diminished stature.

It is easy to imagine associate salary increases coming up as a negative the next time a firm seeks rate increases. “Rule No. 1 of associate raises is that partners do not pay for the raise.” Clients may push back on the basis that they are not going to foot the bill for delusions of grandeur.

But it is just as easy to imagine the mirror-image discussion if the firm declines to increase salaries. A firm that doesn’t raise compensation has less of a claim to ‘market’ rates since they clearly do not consider themselves in the same class as their peers.

Moreover, large, diverse firms are not monoliths. There is plenty of intrafirm variation. You can be AmLaw 150 in profits per partner but still have a viable claim to the best tax or real estate practice around. Which herd is the firm trying to run with?

Clients notice. So do the laterals who might hesitate about moving to a firm perceived as falling behind the pack.

More of the Same. Maybe this is the straw that breaks the camel’s back. More likely, it is just another straw because, well, inertia. Regardless, it is absolutely a sign that law firms expect the status quo to reign for the foreseeable future.

Yet even those of us partially inclined to yawn cannot ignore it. Above the Law’s traffic went through the roof [every associate who got a raise should be sending lavish holiday gifts to Cravath’s Executive Committee and the ATL editorial team]. And the story continues to occupy considerable mindshare.

The big story in law (measured by attention) is therefore something along the lines of: Rich lawyers give slightly more money to not-as-rich lawyers based on belief that other not-as-rich lawyers (inside counsel) will send them high-margin work regardless. 

That the story consumed so much oxygen manifests a lawyers-only view of the world. Obviously, the legal world is, by definition, lawyer centric (though some misguided souls argue it should be client centric). But delivering legal services is increasingly a team sport. The question of how domain expertise is leveraged through process and technology, not just additional expensive bodies, keeps growing in importance. Yet, unsurprisingly, I didn’t hear anyone at ILTAcon discussing commensurate raises for allied professionals. The caste system remains intact.

I have no idea what Perkins Coie pays their associates. But I’d wager that hiring Toby will have a more significant impact on the firm’s cost and performance (and revenue and profitability) in the near, medium, and long term than whatever decision they made on salaries. That the firm has now also lured Keith Maziarek away from DLA Piper is an absolute coup. Add a new, change-agent CIO in Rick Howell, and you can start to tell a story that should be far more important to clients than what associates make. But I doubt an item about a firm assembling a process/pricing/tech nerd dream team among its leadership would get one percent of the client attention or peer-firm mimicry of an elite New York firm marginally increasing salaries of people who already work there.

Likewise, I must have missed the media circus when Christopher Ende left Goodwin Procter to become the Law Firm Pricing, Solutions, and Panel Management Leader at GE. But knowing Chris (from conferences; no intimate knowledge of his role/plans implied) I suspect that his hiring will be more meaningful to the industry than whatever Goodwin pays its associates. If Chris does a quarter of what Vince Cordo has done since he left Reed Smith to join Shell, we’re in for a wild ride.

Which, of course, means I’ve come back to my evergreen themes: (i) clients demanding change and (ii) allied professionals playing a critical role in both making and satisfying those demands. Neither really has much to do with associate salaries.

If clients truly care, then the salary increase is a big deal. If clients don’t really care, then it isn’t. Truly caring would mean changing purchasing behavior.

Referencing associate salary raises to score rhetorical points in the midst of a rate discussion—where negotiating down the size of the annual rate increase has somehow been reframed as getting a ‘discount‘—is not altering behavior. You are still just having a discussion about rates. You might consider a different conversation.

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D. Casey Flaherty is a consultant who worked as both outside and inside counsel and serves on the advisory board of Nextlaw Labs. He is the primary author of Unless You Ask: A Guide for Law Departments to Get More from External Relationships, written and published in partnership with the ACC Legal Operations Section. Find more of his writing here. Connect with Casey on Twitter and LinkedIn. Or email casey@procertas.com.

Some bonus material for those not offended by the length of my posts.

More of the Same II. You get what you reward. We’re rewarding the same things in the same way as before. So behavior is unlikely to change much.

There is a genuine question of whether most firms are even increasing total compensation to their associates. Only after we get through bonus season will we know which firms are actually paying their associates more overall and which firms just moved bonus money into salaries.

Whether or not total pay is actually up, clients should absolutely take an interest in comp structure (and fee structures, governance, succession, process, training, tech, etc). The incentive that clients are rightly worried about is that the perceived increase in fixed costs will drive firms to (a) raise rates and (b) demand more hours from their associates. But these have been the dominant trends since forever. Annual rate increases have come to be regarded as natural law. And most law firm bonuses have been premised on hitting/exceeding hours for decades.

It’s not that incentives don’t matter. I’m just not sure they have shifted in any meaningful way.

Keeping Up With Cravath III: The herd is strangely selective when it comes to mimicking the elite firms. Keeping pace on salaries is relatively easy. But what about lockstep partner compensation? Ruthless brand discipline? Etc. When you bring those up, you get all kinds of “we’re different”, “they’re different”, “that won’t work here”, “you don’t understand”….which is often true enough. Still, the idea that a firm is keeping up with Cravath or Wachtell because they pay their associates the same salary seems to get the causation backwards (you are not elite because of what you pay your associates; you are able to pay associates because you are elite).

I appropriated this from the estimable Bruce MacEwan:

So what does this putative firm of the future look like?

For as long as I’ve been in and around this industry, I have heard ad nauseum infinitum that firm ABC or XYZ, whether or not they had any remotely plausible aspiration to these leagues, only wants to act on the “highest value,” “price-insensitive,” “bet the company,” “make or break,” “premium work.”

Your day has arrived. You may wish it hadn’t.

Because what is the model I’ve sketched above? It’s a model, as a partner at an AmLaw 10 told me last week, with “clients who are happy to pay $1,100/hour for me but not $400/hour for even a qualified midlevel associate.” What is that model?

Wachtell.

We’re all Wachtell now, if we can pull it off.

But I put this squarely in the category of “be careful what you wish for,” since “being Wachtell” is far more challenging than being a typical AmLaw 50-ish firm—no offense to those of you in that category.

Let’s back up: I have a confession. I used “We’re all Wachtell now” calculatedly. The phrase—the very mention of the firm’s name—can inspire envy in the ranks of those who subscribe to the notion that their firm needs to be in that top right quadrant of the 2 x 2 matrix, the “highest value,” “premium work,” etc., engagements. And of course, who can object to Wachtell staking out its own party-of-one place in the PEP stratosphere?

But that’s not all the Wachtell model is about. There are two other critical elements more challenging to embrace: (1) that 1:1 partner:associate leverage, and (2) their intense focus on highly specialized and narrow lines of business, without deviation.

