[Ed. Note: Please welcome guest blogger, Steve Nelson, Managing Principal, Law & Government Affairs, The McCormick Group. – GL]

One of the big topics discussed recently in the legal press is how the very large firms continue to separate themselves from the rest of the AmLaw 200. In an article accompanying the American Lawyer’s financial disclosure reports for the AmLaw 100, the magazine revealed some pretty shocking statistics; while the top 50 firms reporting significant increases in revenue per lawyer, profit per partner and profit per lawyer, the next 50 firms reporting decreases in all of these statistical categories.

This is not a new phenomenon. Over the past few years, many observers have been writing about how the mega-firms are pulling away from the pack. You would think that a large number of midsize firms would be responding by illustrating how they are more efficient and provide very value to clients.  But a recent study performed by The McCormick Group seems to show otherwise.

Since around 2000, and particularly since the advent of the Great Recession of 2008, firms have responded to calls for efficiency by hiring three types of professionals, those handling practice group management so that each practice area can be run more efficiently and more profitability, pricing professionals to respond to corporate calls for alternative fee arrangements, and legal project managers to work directly on engagements to provide value to the clients and efficiency to the firm.

Of those three, one—pricing professionals, have become virtually de rigueur in the AmLaw 200.

Largely because the firm needs to have someone with a financial background respond to requests for proposals and other demands for alternative pricing, more than 80 percent of the AmLaw 200 have at least one professional focused on pricing.  And that has run the gamut from the very large firms down to the bottom of the AmLaw 200.

But the acceptance of practice group management and legal project management is much more uneven.  On the one hand, 60 percent of the AmLaw 50 firms have professionals handling each role, and 76 percent have one or the other.  And when one considers that nearly half of those who have not instituted such programs are either big New York-based firms or large one-practice specialty firms, the adoption rate among large multifaceted law firms is higher.

But as the accompanying chart shows, the percentage of firms having those professionals in place drops dramatically throughout the rest of the AmLaw 200; only 19 percent of the Second Hundred have practice group management professionals, and even less (13 percent) have LPM specialists.

Firms PG Mgt. LP Mgt. Both Either
Top 50 30 30 22 38
51-100 18 26 13 31
101-150 12 10 4 18
151-200 7 3 1 9

A few notes about methodology:

  • Firms were included as having these functions if they have professional personnel (not practicing lawyers) with identifiable responsibility over these functions, whether or not they included the words “practice group” or “legal project management.”
  • Professionals with a pricing or similar title were not included as having LPM responsibilities unless their title or profile included discussion of LPM. (At many firms, pricing personnel are supported by other professionals in the finance department who play a broader role within the firm.) 
  • On the practice management side, firms in some instances have designated just one practice (often IP) as having a practice group manager or business manager.  Those were included nonetheless, so the statistics may overstate a bit the number of firms having full-scale practice management programs. 
  • Of the firms in the top 100 that had no practice group management or LPM function, about half were either New York-based firms or were one-practice specialty firms.

The conventional wisdom among law firm experts is that the firms at the top are doing well because they often do bet-the-company work which commands whatever rates they wish to charge, and that alternative fee billing often works to those law firms’ advantage in terms of success fees on major transactions.  But according to Susan Raridon Lambreth, Principal with the Law Vision Group, while the largest firms do bet-the-company work, many of them also do a lot of other work that is increasingly fee pressured by major clients.  Many of the largest firms in the US are actually facing more pressure from clients on rates and efficiency than the mid-sized firms — by the size of the matters they handle and the nature of their client base.

“It’s the clients with sophisticated law departments that are putting the heavier pressure on firms when it comes to providing client value and the vast majority of their outside counsel are in fact at large firms.  As a result, large firms have significant pressure to provide volume discounts, detailed budgets or caps even on multi-year, complex matters and more. This has resulted in write-offs or downs in the tens of millions to over $100 million in many of the AmLaw 100 firms.”  

On the other hand, many mid-sized firms have a larger percentage of their client base with smaller or more middle market companies, she says, where there is less pressure to provide fee alternatives or budgeting, so the smaller firms aren’t really feeling as much pressure to change their approaches.  Another law firm consultant Timothy Corcoran of the Corcoran Consulting Group, puts it more bluntly.  “There are still a fair number of law departments doing a poor job of managing outside counsel.”

According to some industry surveys, resistance to industry change has been greater among the smaller and mid-sized firms.  Lambreth says that law firm leaders in those firms often want to institute changes, but they don’t have the partner buy-in.  There are a large number of partners that simply don’t see any need to change and it can be harder to make the business case for change short-term, even when there are long-term warning signs.

Indeed, instituting a PGM or an LPM program will often add up to between 5-10 new professional positions, which will often have a material impact to those firms which are already under pressure just to keep up with the previous year’s financial results.  That, Corcoran believes, is exacerbated to the fact that a number of smaller firms are laboring under a false impression about their standing in the market. “They have spent the last few years convincing themselves that clients have determined they’re just as good as the big firms and so now their philosophy is something along the lines of  ‘just as good as the big firms, but cheaper.’ ”  As a result, he says “they’re not doing anything particularly creative, such as embracing LPM to prove they’re just as good (or better).” Inevitably, they run the risk that another firm will come along that looks just as good and is another level cheaper and the client buys from them instead. Or the big firms that are embracing LPM and finding ways to generate higher profits at lower prices can now claim that they are in fact less expensive.”  So, says Corcoran, midsize firms are facing pressure “from above and below.”