Achieving (1) is going to require wrenching changes in almost every firm that chooses to go down that path, and it can risk introducing centrifugal forces that can tear the place apart before you can achieve the goal.

And as for (2), it requires saying No relentlessly, and many more times than you’ll ever get to say Yes.

Are you game?

And if not, what’s your plan?

A couple months back, I was giving a talk in a far off land (Canada) and the moderator introduced me as “the most internet famous person [he’d] ever met.” This was genteel nonsense, all the more endearing because it was absurd on its face.

He was doing obvious violence to the concept of fame. Googling “D-List Celebrity” returns an image of the prop comic Carrot Top, who has 63.4K followers on Twitter. As you can see from the panel to the right, my follower count establishes me 4% as Twitter famous as Carrot Top who himself is only 5% as Twitter famous as Emergency Kittens.

Further, the moderator’s puffery doesn’t hold up even if “fame” is being used in the local sense–i.e., widely known among the tiny subset of people who read about changes in the legal market. As the panel to the right also indicates, I am one of the least followed Geeks. There were several people in that room who are Lambert-like in their audience reach. I was not even the most famous person the moderator encountered that morning.

Rather I think what he was commenting on my ubiquity. It may be dreck, but there is no denying that my production is prolific. If you are one of those people (he is) who actively engages on the topics I cover then I am downright Kardashian in terms of saturation. Repetition has a substantial impact on perception.

In a similar vein, after a few drinks, one of my fellow presenters complimented me on my ability to “stay on message.” That was his polite way of noting that every time he sees me, which is often, I am spouting a slight variation on the same themes. But that’s the thing, I am generally not directing my talks to the people with whom I share the stage, fellow bubble dwellers who see me too often. I’m talking to an audience where 99% of the people have never heard of me and are almost completely unfamiliar with my message.

These fine gentlemen read a huge percentage of what gets written on changes in the legal landscape so they encounter me all the time. They are not alone. There is a cadre of people who are similarly engaged. But how many? My anecdotal answer: not many. 

True Story 1. I used to write the legal tech column for the ACC Docket. For two years, a magazine sent to more than 35,000 inside counsel had my ugly mug opposite the coveted back inside cover. But when I would attend the ACC Annual Meeting–filled exclusively with people who get the Docket–my name/face recognition was de minimus among the people I did not already know (from the internet and other conferences). Mind you, I only got that writing gig after a fair amount of publicity elsewhere. Still, the people I met for the first time had no idea who I was, let alone anything about the ideas I espoused on the back page of the magazine they received every month.

That they did not know me was not all that surprising. Even today, I’m a niche player. But in trying to explain my interests to them, I would invariably make reference to important ACC initiatives like the Value Challenge or prominent ACC figures like Susan Hackett, Jeff Carr, and Ken Grady. Blank stares all the way around. So I would move onto ‘common’ concepts–AFAs, LPM, KM–and still elicit no spark of recognition or interest. Eventually, the conversation would turn to anodyne topics like the weather or the venue before we politely parted ways.

It was evident that attending the ACC Annual was the sum total of their engagement. If a topic was not covered in a panel they attended, they were not going to hear about it. And, of course, these were the self-selected individuals willing to make the extra effort to attend the ACC Annual (a great conference). The majority of their peers got their CLE’s online or for free from local law firms. I was interacting with the most active subset of in-house counsel. And most of them had no frame of reference for topics I consider fundamental to legal service delivery.

True Story 2. Last week, I was talking to a friend who was preparing an internal presentation on his firm’s successful use of alternative fees [slow clap]. He mentioned the presentation to a partner whose response was, “What’s an AFA?” That a partner at any law firm is not familiar with the term is surprising. The AFA conversation is older than I am. Such ignorance from a partner at a firm that was already broadly and successfully using AFAs is even more astounding. Except it isn’t. It is pretty easy to imagine a successful partner navigating a lucrative career without being confronted with the alternative fee concept frequently enough to internalize the abbreviation.

Most Lawyers Don’t Read, Most Clients Don’t (Seem To) Care

Imagine a conversation between an in-house counsel from Story 1 and the law firm partner in Story 2. The exchange might very well contain substantive brilliance that furthers a vital business interest. Neither story suggest that their subjects are anything other than true domain experts who render valuable client service.

But once the topic moves beyond discrete legal issues to the business aspects of the relationship, they probably struggle. Discounts would be about the long and the short of it. Regular writedowns of invoices. Annual rate-increase theater. Discounts serving as the fallback whenever the conversation veered into nebulous topics like efficiency, staffing, responsiveness, etc.

It’s not that they would fail to recognize that there were problems. It’s that they would not really know where to start with remedial action. So they would apply the discount bandaid and try to get back to their comfort zone, substantive legal issues. That is until the in-house counsel became frustrated enough to shop elsewhere, leaving the outside counsel to wonder why the phone stopped ringing.

Most lawyers don’t pay a penalty for their acute focus. When they do, it is usually not obvious, especially to them. They can still make valuable contributions to client success and be well regarded in their profession. Lack of broader interest in the process, technology, and business of law (T-shaped) rarely makes them bad lawyers. It just limits their effectiveness when more lawyering is not the optimal solution to a particular problem.

I don’t blame anyone for not reading me. Indeed, I don’t blame anyone for not reading the people I read (who are much better than me). Lawyers spend all day reading. It is natural that the little time they have off the clock is spent parenting, socializing, exercising, drinking, sleeping, or consuming popular culture. Despite some evidence to the contrary, lawyers are human.

Nor do I expect the reading habits of lawyers to change much. I expect an incremental increase in general awareness of the New Normal and an attendant increase in comfort with process and technology as necessary appurtenances to expertise in the delivery of legal services. Beyond some baseline improvements, I don’t really expect most lawyers to add much process/tech acumen on top of their domain expertise. Rather I see the continued increase and integration of legal operations, legal engineers, allied professionals, process/tech nerds, etc. The integration point is key. It’s not like these people don’t already exist. But the caste system is resilient.

I’m not exactly the first person to point to the superior returns from the division of labor supported by proper management (i.e., making people capable of joint performance). If only we had a group of people whose job required them to keep abreast of changes in the legal market and who were then empowered to modify behavior at law firms.

You’d think that “managing partner” fits that job description. On recognizing shifts in the market, you’d be right. These fine people are acutely aware of what is going on. But managing partners rarely have the unilateral authority to do that much about it because their partners are so focused on autonomy that many of them would choose it over money:

So who do the partners listen to? Clients.

A return to that topic in the next post.