So we seem to be at a crossroads:  the large firms that are doing the best economically have invested heavily in creating more value to their clients, while the midsize firms that are facing a more uncertain future are unwilling or unable to make changes so that they become more efficient.  That’s certainly not the narrative we tend to hear.

Toby Brown and I got a sneak peek yesterday at Bloomberg BNA’s new Big Law Business community site, and we liked what we saw. We all know that Big Law is big business, but there are very few resources out there from vendors that cover current stories and trends of the business side of a large law firm, and even fewer that promote a community to comment and contribute. Most of us have relied upon bloggers to fill the gap, but a resource like this coming from Bloomberg Law is a welcome new addition.

The site is free to access, but content contribution will be limited to those of us that work within large law firms (AmLaw200), in-house counsel, thought leaders within the industry, and vendors within the industry that want to contribute useful content to the community through articles, white papers, videos, and other (non-commercial) type content.

BBNA’s David Peikin gave us the tour and said that “[T]he community enables legal executives to share best practices leveraging the insight and wisdom of those in similar roles at other firms and supports peer-to-peer engagement with focused, role-based content areas for managing partners, in-house counsel, technologists and marketers.”

There are no walled communities within the site, so everyone can see all the content regardless of what type of role you play within your firm.

The site is now open, so go check it out and see if this is a community you’d like to join. Bloomberg BNA’s press release on the Big Law Business site is below.

FOR IMMEDIATE RELEASE

CONTACT:
David Peikin
703.341.5900
dpeikin@bna.com

BLOOMBERG BNA LAUNCHES BIG LAW BUSINESS, 
COMMUNITY WEBSITE FOCUSED ON THE BUSINESS OF LAW

Arlington, Va. (March 5, 2015) — Bloomberg BNA today announced the launch of Big Law Business, a first-of-its-kind online community that helps law firm executives and in-house counsel be even more successful in addressing opportunities and challenges created by accelerated disruption in the legal market related to the business of law.  Big Law Business enables legal executives to learn how to better manage day-to-day business, finance and technology issues while also sharing best practices.

Big Law Business helps legal executives and professional managers better serve their internal and external clients through access to a wealth of targeted content — perspectives, news and insight, data, and resources — created by Bloomberg BNA editors and thought leaders in the legal market.  The community also supports peer-to-peer engagement in focused, role-based content areas for managing partners, in-house counsel, technologists and marketers and also will offer related online and offline programs.

“Big Law Business provides access to a wealth of robust content, including timely news on the business of law from our dedicated editorial staff and the rich data and in-depth analysis the market has come to rely on from Bloomberg BNA and Bloomberg Law,” said Scott Mozarsky, President, Cross Platform Businesses, Bloomberg BNA.  “Big Law Business features articles, podcasts, videos and white papers, enabling legal executives to stay on top of the latest trends affecting the business of law.  And the community will provide visitors ample opportunities to engage with those in similar roles at law firms and corporations and benefit from shared insights and wisdom.”

You can follow Big Law Business on Twitter and LinkedIn.

About Bloomberg BNA
Bloomberg BNA, a wholly owned subsidiary of Bloomberg, is a leading source of legal, regulatory, and business information for professionals. Its network of more than 2,500 reporters, correspondents, and leading practitioners delivers expert analysis, news, practice tools, and guidance — the information that matters most to professionals. Bloomberg BNA’s authoritative coverage spans a full range of legal practice areas, including tax & accounting, labor & employment, intellectual property, banking & securities, employee benefits, health care, privacy & data security, human resources, and environment, health & safety.

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The following is the final part of a 4 part post expanding on my short introduction to an ILTA session entitled, Do Robot Lawyers Dream of Billable Seconds? If you have not yet listened to the full session (and you have nothing better to do for the next 90 minutes), you should go listen to it now. If you would like to download and read the entire 4-part post you can get it here.



What does an Exponential Law Firm that can survive in this type of environment look like?

I would be lying if I said I knew for sure, but I think we can look to a number of trends and begin to get a fuzzy picture of the future.

More Legal Processing will be passed off to computers

We like to pretend that everything we do is custom tailored for every client, but it is simply not true. We are already past the point where we need to improve efficiency in order to provide a better price to our clients. In the near future, we will need to improve efficiency in order to make a profit. That means we will need an honest assessment of the work that can be automated, or performed by algorithm, and the work that will require custom analysis by specialized attorneys. Then we will begin pricing that work accordingly.

The rise of the Legal Processing Engines

This obviously goes hand in hand with the above, but one of the implications of this change is that the output of biological legal processing units (most attorneys) will shift from customized legal work, to engine building and maintenance. The focus of many firm attorneys will no longer be on individual clients, but on entire types of matters at once. Attorneys will no longer slave over a single contract, but over the engine that builds that type of contract.

Engines will manage as much work as they can and spit out any unique or unusual work to be reviewed by senior attorneys. That “unique” work will be analyzed and evaluated to determine whether it can or should be incorporated into the engine for future use. Over time the engines will do more and more complex work.

The rise of the Legal Engineer

Inherent in the rise of the Legal Engine is the role of Legal Engineer. We are already seeing this role pop up at many firms. These are people with legal training and technology “know how”. They are equally comfortable analyzing contracts and programming new applications. There are very few people who fit this role today in big law firms, but firms who want to survive post disruption will hire these people by the truckload. The engineers will be responsible for creating and maintaining the firm’s engines. As laws change, or interpretations change, the engineer will modify the engine appropriately.

Machine Readable Documents

Once we are using engines to process legal matters anyway, it will make sense to just go all the way and make all legal documents machine readable. Gone are the fuzzy shades in meaning between contains and includes, or the differences between shall and must, to be replaced by the definitive ⊇ and =.

Proactive Practice of Law

In this world, firms will stop being reactive. The idea of waiting for a client to approach the firm before working on a matter will be unthinkable. Legal engineers will build engines based on legislation and firm sales associates (or Partners) will pitch those engines to potential clients.

Is this Science Fiction?

Simply put: computers process information more consistently, accurately, and faster than people do. They are networkable, scalable, and manageable in large numbers by relatively few administrators. If I am right in my assessment that what we actually sell to clients is Legal Processing, then no, this is not science fiction. In order to compete in an exponentially changing industry, we will have to move the bulk of our processing from biological to digital processing units.

If Diamandis’ exponential framework is correct, then we are approaching a digital disruption that will fundamentally change our industry forever. The players will change. New firms will quickly morph from newcomers into industry leaders. Many of the old guard will fail to change and will subsequently fail entirely. And a few will probably stick around, doing things much as they always have for a very select, demanding, and equally slow to change clientele. At least until those clients also get disrupted.

Whether or not I am right about what we sell, or that the framework directly applies to the legal industry, is almost irrelevant. The 6 Ds Framework provides a useful model for imagining the kinds of changes that could take place in our industry, based on the kinds of technological changes that have already upended other industries.

The only thing of which I am absolutely positive is that both lawyers and IT personnel, as a general rule, do not think much beyond the next immediate hurdle. They approach the world linearly, solving problems as they arise, and planning for a steady progression of linear events. But if we are already on a path of exponential change, then our standard linear approach to managing firms will be our demise. A purely linear response to an exponential threat is the equivalent of no response at all.  

The following is the 3rd part of a 4 part post expanding on my short introduction to an ILTA session entitled, Do Robot Lawyers Dream of Billable Seconds? If you have not yet listened to the full session (and you have nothing better to do for the next 90 minutes), you should go listen to it now. If you would like to download and read the entire 4-part post you can get it here.


What does this mean for legal service delivery?

The examples above are not directly comparable to the
legal services we provide. I deliberately did that to illustrate the 6 Ds
concept before completely confusing the issue by describing how it applies to
our industry. As it is, I’m sure more than a few of you have read the examples
above screaming, “Yes, but that has nothing to do with us! What the hell are
you talking about?”

I am more than willing to concede that I may be wrong
about the legal industry passing a threshold of digitization in any way similar
to the entertainment industries or physical goods manufacturers. Or, that
Diamandis may be wrong about industries passing that threshold and then
necessarily conforming to his exponential framework. But for the sake of
argument, let’s say that Peter and I are not wrong. We are definitely passing a
threshold, an industry wide digital disruption will eventually take place, and
we will begin to conform to the exponential framework just as others have. That
begs the question, what does a dematerialized, demonetized, and democratized
legal services industry look like, and how could a law firm survive in it?

The Dematerialized Practice of Law

It’s likely that the first complaint against applying the
6 Ds framework to the practice of law will be that we are not a material
industry, and that we therefore have a distinct advantage over manufacturers or
sellers of things. We don’t produce material goods, unless you count mountains
of documents, and even if we become entirely paperless there will be no change
in our service.

That might be true, but let’s think about a service
provider who has already gone through this digital threshold: travel agents.
Travel agents still exist of course, although in nothing like the numbers they
did 20 years ago. They provided a service, with almost no material aspect and
yet they were one of the first industries to be decimated by the rise of the
internet. It turns out most people were happy to book travel themselves as long
as it was easy and inexpensive. How many people or companies would gladly
handle their own legal services if they had access to resources and knowledge,
for a low price, and they didn’t actually have to deal with a real live
attorney?  If such a thing were possible,
how many attorneys could the industry continue to support?

The Demonetized Practice of Law

We have seen downward pressure on legal prices since the
downturn of 2007.  That has mostly come
in the form of clients demanding discounts on hourly rates or fixed fee
arrangements. But suppose clients, even large corporate clients, had a new option:
they could pay a monthly fee for unlimited access to a firm sponsored set of
expertise engines that handled much of their routine legal needs. They could
pay month to month for this a la carte service, or they could sign a 2 year
contract which also entitled them to steeply discounted hourly rates for legal
services not covered by the engines. Setting aside for the moment, whether such
a thing is possible, or more to the point, whether the bar associations would
allow it, what would that do to legal service prices?

The Democratized Practice of Law

This is the good news, if the prices of legal services
decline precipitously and the delivery of legal services becomes much more
widely available, then the pool of potential clients will be significantly
larger than today’s client pool. Smaller companies and individuals who
currently choose to do without external legal counsel and instead turn to
LegalZoom or other form providers, could suddenly be approaching big firms to
handle their legal needs.

Some of you are thinking, “But that’s not the kind of law
we practice, we do big law for big corporations.” To which I will respond, look
around you. The era of the big corporation is ending. The average lifespan
of a company
on the S&P 500 has fallen from 60+ years in 1960 to just
over 15 years today. There will probably always be some big corporations, but I
don’t think they will be the norm.

Relatively small companies like AirBnb (600 employees) and
Uber (~1,000 employees) are taking on much larger and more traditional service
providers, and they are having success. AirBnb and Uber are valued at $10Bn and
$15Bn, respectively. These are new types of companies that grow quickly, by
connecting people who have services to offer to those who need them, and taking
a percentage. This is relevant to us on two fronts: 1) If given the choice of
monthly subscription fees for access to legal engines or more traditional legal
services, which do you think these startups would choose? AND, 2) How long
before the law firm equivalent of AirBnb or Uber start selling them these
services?