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D. Casey Flaherty is a consultant who worked as both outside and inside counsel and serves on the advisory board of Nextlaw Labs. He is the primary author of Unless You Ask: A Guide for Law Departments to Get More from External Relationships, written and published in partnership with the ACC Legal Operations Section. Find more of his writing here. Connect with Casey on Twitter and LinkedIn. Or email casey@procertas.com.

ADDENDUM: At ILTAcon (amazing conference), my friends mocked me for writing so frequently and so long. Deservedly so. I can’t let go of ideas until I get them on paper. This is my scratchpad, which some of you seem to enjoy.

This was supposed to be the final installment in my series on why law firms are not doing more to change the way they deliver legal services.

In Part 1, I made the case that managing partners were well aware of the shifts in the legal landscape but were becoming more pessimistic about their firms’ ability to adapt. In Part 2, I suggested it was rational for powerful partners to resist change efforts because their success validates their approach. In Part 3, I explained the clients tend not to ask for change (voice) because they seek alternatives instead (exit). In Part 4, I cautioned that client’s signalling (exit) was too incremental to materially affect near-term behavior and therefore expressing their dissatisfaction (voice) was imperative if they want more/faster change than they are getting. Here I tried to dig a little deeper into why partners might be unaware of what they might do differently.

Because it is so important (and repetition matters), I want to conclude with some more thoughts on the role clients play. Hence one more post than originally planned.

Six posts out of a single survey question serve as Exhibit A that I write way too much.

 

image [cc] Angelskiss31

Let me start out this post by saying that I like David Perla, President of Bloomberg Law and Bloomberg BNA’s Legal division, and consider him to be an ally for the law librarian and legal information/knowledge profession. However, I have to say that I am a little disappointed at his Above the Law article yesterday called “A Challenge for the Gatekeepers.” His article starts out with a warning to the legal industry saying that “change is coming – with or without you,” but then he spends the rest of the article singling out Law Librarians and Knowledge professionals as the gatekeepers. Although David says this isn’t about Bloomberg Law’s new roll out of a Tax Product, quite frankly, it reads like it is. I’m really disappointed that he took to Above the Law to vent.

Transitions in how a legal products perform for practice areas is something law librarians deal with practically on a daily basis. One of our primary responsibilities for our firms are to evaluate these products and present an initial evaluation report to the Practice Group Leaders or power players within the practice area. Law Librarians have a diverse legal expertise, and some are legal area experts. I know law librarians that are more savvy when it comes to understanding practice areas like Tax or IP than most Associates or Junior Partners in their firms. We understand our firms, we understand our Practice Groups, and we are tasked with the responsibility to know when it is right to push for new products, and when it isn’t time.

I can’t speak for everyone, but I push for change every day! EVERY SINGLE DAY!!

I constantly evaluate new products, establish training sessions to teach attorneys and others the value of the very expensive resources we purchase with our law firm partners’ money. I work to de-duplicate resources so we are not wasting money. I also make recommendations on keeping similar products because I understand the way the attorneys work and know that sometimes it pays to have those resources, even if on the surface it seems irrational. I make sure that we have team members that go to PG meetings to observe, listen, and engage. It’s not gatekeeping. It’s called being a leader and making sure that we are implementing the overall strategies of our individual attorneys, our Practice Groups, our Offices, and our Firm as a whole.

I’m a little confused when David wrote:

I attended a session at AALL [American Association of Law Libraries] where librarians were brainstorming how to be more relevant or get lawyers to pay more attention to them. But when the moment comes to actually introduce change at law firms, they flinch out of fear. Afraid that the attorneys they work for will find change uncomfortable, they balk—just as Monster’s executives balked at upsetting the site’s customers.

Not buying a new legal information product is not the same as “flinch[ing] out of fear.” I find that statement to be a bit misleading, and way overly broad in the assumption that law librarians can’t pull the trigger on change.

I appreciate Bloomberg BNA being a disrupter in the legal information field. But, I will say that when the disruption initially affects the Tax and the Labor & Employment groups, it makes for a very difficult sale to those groups. Not that they are change adverse, but that they are either well served by their current products and have a comfort level with them, or that they are a group with very narrow profit margins that have to have concrete evidence that new, much more expensive, products will truly make their work more efficient and not decrease that narrow margin.

It’s not about throwing up barriers for change. It’s about understanding our environments and applying our expertise, experience, knowledge, and wisdom to every single change we see, every single day. I’m not a gatekeeper that flinches at change, I’m an experienced leader for change that make sense for my organization.

When buyers are dissatisfied, they shop elsewhere. Decline in demand signals the seller to change behavior. It’s textbook. And yet it does not seem to be working in the legal market. Despite a decade of buyer dissatisfaction, behavior has remained mostly the same. Managing partners recognize the many signals of client discontent but still claim that clients aren’t asking for change.

Last post, I explained why clients rely on exit rather than voice to express frustration. Here, I will try to illustrate why voice remains critical. In short, there is too much friction in the market. The current pace of exit is insufficient to drive major change. Nor does exit necessarily ensure structural reform, as opposed to reallocation of the same damn problems.

Clients are mad but not that mad

 Clients’ bark is much worse than their bite. The overall trend isn’t so much a decline in demand for law firm services as a flattening. Rather than a net reduction in law-firm business, the insourcing and managed-services pushes are still experienced as a slowing of the explosive growth that marked the law firm market for decades.

This not-quite-decline is why managing partners point to insufficient economic pain as a barrier to change.

While the slowdown is enough to sustain a cottage industry in conferences and thinkpieces (see e.g., me) about the imminent implosion of the traditional law firm model, it is not enough to fundamentally threaten the model. What is true generally is especially true for the partners with the most power within law firms–i.e., those with the biggest books, best relationships, and shortest time horizons. They are doing just fine and that seems likely to continue.

Why clients don’t use exit more

Exit is risky and expensive. Incumbents mostly do quality work, and switching costs are high. We tend to form long-term supplier relationships. We should act accordingly.

Even if prices are a problem and service delivery is frustrating, good lawyers remain extremely valuable. If a client already has good lawyers, they are loath to move their business elsewhere. We have few reliable proxies for, let alone measures of, lawyer quality–which currently resides somewhere between a credence good and “I know it when I see it.” There is risk inherent in transitioning from known to unknown commodities. As Firoz Dattu of AdvanceLaw has observed, we have an information problem.

Moreover, the transition itself is resource intensive because of search and ramp-up costs. An incumbent that already knows the company, personalities, procedures, etc. offers genuine advantages. Indeed, the more rigor a client adds to protocols, processes, billing guidelines, etc., the more painful it is to find a new firm and bring them up to speed.

The transition to insourced or managed-service alternatives can be even more daunting, including the part where inside counsel attempt to repurpose budget that the organization is acclimated to directing towards law firms (law firms aren’t the only ones biased toward the status quo).