(Tomorrow: What does an Exponential Law Firm that can survive in this type of environment look like?)

The following is the second part of a 4 part post that expands upon a short introduction I gave to an ILTA session entitled, Do Robot Lawyers Dream of Billable Seconds? If you have not yet listened to the full session (and you have nothing better to do for the next 90 minutes), you should go listen to it now. If you would like to download and read the entire 4-part post you can get it here.


The 6 Ds: An Exponential Framework

Image from Peter Diamandis’ presentation to ILTA.

On the first day of this year’s ILTA conference, I attended the keynote session presented by Peter Diamandis. Diamandis is the founder of the X-Prize and Singularity University. In corporate-speak, Diamandis is not just an “outside the box” thinker, he tore the box apart, set the pieces on fire, and urinated on the flames. I watched his speech in rapt attention, increasingly fired up by what he was saying. I imagined the headlines that would appear in the news the following day, “Angry Nerds burn down Gaylord Opryland Hotel!” or, “Diamandis Sparks Legal Geek Riot”. But strangely, at the end of his talk he received polite smattering of applause and the assembled nerds quietly stood and shuffled out of the ballroom toward the first coffee break of the day.

It was clear that not everyone heard what I heard. Because I heard Diamandis say, “Most of your firms will not exist in a few years. Much of this conference is a waste of time. You should all go find new jobs.” Of course, he didn’t put it that bluntly, but if you pull his remarks together and add up all the pieces, I think that was the underlying message.

One slide in particular had a profound effect on me. So much so that I scrapped the introduction I had written for my session later in the week and instead talked about this one concept: The 6 Ds.

Diamandis calls the 6 Ds an Exponential Framework. I struggled with that name for a long time, but I couldn’t come up with a better one either. It’s not a process; the Ds don’t necessary happen sequentially. It’s not a workflow, or an organizing principle. Model, pattern, and path don’t quite fit either. It’s just a framework that industries begin to take on once they cross the threshold of the first D.

Digitization

Perhaps you can begin to see why I needed such a lengthy preamble to this post. We have already crossed, or we are at the very least currently crossing, the digitization threshold in the practice of law. Diamandis’ framework suggests that crossing that threshold has entirely foreseeable consequences and that if we want our firms to survive, we must prepare them to exist in a completely different industry than the analog one we have lived in to this point.

The premise is that digitizing a product or a service throws an entire industry onto the Moore’s law bandwagon. Change within that industry immediately becomes exponential as processing power doubles and prices halve every 18 months.

I will cover each of these in turn, but the remaining 5 Ds that follow from this initial act of Digitization are:

  • Deceptive (initial change)
  • Disruption
  • Dematerialization
  • Demonetization
  • Democratization

Deceptive

This D is tough because it is the only one that describes a state of being rather than an action or direct change. The idea is that even though change immediately begins to happen exponentially, it still appears to be slow or even non-existent. This mis-perception is a product of our human inability to intuit exponential change. In real terms, even exponential growth appears static at very small levels. For example, without a high powered microscope, you would have a difficult time recognizing the initial exponential growth of bacteria in a petri dish. One cell becomes two, two become four, eight, sixteen, thirty-two, and so on.  For a long period of time, you would swear nothing is happening at all, and then BAM! an obvious explosion of growth. The rate of growth in that example is constant, but our perception of it is that it happened all at once; out of the blue.

Arguably, this is where we currently are in the legal industry. We are digitizing our practice and we have begun the process of exponential change, but that change is still small and very hard to see.

Disruption

Disruption is the elbow in the graph; the point at which change goes from near horizontal to near vertical over a very short period of time. That’s the point at which it becomes impossible for anyone to seriously argue that a significant and industry altering change has not occurred. The horizontal underline that turns into the letter L in the word “exponential” on the image above was created in Excel. It is an actual graph of steady exponential growth. You can see conceptually how deceptively small change can sneak up on an industry and give way to massively large disruption.

Diamandis argues that we have seen many industries crossing the digital threshold and that they all begin to follow this same framework. The last 3 Ds represent the post-disruption world.  They don’t necessarily happen in any particular order; they are more like directions that a digitally disrupted industry begins to head.

Dematerialization

Once a product or service is digitized, the materials (physical goods and associated services) begin to disappear. Kodak learned this the hard way when most people decided that the crappy digital camera attached to their phone was good enough. They stopped carrying dedicated cameras, and buying and processing film. Sales of physical books are down since the Kindle debuted. Who buys CDs or DVDs anymore? Physical media is wasteful, and expensive, and unnecessary. Just enumerating the physical goods that have been supplanted by the “phone” in your pocket would take pages.

Demonetization

Disrupted industries have seen the total amount of money that customers are willing to spend for non-material goods decrease significantly post-disruption. That is not to say that there is no money to be made, simply that the players who survive are often fighting over a smaller pool of available revenue or they have to grow significantly in volume to make up for the decrease in per unit cost. For example, digital music and movie downloads can no longer command the same premium prices that CDs and DVDs once did. Entire secondary industries based on distribution of physical media have dried up. Virgin Mega Stores and Blockbuster Video, once multibillion dollar juggernauts have disappeared and been replaced by digital distributors, like Spotify and Netflix, selling monthly unlimited access to entire libraries of media for the former price of a bargain bin album.