That, on net, the most common preference is to remain with incumbent firms does not mean those firms couldn’t stand to improve (hence the dissatisfaction). Repeating some of my standard schtick: with people and price in place, it is process that offers the most levers to drive continuous improvement. The only way to address process is to actually address process. That requires having a data-driven conversation. In short, voice.

If most incumbents are going to remain incumbents for a material length of time (i.e., no exit) then voice is the only real option to affect behavior.

Repeating the same thing, expecting different results

 I’ll never understand shopping primarily on the size of a discount (where the client chooses the firm with the higher effective rate because the firm came down by larger percentage from their rack rate). Then again, I also don’t understand moving from one firm to another solely because the latter has lower rates.

All else being equal, lower rates mean lower spend. But all else is rarely equal. Even assuming the same quality, the basic math problem is that the variable you aren’t controlling (hours) tends to have a much wider range than the variable you are controlling (rate). Where the difference in rates is usually linear (5% to 30%), the hours required can differ by orders of magnitude (20 hours of superfluous research to support the same 2 hour drafting exercise). The extra hours can swallow up the lower rate subtly and quickly.

This realization is usually accompanied by the resolution to do something about hours followed quickly by the awareness that proper scoping militates towards alternative fees. You’ll get no objection here on the shift to alternative, especially value, fees. But recognize that it is the move to value fees that is doing the heavy lifting on changing behavior, not the switching of firms. That said, I can get behind selecting a new firm because they excel at value fees (e.g., they employ Toby). Still, we’re now a long way from exit for the sole purpose of reducing hourly rates.

You are not going to change behavior by moving from one traditional firm to another simply because the latter has lower rates. You may not even save money.

Insourcing

Of course, you can move to the ultimate flat rate–a salary–and still not solve your problems. You are not just bringing a lawyer in-house. You are also insourcing the attendant challenges of scale. Resource allocation, document management, knowledge management, project management, data/analytics, technology, training, professional development….The demands and difficulties of scale will always grow faster than the in-house team.

Returning to the discount analysis, the problem remains much less about (i) the unit cost of lawyer hours than (ii) the number of units legal tasks demand. While insourcing in the present environment makes it easy to demonstrate a reduction in unit cost (rate), it is not automatic that the transition will do anything about unit volume (hours).

It is certainly possible for in-house teams to get a handle on scale (legal ops!). But they do so by addressing service-delivery issues–i.e., the same issues on which they were silent with their law firms when opting for exit over voice–and prevention (a separate but vital topic).

There is an argument to be made that coherence is easier to achieve when everyone answers to the same boss. They’ve handed out Nobels in economics (Coase, Williamson) for explaining why we have islands of dictatorship (organizations) dotting the sea of the market. That is, there is logic beyond unit-cost reduction that supports insourcing trend.

I agree with this logic to a point. I think it was absolutely essential for in-house departments to get bigger and more sophisticated relative to their external spend. Exit, let alone voice, requires extraordinary effort for a law department that is already completely underwater trying to triage too many matters. Any system predicated on extraordinary effort is doomed to underperformance.

But, as I said, only to a point. The unit-cost ROI is proving a little too compelling for many law departments. They are mostly just throwing less expensive bodies at the same problems. They are growing in ways that make perfect sense and save real money, for now. But they are trading short-term tractability for long-term flexibility.

Today’s cost-saving hires are tomorrow’s roadblocks. “We’ve been doing it this way for 10 years…we know what we’re doing…we just need more headcount” is something all new hires will be able to say eventually. Entrenched employees, especially autonomy-obsessed lawyers, are challenging to retrain, repurpose, or retire. (Recommended: here and here from the peerless Ken Grady).

Sustainable cost savings may prove illusory. No matter the extent of the short-term savings, the in-house department will eventually have to address the systemic service-delivery issues (i.e., voice). Insourcing just changes the audience. I would not be the first one to observe that, often times, in-house departments have an easier time affecting external behavior.

Managed-Service Providers

 The inevitability of addressing systemic issues remains true even if the bodies being thrown at the problem are really inexpensive on a relative basis. Managed-service providers, too, can suffer from the legal cost disease.

I’ve said many times, there is nothing wrong with labor arbitrage. If a law department can get the same product at a lower price, they should. In a world of tradeoffs, it is even worth considering slightly lower quality at radically reduced costs on non-critical work. But labor arbitrage only slows, rather than levels, the uptick in legal spend–i.e., it does not fundamentally bend the legal cost curve identified by the essential Bill Henderson:

It is justifiable for a law department to enter into a relationship with a managed-service provider expecting that the initial savings will come from labor arbitrage. But the long-term strategy has to involve systematization through process and technology. Systems do not arise spontaneously with managed-service providers, just as they are not naturally occurring at law firms or in-house. Law departments will still have to pay attention to and address (voice) the systems by which their managed-service providers are delivering legal services.

Just as there is logic to insourcing beyond labor costs, there is a compelling argument to be made that managed-service providers are in pole position to thrive in a more system-oriented legal market. First is the simple but genuine advantage of being relatively new and nimble. Building from scratch is often easier than retooling. Second is that the value proposition of managed-services providers is already expertly designed systems, rather than the individual expertise of particular partners. Not only is this more in line with the drive to systemization but it also suggests more stable long-term arrangements (no lateral mania with client work treated as chattel), especially since it complements law department insourcing of expertise. Underpinning both of these advantages are a capital structure and culture more amenable to infrastructure investment, process re-engineering, and technology deployment.

Back to Law Firms

I truly believe that in-house teams and managed-service providers will continue to grow as central pillars of legal service delivery while the frantic growth that law firms experienced for decades seems very much dead.

But let me conclude with some love for law firms. Inertia is unavoidable but not indomitable. Because they have been ascendant for so long, law firms have more intellectual capital than anyone. They have relationships, track records, experience, perspective, etc. They are filled with brilliant, experienced, talented, hard-working domain experts who are genuinely dedicated to quality and client satisfaction. Some of these domain experts are lawyers. Some of them are allied professionals who have spent more than a decade preparing for the transition to a more system-oriented legal market (see y’all at ILTACON next week). In theory, law firms even have more financial capital than anyone.

Law firms have the time, the talent, the funds, and the opportunity to make us doomsayers look silly. They just need a little push. But, clients, you do need to ask. A tad more on why in a subsequent post.

Exit isn’t enough. Whether work is being done in-house, by a law firm, or by a managed-service provider, the systems for delivering legal services will need to be addressed. Clients will have to use voice at some point. There is no time quite like the present.