Democratization

Finally, the 6th D follows naturally from the 4th and 5th. If a good or service is now digitized and available online, and its price is now affordable to most people, then it is democratized.  Everyone can have access to it. This is the digital publishing revolution of which we at 3 Geeks have taken terrific advantage. Fifteen or 20 years ago, we could have published a newsletter that might have reached a couple of hundred people within a small region of the US. We would have had publishing and distribution costs. We would have probably charged a subscription fee. We would have needed someone to manage all of that for us, because frankly, we’re too lazy to do those things ourselves. Today, however, we have readers all over the world who read our non-sense daily and it costs us nothing but our time.

(Tomorrow: What does this mean for legal service delivery?)
The following is the 1st part of a 4 part post expanding on my short introduction to an ILTA session entitled, Do Robot Lawyers Dream of Billable Seconds? If you have not yet listened to the full session (and you have nothing better to do for the next 90 minutes), you should go listen to it now. If you would like to download and read the entire 4-part post you can get it here.



Computers

During World War II, a “computer” was a person who
calculated ballistic trajectories and published the results in books and sets
of tables that were given to artillery units and battle ship commanders. These
computers were mostly women who manually processed the calculations applying
complex mathematics and their substantial brain power to the task. They worked
in teams, checking and quadruple-checking each other’s work, as incorrect
results could quite literally affect the outcome of the war and lead to the
deaths of many soldiers on the front lines.

After the war, many of these computers were instrumental
in programming and debugging their brand new, building-sized, electronic
namesakes. Today, the term computer is never used to refer to a person.

These women were certainly not the first laborers to lose
their jobs to machines. The industrial revolution had seen many manual labor
positions replaced by newly developed engines, from coal powered steam shovels,
to electric sewing machines. But these “computers” were probably the first
knowledge workers (people that rely on their brain processing power rather than
their physical skill) to lose their jobs to machines.

Over the last seventy years that process has continued
unabated, with ever smarter electronic computers tackling more complex and
complicated knowledge work. And at every step of the process the next
profession in line had a million and one reasons why “a computer could never do
what they do.” But today we live in the world of IBM’s Watson. Watson is not a
miracle, it’s the natural progression from those World War II era computers, to
ENIAC, to the Personal Computer revolution, to the Smartphone, and eventually
to a computer that beats the best humans at the most difficult of human games;
Chess two decades ago, Jeopardy a few years back, and Settlers of Catan every
night on my iPad.

More impressive than my iPad beating me at a popular
German board game is the Watson victory on Jeopardy. Computers are now exhibiting
what were once considered uniquely human abilities: parsing and processing
natural language, understanding puns, and double meanings, and then determining
the intention of the questioner in order to select a correct solution from many
plausible answers. That is not terribly far removed from parsing the exact
meaning and intention of legal documents and then determining an appropriate
course of action based on precedent and prior analysis. The legal profession
should be on notice: the computers are coming.

What do we sell?

A few years ago I asked a number of my friends and
colleagues from other firms three questions:
  1. What do
    Lawyers think they sell?
  2. What do
    Law Firms think they sell?
  3. What do
    Clients think they are buying?
While none of the respondents gave the same three answers,
they all agreed that there were separate answers to each question. That kind of
confusion leads to all kinds of marketplace chaos and I tried to suggest a
common answer, that we were selling “access to the collective knowledge and
expertise of the firm.” That was not a satisfying answer to me, even then. The
question has continued to nag at me ever since, and after much consideration, I
am ready to suggest a new answer: We sell Legal Processing.

That doesn’t feel emotionally satisfying either, but the
more I think about it, the more convinced I am that that should be the simple
answer to all three questions. Clients typically come to us with legal problems
and we run those problems through our legal processing engines (attorneys,
established workflows) to produce advice, documents, in person counsel, or any
of the other things we commonly produce for clients. So, my original answer
wasn’t wrong, it just didn’t go deep enough. Lawyers are selling their legal
processing time, law firms are selling their collective legal processing
ability, and clients are buying the legal processing that they cannot or do not
want to do internally.

Much like the computers of World War II, the lawyers of
2014 continue to do most of that processing using their biological processing
units. These brains, as we call them, are extremely energy efficient and fast,
but are slow to train, prone to fatigue, often make mistakes, and are
notoriously difficult to network (not to mention the hardships of managing
them).

Digital Legal Processing

In recent years, we have entered a new era for the
practice of law, the digital era. The digital era probably began in earnest
with the explosion of e-discovery solutions in the last decade. These tools
were not simply technological means of improving the analog workflow, like a
Document or Contact Management System, these applications were beginning to do
the actual work that previously required lots of young associates with a great
deal of management supervision. With predictive analysis, many fewer associates
could do the same work in much less time, more accurately.

I have seen no fewer than 5 contract review applications
in the last few months that promise to reduce processing time and to increase
accuracy by large percentages. Eventually, these tools will most likely replace
biological processing units entirely. Even now, a large document review that
relied entirely on human ability, engaging no computer assistance at all, would
most likely leave a firm open to a malpractice suit. It is not a huge stretch
to imagine a time in the near future, when biological processing interference
of any kind, might do the same.

E-discovery and contract review applications are one type
of digital legal processing. They are essentially highly skilled and ever
improving pattern recognition tools, but obviously the practice of law does not
boil down to simply better pattern recognition. It also requires an
understanding of current laws, an ability to apply a client’s particular
circumstances to the current laws, and to make inferences, calculations, and
recommendations based on that understanding of the law. This is where Expertise
Systems enter.