Full Arc: Law Firm Resistance to Change and Law Department Responsibility

_______________________________________

D. Casey Flaherty is a consultant who worked as both outside and inside counsel and serves on the advisory board of Nextlaw Labs. He is the primary author of Unless You Ask: A Guide for Law Departments to Get More from External Relationships, written and published in partnership with the ACC Legal Operations Section. Find more of his writing here. Connect with Casey on Twitter and LinkedIn. Or email casey@procertas.com.
Actions are supposed to speak louder than words. Directionally, client action seems fairly unambiguous:

Managing partners are well aware of these broad trends. Yet they still claim that clients aren’t asking for change:

I tackled those pesky partners last post. Not only is the net impact less than dire—erosion, not extinction—the danger is also not evenly distributed. The pain isn’t that acute for most rainmakers who can point to decades of empirical evidence that suggests they will be fine. Given their stature, relationships, and time horizons, most are probably right.

In addition to robust data, the rainmakers can probably offer a fair amount of anecdotal evidence, or the absence thereof, about clients’ supposed interest in change. The top partners probably don’t hear much about change from clients. And if they do, it is probably while trying to quickly get past the annual unpleasantness of rack-rate kabuki—where the two sides keep using the word “discount” while actually dickering over how much to raise rates.

This does not mean that clients are content or passive. It means they are bad at articulating their concerns or do not consider complaining worth the effort. Very few firms know they’ve been fired. The phone just stops ringing. Even fewer firms know why they’ve been fired. Or why they didn’t win the RFP. Or why their work from the client was down 2% instead of up 2%. Or….It can be a very slow bleed. There are many ways to lose business that do not involve a formal “you’re fired.” And there are just as many possible explanations for the loss.

In short, clients are using exit, not voice. In the classic treatise Exit, Voice, and Loyalty, the economist Albert O. Hirschman outlined a client’s options when quality declines (or fails to keep pace with what is available elsewhere).

Clients can be loyal–i.e., they keep returning to the firm because of relationships, complacency, lack of alternatives, high switching costs, devil-you-know conservatism, etc. Loyalty is major part of the legal market, in part, because there are genuine advantages to incumbency. Loyalty continues to be the most important aspect of the client/firm relationship. We’re witnessing a steady accumulation of minor paroxysms, not a mass exodus.

Clients, however, can and do exit. They take their business elsewhere. Alternative destinations include other firms, in-house, and managed service providers. As the headlines above demonstrate, exit is becoming a more prominent part of the legal landscape.   

Or clients can exercise voice. They can express their dissatisfaction but still afford the firm an opportunity to course correct. The managing partners’ “clients aren’t asking” response suggests that clients rarely do this. Clients choose exit instead.

Voice is critical. Loyalty signals acceptance of the status quo. Exit signals dissatisfaction and decline. Voice is the informative middle ground that demonstrates loyalty, raises the spectre of exit, and provides the path forward to bolster the former while avoiding the latter.

There is a vital difference between asking for a manager and leaving the store to shop elsewhere. So why don’t sophisticated corporate clients exercise voice? My friend Connie Brenton of NetApp/CLOC provided part of an explanation in a piece we co-authored on the topic:

Client preference for exit over voice has much to do with resource constraints. We need results now, innovation now, efficiencies now. We haven’t the time to wait for our firms to catch up. There are also an increasing multitude of accessible alternative solutions and technologies that were not previously available, making the exit not only easy but the responsible decision for our businesses. Organizations such as the Corporate Legal Operations Consortium (CLOC) provide a forum to share best practices including how to better in-source legal work or move day-to-day work to lower cost alternatives.

Frankly, as Ron Friedmann has observed, it is often easier and quicker to start from scratch than to try to retool. Not only are established processes resource intensive to amend, but interpersonal dynamics also consistently fall back into familiar patterns. If the inside lawyer and outside lawyer are accustomed to resolving every hiccup with a discount, it may feel unnatural to have any other conversation, especially when there is ‘real’ work that needs to get done.

In the short term, it is simple to show ROI on moving to a firm with lower rates, bringing work in-house, or diverting work to a managed-service provider. Each option can be far less daunting than asking a long-time incumbent to cut their rates in half, let alone make an abrupt move to value fees (which Pat Lamb compares to reciting the alphabet backwards). You don’t necessarily let the incumbent go immediately. You taper their work, which subtly moves from increasing to flattening to declining as the new resources come online. Indeed, by keeping the incumbent around, you get to have a control to validate your ROI calculation.

The right question may not be why clients don’t use voice but, instead, why they should even bother. Since I wrote a guidebook entitled Unless You Ask, I feel compelled to try to answer in my next post.

Full Arc: Law Firm Resistance to Change and Law Department Responsibility

_______________________________________
D. Casey Flaherty is a consultant who worked as both outside and inside counsel and serves on the advisory board of Nextlaw Labs. Find more of his writing here. Connect with Casey on Twitter and LinkedIn. Or email casey@procertas.com.

As many of you that follow 3 Geeks know, I’m a big fan of the products that are coming out of Stanford University’s CODEX program. One of the latest insights comes from a CODEX fellow, Casetext, with their new CARA platform. Casetext’s VP of Legal Research, Pablo Arredondo, has been talking with me about CARA for a number of months now, and I’ve seen a few versions as he prepped CARA for release. If you’ve ever seen Pablo demo this new product, then you know how excited he is about the value that he believes this brings to legal research.

What is CARA? CARA is a ‘brief-as-query’ legal research tool, in which instead of using a keyword query you drop an entire brief in as the input. Users can input a brief in either Word or PDF format. From my use of it, I would explain CARA as a tool to analyse your brief (or the other side’s brief) to find potential missing points of law, or alternative arguments not cited within the brief.

CARA data mines the inputted brief and uses the gathered information to form a sort of ‘mega-query’ that runs against Casetext’s database of case law. CARA takes a look at the brief and analyzes how much cited cases are discussed within the brief as well as the other text within the brief. Arredondo explained to me that “[t]he analysis CARA runs looks not only at direct citation relationships (Case A cites to Case B) but also ‘soft citation’ relationships – Case A doesn’t cite Case B directly, but Case C cites to both A and B.” He also says that, “CARA also discounts heavily cited procedural cases like Celotex” so that these citations do not skew the results. Attorneys and researchers upload their drafts to check for missing cases before filing and uploading their briefs, and they check their opponent’s briefs to see if there are missing cases that they might be able to exploit.

Screenshot of CARA results.

CARA outputs a list of cases, all linked to the full text on Casetext. The results are displayed along side

  1. concise summary of case holding; 
  2. most cited passage from the case; 
  3. link to a law firm client alert discussing the case.  