Expertise systems allow firms to capture an individual
lawyer’s (or an entire practice group’s) knowledge and understanding of a
particular law, in a way that allows other lawyers or clients to use that
knowledge, even if they do not have access to the original lawyer(s). In other
words, with an expertise system, it is possible to build legal processing
engines that handle the routine aspects of practicing law, leaving the novel
and unique to be handled by the firm’s biological legal processing units
(attorneys).
Everything to this point is preamble to the next concept.

(Tomorrow: The 6 Ds: An Exponential Framework)

Competitive Intelligence in law firms happens.  I know it does because for almost ten years, I have been doing it. And still, it seems CI in law firms is a mystery, an enigma to those in the legal community as much as in the CI community.  I am writing this post as I fly home from the Strategic and Competitive Intelligence Professionals (SCIP)’s annual meeting. The meeting was superb, one of the best conferences I have attended recently.  The energy levels were high, people were engaged, conversations spilled out of conference rooms and networking events were packed.  And yet, when people asked me what type of organization I worked for, I got questions like “law firms have CI?” or “how do law firms do CI?” No ever questions my colleagues in the pharmaceutical, consumer goods, defense or food services industries, so why me?  Or rather, why still me?
On one panel discussion I sat in on, which looked at the first 100 days of a CI program, Mark Greene, Chief Business Development Officer at Waller, suggested that advertising in law firms is relatively new – its only been around for 35 years, as compared to the other industries.  So, arguably, the need to be “competitive” and the need for intelligence to do may also be new or newish.  It seems a plausible rationale, but given that next month, the ARK Group will be hosting a one-day conference on CI in Law Firms (check it out if you will be in the NY area, it is usually a great conference). And at its annual meeting in July, the Special Libraries Association (SLA),’s Competitive Intelligence Division will be running a session specifically about the Evolving Role of Competitive Intelligence in Law Firms, I think the industry-in-its-infancy argument is tired. 
When I walked to exhibit hall and talked to vendors, very few service providers outside of data providers such as S&P Capital IQ had law firm clients. Shift Central, and InfoNgen were two of the few intelligence product vendors in the room with existing law firm clients.  Aurora WDC was one of the only primary research and consulting firms who were willing to engage in a needs analysis for the industry and recognize the needs of the CI industry in legal. 
There seems to be a significant disconnect between what service providers and professional associations are making available, and what the industry needs.  Why?  What makes legal different?  When it comes down to it – I can identify three areas that make law firms significantly different enough that vendors are at a loss for an approach and CI people such as myself may have a bumpier ride in influencing the decisions at firms. 
1.     Despite several huge national and International firms in existence, the industry is still relatively small and insular.  So companies such as Bloomberg Law and AmLaw which do cater to the industry, won’t have a presence at bigger trade shows such as SCIP. That being said, I believe most CI service providers are wiling to work with CI practitioners to tailor solutions.  This puts the onus on the CI practitioner however to figure out what he/she needs and then work with a selected vendor to make it happen.  Not always a preferable approach.
2.     The management structure of law firms is, despite many firm’s attempts otherwise, is still primarily a partnership structure with multiple bottom lines and conflicting priorities.  Even where CI sits within the organization can be a challenge.  The operations and budget of Marketing, Library, Business Development, and/or Knowledge Management within firms will vary widely, making the “home” of CI susceptible to even more scrutiny.  The only way for the law firm CI practitioner to deal with this challenge in my mind, is to work slowly, gain small wins and manage expectations.
3.     Finally, the third difference and difficulty I see for law firm CI practitioners is the notion that CI in law firms supports both the practice and the business of law.  This is a very fundamental difference between what we do and what practitioners in other industries do.  And, this is a challenge that those outside of the industry may not understand.  It is a subtle difference but one that makes all the difference.  Law firm CI is different in that we need to focus on not just the business but also what is happening from a legislative and regulatory point of view.  This presents a unique challenge, which when coupled with the other two points above, makes legal CI seem like a daunting task for the practitioner and an industry not obviously ready for outsourced or assisted CI.
So what do we do in the face of these differences?  We carry on.  Now more than ever, I am inspired to put legal CI on the proverbial map.  I feel confident that what the legal industry is doing in CI fighting above its weight in terms of its sophistication and tactical approach. Despite the challenges and the not-so-obvious-existence, CI in law firms is alive and well, if possibly under-served.  Time will tell, but I am willing to bet it won’t take long before the CI community in law firms is setting bar the for everyone else.

After reading NYTimes reporter David Segal’s article, “Is Law School a Losing Game?”,I thought back to the year that I graduated law school.

The earlier ’90s were not much kinder than now. Coming out of school on the heels of the energy recession, I was one of the lucky few to land a job. Most of my peers struggled to make their way: forming their own partnerships, going solo, moving back home to join the family law firm, going into legal recruiting.

I’ll never forget one day when I was being extra diligent and made my way back to my alma mater’s library when I ran into a former classmate. I was shocked when he told me that he was bird-dogging cases at the courthouse while living out of his car.

I’ll never forget the look on his face: it was a mixture of horror, shame and desperation.

I was the first in my family to become a lawyer.

When a relative decided to follow in my footsteps, I cautioned them in all the mistakes that I had made: focus on your grades, forget about class recitations, get as many clerkships as you can and start looking for a job as soon as you start school.

And, above all, don’t live off of student loans.

There were many days that I regretted that law degree. Today, I have made my peace with it. And now I know that I’m fortunate to have a job in the legal field that is personally satisfying.

Not everyone is so lucky.