Because attorneys are uploading drafts/work product, there is always a question of “who can see my draft?” Arredondo told me that “Casetext has applied stringent security to CARA.  Inputted briefs are not stored; once the data is extracted the brief is deleted. The reports CARA generates are accessible under a unique URL with a long hash; only those possessing the link can see the report.”

A geek like me loves to learn about how the back-end of these systems work, so bear with me for a paragraph as I repeat Pablo’s explanation of how CARA processes the brief that you drop in for analysis. CARA uses what is called topic modeling system (latent semantic analysis) to sort results based on how well they match the topics in the brief.In law-librarian terms, this means that CARA uses the full text of the brief and compares it to the full text of existing cases, looking for similarities in both legal terms and regular nouns. It’s not magic, it’s math. But, sometimes math can look like magic. Alright… end of uber-geek discussion.

The second serious question that most of us ask when we see products like this is “does it replace Westlaw or Lexis?” The answer is simply, no, and it is not meant to. CARA is designed to supplement traditional research systems. It can catch cases you missed using regular tools or help you find cases that you would have found anyway, only much faster. In these modern days of “efficiency” in legal practice, getting to the answer, faster, is a competitive advantage, and that is what CARA sets out to do.

Pablo mentioned that CARA will be made freely available to the judiciary, and that trials for firms or individuals are available for anyone who wishes to evaluate CARA. He said that there were no strings attached to the trial, and that you can contact him for details on the trial at pablo@casetext.com.

[NOTE: Please welcome guest blogger, Michael J. Robak, Associate Director/Director of Information Technologies, Leon E. Bloch Law Library, University of Missouri – Kansas City. -GL]

The movement to establish a true Technology instruction track and andragogy (meaning Susskind, Kowalski, et. al.) in the legal academy is gaining real momentum.  As readers may recall, on March 16, 2016 the ABA TECHSHOW provided an opportunity for an Academic specific event tied to TECHSHOW which 3 Geeks generously allowed me to advertise.  This first ever Dean’s Roundtable, held at IIT Chicago Kent College of Law (which was enthusiastically supported and hosted by Professor Ron Staudt,), was incredibly successful and helped set the stage for creating an Academic track at the 2017 ABA TECHSHOW.

The event was so successful that the 2016 ABA TECHSHOW Chair, Steve Best, thought a second edition of the Dean’s Roundtable would provide an even greater opportunity for dialogue if it could be held in conjunction with the ABA Annual Meeting in San Francisco in early August for a West coast version.  Those who attended the Roundtable, including the first Roundtable’s generous sponsor, Thomson Reuters, thought a second event would be well worth creating.


And so we are announcing the Dean’s Roundtable Part 2 to be held at UC Hastings College of Law on August 4, 2016 from 9:00 am to 1:00 pm. And I am pleased to announce Thomson Reuters is again generously sponsoring the event.


If you are at a law school in the San Francisco area or if you are attending the ABA Annual Meeting or if you are interested in helping build technology teaching or the ABA TECHSHOW Academic track please consider attending the Dean’s Roundtable Part 2 on August 4, 2016. 


And we particularly extend the invitation to practitioners, we need comment and recommendations from outside the ivory tower.

This is a free event and registration can be found here.

We hope to have in attendance a number of the members of the ABA Law Practice Division, including members of the Executive Committee, to create an even stronger dialogue about the “how and what” of teaching technology, particularly from those practitioners most engaged with serving as technology evangelists.  The second part of the dialogue will focus on helping design the academic track for the 2017 ABA TECHSHOW.  2017 TECHSHOW chair, Adriana Linares, is an avowed and immensely supportive proponent of the track and is working with her Board to develop the track.  Input from the Roundtable will be very important to getting this organized.

Besides the ABA TECHSHOW Academic track, there have been two other important developments in the month of July.  The first was a discussion that occurred in early July at the SubTech 2016 Unconference, hosted by the University of Richmond Law School (and thanks to Marc Lauritsen for organizing and Roger Skalbeck (and Dean Wendy Perdue) for hosting) the event for connecting law schools that have engaged in the substantive teaching of technology. During this unconference,   John Mayer, law tech dude extraordinaire, (where would we be without John!) sua sponte created a website to serve as a connector for those wanting to teach technology.  Among other services, the website will collect syllabi from anyone who wants to contribute.  If you are on the Teknoids listserv you’ve probably seen the conversation.

The second terrific development occurred during the AALL Annual meeting last week.  Elizabeth Farrell Clifford (who attended SubTech 2016) organized a flash meeting to discuss teaching technology.  This amazing event had about 30 people in attendance with another 15 or so expressing regret to Elizabeth they could not attend.  The meeting had each of the attendees discussing what they taught or planned to teach and clearly demonstrated law schools are recognizing the need to formally move in this direction.  The attendees unanimously supported the idea of creating an AALL Caucus focusing on teaching technology.  Elizabeth and I are moving forward on this proposal.

The half day conference Agenda is as follows:

8:30 a.m. – Registration
9:00 – 10:15 – Moderated Panel Discussion
Moderator – Dean Ellen Suni – University of Missouri – Kansas City School of Law
Panelists:
Professor Oliver Goodenough – Vermont Law School
Professor Alice Armitage – UC Hastings College of the Law
Professor Dan Linna – Michigan State University School of Law
Professor Jeff Ward – Duke Law
Assistant Dean Bobby Ahdieh – Emory University School of Law School
10:15 – 10:30 Break
10:30 – 12 noon – Discussion Forum
The panel will lead a discussion with members of the audience to move toward consensus regarding the next steps for advancing teaching technology in law school and examining how the ABA TECHSHOW can be part of these efforts going forward.

12 noon – boxed lunch and further discussion
(Generously provided by Thomson Reuters)
 

Please feel free to email me (the man behind the curtain) with comments, thoughts, ideas or any suggestions.  There will most likely be a discussion about the Academic Track and this topic generally at the Association of American Law Schools (AALS) at the January, 2017 meeting in San Francisco.

It is rational for someone who has been wildly successful doing something a certain way to keep doing it that way, especially when the odds appear favorable that they will continue to be successful. Most people don’t exit their comfort zone without a compelling reason. This is doubly true of many high-status experts.

Any story about lack of change in the legal market premised solely on lawyers being stupid has limited explanatory power. I’m partial to a more nuanced narrative where the incentives to change are not evenly distributed. More specifically, those with the most power, by definition, encounter the least pressure to embrace innovation.

A continuation, this post will focus on law firm partners resisting change.