I thought I misread the LexBlog “New Blogs” post this morning when it said that Fox Rothschild just launched its twenty-sixth (that’s 26!!) blog this week. Holy crap!!  Twenty-Six Blogs from a BigLaw Firm??? That is completely amazing. Not only that, but in my quick scan of the blogs, it seems that there is current content (no older than two or three weeks at most) on each of the blogs.

In an age where many firms are still struggling to come to grips with social media, it seems that Fox Rothschild has grabbed social media by the horns and is showing everyone else how to ride it. As Mark Silow, Fox Rothschild Administrative Partner, puts it:

“Clients depend on communication from counsel to keep track of the legal changes that affect their business. That’s why we speak with our clients on every level — including using innovative communications like Blogs.”   

It is good to have trailblazers out there for the rest of the flock to follow.  Keep up the great work!!  One hint to the webmaster at FR, though… go ahead and link to the actual blog page… and skip the intermediate page that doesn’t have any content!! Here’s a list of all of the blogs:

Art Law
Attorneys Gary Moriwaki, Daniel Schnapp and John Wait cover issues relating to art litigation and finance, specifically art recovery, art preservation, art as collateral and valuation of art. They also discuss recent trends in the art market.
View Blog
California Employment Law Blog
Labor and Employment attorneys Keith Chrestionson, Alex Hernaez and Jeff Polsky discuss a wide variety of legal challenges faced by California employers, including class actions, wage and hour, overtime, discrimination, harassment and privacy issues.
View Blog
Condemnation & Eminent Domain
Fox Rothschild has one of the leading eminent domain and real estate litigation practices in the country. Join David Snyder, co-chair of the firm’s Condemnation Practice Group, as he provides useful information and commentary regarding developments in the law, updates on projects and helpful tips regarding eminent domain and other real estate litigation related topics. This is an excellent resource for real estate professionals, property owners and condemnors who may be embarking upon a new project.
View Blog
Delaware Bankruptcy Litigation
Join attorney Jason Cornell, whose practice includes representing a broad range of clients in bankruptcy matters before the U.S. Bankruptcy Court, District Court and the Third Circuit, as he offers his take on corporate bankruptcy proceedings in Delaware and throughout the United States.
View Blog
Delaware Intellectual Property Litigation
Wilmington Office Managing Partner Gregory B. Williams explores the decisions issued by the U.S. District Court of Delaware in the areas of antitrust and intellectual property law.
View Blog
Education Law
Timothy Gilsbach, Mark Fitzgerald, A. Kyle Berman and Jeffrey T. Sultanik maintain a blog about education law, highlighting the statutory and regulatory changes and offering observations about the educational society and the impact that society has on educational institutions. Topics covered include gender discrimination, special education, parental rights, higher education, student speech and services and Title IX.
View Blog
Employee Benefits
This blog provides updates and commentary on various topics specific to the interaction between employee benefits and human resources, with an eye toward topics salient to the administration of employee benefit programs in conjunction with employment concerns. It is essential to keep current on the changes in the law (and, in some instances, case decisions) that directly impact benefits plan administration – including the ever-changing “reasonable person” standard under ERISA. Any professional who actively participates in the administration of plans and has questions regarding the current state of the law and the interaction of the law with human resource obligations will find this forum helpful.
View Blog
Employment Discrimination Blog
The firm’s Employment Discrimination Blog covers all aspects of employment discrimination and harassment, including new court decisions and legislation, compliance, best practices, interesting trends in workplace relations and employment-related issues affecting employers.
View Blog
Fair Housing Defense
Join Fox Rothschild attorneys Scott Badami, Karin Corbett and Christian Moffitt as they provide insight and information on and compliance with the Fair Housing Act and its state and local counterparts. The blog provides a forum for issues of interest to apartment owners and management companies as well as professional management employees.
View Blog
Family and Medical Leave Act
With new regulations regarding the Family and Medical Leave Act (FMLA) on the horizon, and requests for FMLA leave on the rise, employers need to be aware of new developments in FMLA case law and regulations. Join Catherine Barbieri, a partner in Fox Rothschild’s Labor & Employment Department and the firm’s Hiring Partner as she discusses changes to FMLA, what employers need to know and how to respond on the FMLA Blog.
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Fashion Law Blog
Staci Riordan, chair of the firm’s Fashion Law practice, covers a wide variety of business issues faced by the fashion industry, including strategic planning, licensing, trademark and copyright infringement, the Design Piracy Prohibition Act, employee issues and much more, in the firm’s Fashion Law blog.
View Blog
Federal Taxation Developments
Join nationally recognized tax attorney Jerald David August as he discusses recent tax legislation, regulations, rulings and case law developments have resulted in a significant amount of new information that can substantially impact taxpayers.
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Getting Funded Law Blog
Looking for financing for a project or business in the current economic climate? Attorneys Gregory Kleiber, Michael Maransky, Megan Duryea Santana and Robert Walper cover a wide variety of topics pertaining to getting loans and funding, including traditional bank financing, sale-leaseback arrangements, public-private partnerships and much more.
View Blog
HIPAA, HITECH and Health Information Technology
Need information about the legal developments, issues, and other pertinent information relating the creation, use, and exchange of health information? Look to Fox’s HIPAA, HITECH and Health Information Technology blog. Join our multidisciplinary team of Fox attorneys as they discuss topics such as EHRs and PHRs; HIEs, RHIOs, and EHR networks; privacy and security; breaches; recent legislation; intellectual property issues; physician perspectives; litigation risks, among other related topics.
View Blog
IP Legal Watch
The IP Legal Watch Blog analyzes issues of interest concerning patent, copyright, trademark and related litigation, with an emphasis on recent court decisions and breaking news.
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New Jersey Family Law
Fox Rothschild’s New Jersey Family Legal Blog provides practical information and useful tips related to such topics as alimony, child support, custody, parenting time, divorce, equitable distribution, prenuptial agreements, domestic violence and grandparent visitation. This blog is an excellent resource for individuals with New Jersey specific family law questions and advisors whose clients may encounter family law issues.
View Blog
New Jersey Real Estate
The New Jersey Real Estate Blog, authored by Fox Rothschild attorneys Jeffrey Hall, Jack Plackter, Alexander Wixted and Andrea Tompkins Wright, serves as a source of information on topics related to New Jersey real estate property law and development. The blog provides information on topics such as land use and zoning, green building and tax appeals. It also provides new case law as well as legislative and regulatory updates. The blog is intended to be a resource for multifamily, industrial, mixed use and commercial property owners and developers.
View Blog
PA Brownfields & Environmental Law
Join M. Joel Bolstein as he offers his thoughts about information and developments in Pennsylvania brownfields and environmental law. Topics Joel has discussed include low risk sites, SIA agreements, the Hazardous Site Clean-up Act (HSCA), and more.
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Pennsylvania Family Law
The Pennsylvania Family Law Blog provides readers with information on and insight into Pennsylvania Family Law issues, including divorce, equitable distribution, alimony, child support, spousal support, alimony pendente lite, and custody.
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Physician Law
For those seeking current news and updates on legal issues affecting physicians and non-institutional providers in both their personal and professional lives, Fox’s Physician Law blog is for you. Attorney Todd A. Rodriguez offers his insights and tips on new legislation and legal issues relating to practice management, billing and coding, ancillary services, malpractice insurance, fraud and abuse developments, and other important legal issues.
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Privacy Compliance & Data Security
Privacy compliance and electronic data security affect almost every business. Data breach prevention is essential. Fox Rothschild’s Privacy Compliance & Data Security Blog will help readers navigate through the policies and best practices of data breach response. The Blog covers topics including compliance with data protection laws and regulatory enforcement and litigation as well.
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Sports Law Scoreboard
Jeffrey Kravitz, Ismael Bautista, Jr. and Edward Hayes are dedicated sports fans and practicing attorneys. Their blog highlights current news in sports and discusses the associated legal implications in a manner designed to entertain and inform the sports community, fellow fans and casual observers.
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Wage & Hour — Developments & Highlights
Members of Fox Rothschild’s Labor & Employment team provide the latest information and commentary on developments in wage and hour law, including classification of employees as exempt/nonexempt, class action issues and cases, independent contractor developments and cases, what does and does not constitute “working hours” and much more.
View Blog
White Collar Defense & Compliance
Fox Rothschild’s White Collar Defense & Compliance blog includes articles of interest to both practioners and corporate counsel in the areas of criminal defense, regulatory compliance, and internal investigations. Our objective is to identify new cases and developments, as well as statutory/regulatory enactments of note, and to spot emerging trends in these practice areas. Your comments, including suggestions concerning other content which may be of interest, are always welcome.
View Blog