A Primer On The Legal Economic Landscape

For context. Legal Business just released the Global 100 under the banner Hitting the Wall. The headline for this year’s Am Law 100 was Signs of a Slowdown. The Altman Weil 2016 Law Firms in Transition survey opens with the observation that “most firms are choosing to proceed with lawyerly caution in the midst of a market that is being reinvented around them.” The key findings from the survey are:

  • Unreliable demand
  • Surplus of lawyers
  • Inefficient delivery of legal services
  • Proactivity is a competitive advantage
  • Resistance to change

Likewise, the Peer Monitor/Georgetown 2016 Report on the State of the Legal Market states, “U.S. law firms continued to experience very sluggish growth in demand, coupled with negative growth in productivity, and continuing downward pressure on rates and realization.” The Report warns of BigLaw’s Kodak moment:

This story of the demise of Kodak is an important cautionary tale for law firms in the current market environment. Since 2008, the market for law firm services has changed in significant and permanent ways….

The reactions of the law firm market to the rapidly changing environment in which firms operate parallels in some respects the story of Kodak. The current challenge in the legal market is not that firms are unaware of the threat posed to their current business model by the dramatic shift in the demands and expectations of their clients. Instead, as in the case of Kodak, the challenge is that firms are choosing not to act in response to the threat, even though they are fully aware of its ramifications.

There are many reasons that may lead firms to make this choice, but one of the primary ones is surely that, like Kodak, many law firm partners believe they have an economic model that has served them very well over the years and that continues to produce good results today. They are consequently reluctant to adopt any changes that could put that traditional business model at risk. While that might appear to be a viable short-term strategy, the danger is – again like Kodak – that this effort to preserve their past and current success could result in law firms failing to respond to trends that over time could well challenge their traditional market positions.

“Over time.” That’s the thing. There was no single ‘moment’ that caused Kodak’s demise. There was a long series of choices that resulted in Kodak becoming less competitive in the market it once dominated. The market for photography did not collapse. Especially accounting for smart phones and social media, photography is far healthier than it has ever been. But the economics of the market changed, and the largest incumbent did not (enough).

Certainly, advances in technology—from film to digital—underpinned the economic recalibration. But technology was not Kodak’s problem. The Report does a nice job laying out the history in which Kodak itself was responsible for much of the innovation that would undermine its market dominance. Rather, as explained in a new post up at the Harvard Business Review entitled “Kodak’s Downfall Wasn’t About Technology”:

The right lessons from Kodak are subtle. Companies often see the disruptive forces affecting their industry. They frequently divert sufficient resources to participate in emerging markets. Their failure is usually an inability to truly embrace the new business models the disruptive change opens up. Kodak created a digital camera, invested in the technology, and even understood that photos would be shared online. Where they failed was in realizing that online photo sharing was the new business, not just a way to expand the printing business.

The reason we still talk about the “Kodak moment” is that it made for really good copy. Headline writers jumped at the opportunity to use the company’s tagline when describing the rare cataclysm of a premier company filing for bankruptcy. But it was a moment of reckoning that was decades in the making. And the bell was tolling for a once prestigious participant, not the industry itself.

As an industry, legal is doing relatively well. Contrary to the headlines, demand is not flat. Rather, demand for law firm services is flat. According to HBR, the ACC, and LEI, the surplus is being captured by clients and, to a lesser extent (for now), their alternative service providers.

For law firms as a group, the story is one of stagnation, not collapse. There is, however, more volatility at the individual law firm level with bankruptcies and mergers. Unsurprisingly, the volatility is greatest at the individual lawyer and staff level. We’ve experienced significant de-equalizations and layoffs. This year, nearing a decade since the start of the Great Recession, the Am Law 100 again reduced the number of equity partners.

Pretty bleak picture, right? Not really. Not for everyone.
Profits Per Me
Anyone who is interested in this topic should read Bruce MacEwan’s Growth is Dead and Bruce in general. Among the many reasons to read Bruce is the compelling way he explains that the top lawyers at the top firms have never really experienced a bad year. In the almost three decades (1987-2016) of the Am Law 100, revenues have increased from $7 billion to $83 billion, a compound annual growth rate of 8.9%. Over that time, profits per partner have quintupled (5x) from $324K to $1.6M (2.3x if we adjust for inflation).

And that’s the average firm and the average partner. Averages are misleading. Many lawyers substantially outperform the average. At most firms, including the average and below average, the compensation spreads among equity partners keep growing. That is, the people with the most power within law firms have been doing quite well for a long time and there are few signs of their good times ending anytime soon. Soon matters. Most rainmakers are closer to the end of their career than the beginning. Time horizons affect perspective.

The top partners at the top firms probably figure that clients hire them for their deep expertise. They probably figure clients will continue to do so. Many of them are probably right. And those that are right will continue to have the most power in traditional firms because they will be the ones bringing in the business. The participants with the most interest in shifting the business model—and it is more about business model than tech, which is just one piece—will either not be enfranchised to begin with (e.g., associates and allied professionals with little to zero chance to make partner) or will find themselves disenfranchised (e.g., de-equitization) once the new normal intrudes on their professional tranquility.

Ken Grady recently had some tweets that did a wonderful job summing up partner resistance to change:



Why take risks when you can be rich without doing so? Why try to disrupt yourself when the market is not? If you’ve been extremely successful for 30 years and that is likely to continue for the next 10—when you’ll retire—why change course?

And the explanation need not be avarice. Attention is a finite resource. The most successful lawyers are stunningly busy. They are busy doing important work for key clients. If they are not feeling pressure from those clients (“client’s aren’t asking for it” is the subject for next post) and if market machinations are not affecting their wallets, how much attention are they really going to devote to what appear to be other people’s problems. How much effort are they going to put into real change, which requires real resources (attention, time, money).

Managing partners are paying rapt attention. Isn’t it their role to force their partners to also come to terms with the shifting market? Call a partners’ meeting. Hand out Bruce’s book and George Beaton’s Remaking Law Firms (both highly recommended). Restructure compensation to tie it more to firm than individual performance. Invest in infrastructure. AFAs. Legal project management. Technology. Alternative staffing models. Experiment….

That’s all well and good until a few key rainmakers decamp for other firms where they are guaranteed to make more money. Those people who don’t usually pay attention because they don’t have to will still notice if the firm pursues change initiatives that affect their time, workflow, or bank account. On the latter point, supported by strong historical evidence, these successful, high-status professionals consider substantial annual growth in their compensation to lie somewhere between a natural law and a birthright.

Even now, their belief in their ever-escalating economic value seems well founded. The lateral market is nuts. 93.7% of firms are pursuing growth via the zero-sum game of acquiring laterals. Unhappy rainmakers are coveted free agents subject to bidding wars. This makes the BigLaw business model—where your most valuable assets can walk out the door—inherently fragile. Even the largest law firms are susceptible to animal spirits and the cascade effect of rainmaker defections.

The prime directive of the managing partner is to keep the firm solvent and intact. That limits their leverage to force through changes that key partners resist. Successful partners need someone to handle the administrative side of the business. But, as autonomy-seeking missiles, they hate to be managed. Martin Bragg captured this well in exchange we had after my first post on the topic (reprinted with permission):

I am of the view that the real power lies (in most firms) with the king makers rather than the kings which in turn means that (most firms) are herded rather than led. The irony of this is that most lawyers in my experience hate anything to do with firm management but are unwilling to let others do it for them!

As a Martin alludes to, the foregoing is a bit of a caricature. My posts are about “most firms” and are already too long without nuance. There are some managing partners who are empowered to take a “let’em leave” attitude to partner defections. There are large firms with interesting, innovative approaches to business models, R&D, and productizing services. It’s not that change isn’t happening. It just doesn’t seem to be happening enough.

I’ll leave the final word to Bruce, who had a great post reacting to the Global 100:

In Law Land the cynical smart money is almost always on stasis; nothing will really change because any talk otherwise will spook the partners. If nothing else, this view has years and years of solid predictive success behind it.

But I wonder.

Rates of growth and decline—I emphasize decline because it is largely a story of decline in the only currency that matters, purchasing power—in overall gross revenue, RPL, PPL, and even PEP are to almost all of the 120,000+ lawyers toiling in these firms pretty abstract and denatured concepts.

One number, however, is as hard core and riveting as can be: One’s own personal compensation. This is where the abstracted figures have an impact people recognize and understand.

We can all have a debate in the parlor about whether too many lawyers with room temperature C+/B- talent were too highly paid by too many firms for too long, but as the reality of these numbers, “the New Normal” as far as the eye can see, and heaven only knows what other exogenous shocks intrude on our world, begin to sink in, real take-home pay is going to fall, and barring “something radical,” continue to fall for the great majority of these 120,000+ souls. (You guys gathered under the Wachtell banner, and few others of similar caliber, are excused—but then I stipulated I’m talking about C+/B- talent, so you knew that already.)

Upton Sinclair (1878—1968) was among many other things , author of the 1906 classic The Jungle, exposing malfeasance in the US meat packing industry and contributing to momentum behind passage of the Pure Food and Drug Act. He also gets credit for this barbed quip:

It is difficult to get a man to understand something, when his salary depends upon his not understanding it.

For quite some time now—coming up upon a decade—for partners in highly successful firms to “understand” that the good old days aren’t about to return would have entailed their understanding that the ever-upward trajectory of their compensation could be imperiled. No wonder the notion of change, much less “something radical,” spooked them. Self-interest required no less.

What if that is something that might be about to change?

Full Arc: Law Firm Resistance to Change and Law Department Responsibility

_______________________________________
D. Casey Flaherty is a consultant who worked as both outside and inside counsel and serves on the advisory board of Nextlaw Labs. He is the primary author of Unless You Ask: A Guide for Law Departments to Get More from External Relationships, written and published in partnership with the ACC Legal Operations Section. Find more of his writing here. Connect with Casey on Twitter and LinkedIn. Or email casey@procertas.com. 

 While I was sadly unable to attend the 2016 AALL annual conference that wrapped yesterday in Chicago, I have it on good authority that the most recent ALM Law Library Survey  caused some intense discussion around industry surveys and their value. The issues raised go well beyond law libraries and seem to fit almost any annual survey where industry statistics or trends are presented. Those in legal marketing, would no doubt agree that directory rankings, akin to surveys of the industry are just as flawed in their research and survey methodology. Not to mention the concentrated amount of work they represent for a dubious ROI.  Nevertheless, since it was a hot topic yesterday, let’s go back to the ALM Law Library Survey as the catalyst for exploring the topic of surveys and their value. 

On the surface, the question “Do you plan to eliminate a majority of your print collection within the next five years?” seems innocuous. But if you think about it for more than a second, the question itself is a bit like leading the witness. There is no way to answer the question without distorting the data.   If you answer yes, the analysis will jump to suspicions of shrinking libraries, if you answer no, the analysis will jump to law librarians not embracing the future and e-resources.  Either way, the survey will point to a definitive trend about the value of librarians and libraries as a result of one poorly worded question the value and timeliness of which is in and of itself outdated. Not to mention that the results are often skewed by lumping all respondents together regardless of budget size, head count or prior culling of collections that have already been accounted for in previous surveys.  

The question, simple on the surface, points to a lack of understanding about the industry and most certainly limits the usefulness of the aggregated responses.  Print resources are an indication of – what?  Surveys, much like directories, league tables and the like provide those who create these industry research pieces with dramatic headlines, website traffic and social media click-throughs, generating soft leads and business or consulting opportunities. Surveys also provide data and data should provide insights, at least that is how it is supposed to go down.  But there has to be integrity and mindfulness in both the collection and analysis – the question above and its binary answers with no context, provides for neither. 

I am a data junkie, you all know that. I love metrics, and analytics makes me happy.   I understand the desire to create some benchmark that compares everyone to everyone else to see who’s winning and who’s falling behind. It can be the American Lawyer rankings, or it can be a Cosmo survey. The problem is that if those that are producing the survey don’t ask thoughtful questions and implement solid statistical analysis, they can pretty much make up the results (the old “I can make data say and anything I want”) to serve their end needs.  Now, I may be naïve or a bit of a Polly Anna, but I honestly don’t believe that those who create these surveys do so with malicious intent. I do believe that ALM or Bloomberg, Lexis or Thomson genuinely care about the clients they serve and do want to provide value to their clients by way of empirical data and industry insights.  

As I see it, the current model of survey and reporting as discussed at AALL has two flaws.  The first: survey creators are often on the sidelines, looking in on the action – they support the game but aren’t in it the same way industry leaders would be.  Therefore, to really add value, survey creators need to find a way to include industry leaders or practitioners in the creation of the survey so that the same questions are not asked year after year skewing the results in to a cumulative data mess. If you want to provide real usefulness, start by asking insightful well-crafted questions.  The second: despite working in an industry of word smiths who manipulate language to serve the needs of their clients, many of us (myself included) need to brush up on our written communication and analysis skills. That is, we need to be able to draft better questions, that result in stronger more representative and meaningful findings.  The size of print collections in the earlier example is no more an indication of a library’s strategy than the number of beds in a hospital speaks to the quality of care. Correlation is not causation, and poorly constructed survey questions, limit analysis to trite observations adding little benefit to the working body of industry knowledge.

I’ll stop the rant now, but hope next time the discussion turns to surveys, we can actually discuss the results and what action we want to take, rather than the methodology.