Here are the two launched this week:

Life Science Blog
Fox Rothschild’s Life Science Blog focus their posts on pharmaceuticals, medical devices, biologics, foods, dietary supplements, cosmetics, animal feed and Drugs, radiation-emitting Products and nanotechnology.

Franchise Law Update Blog
In Fox Rothschild’s Franchise Law Update you won’t find only a discussion of the regulatory aspects of franchising, but diverse topics including business finance, employment, litigation, and the protection of intellectual property like trademarks and copyrights.

Baker Botts announced yesterday that are moving into their next phase of “Associate Attributes Model [pdf]“, established in 2008, through the implementation of the “Talent Management Program“. The idea is to move Associates off of the lock-step model that has been prevalent in law firms, and toward more of a merit-based system that evaluates the talent and performance of the Associate to determine his or her “level” within the Associate ranks. So, old Army guys like myself can think of it as a pseudo-military officer ranking:

  • “Junior Associate” = 2nd Lieutenant
  • “Mid Associate” = 1st Lieutenant
  • “Senior Associate” = Captain

Just like in the military, the people you graduated with at the Academy (these are top firms… so no ROTC’ies) wouldn’t automatically get promoted at the same time. Three factors are used to determine the skills of the Associates, including “Core Attributes”, “Professional Skills” and “Interpersonal Skills”, and those go through a rigorous five step process by established individual and committees of supervising lawyers. Here’s a list of the five steps:

Step 1: Associates Are Requested to Identify Supervising Lawyers
Step 2: Departments Form Evaluation Committees Interview supervising lawyers
Step 3: Evaluation Committee Interviews Supervising Lawyers
Step 4: Data Compilation and Evaluation
Step 5: Associates’ Formal Evaluation Meetings

The overall purpose of this evaluation and three-levels of Associates is to respond to requests from the “clients for a clear demonstration that lawyers’ experience and capabilities correlate to their billing rates.” Of course, Baker Botts adds that they will still be paying their entry-level associates $160,000 a year.

It’s this last part (the salary) that makes me wonder why Baker Botts is going to all this trouble to look like they are breaking away from the old “business as usual” only to fall right back into the trappings of BigLaw version 2007 all over again? I won’t even get into the logistical nightmare of trying to get partners to sit in and effectively work on “evaluation committees.

I could be off base here, but it seems right now that it is a buyer’s market when it comes to hiring talent out of law schools, and it doesn’t seem like any firms are taking advantage of this. Why is a Texas-based firm that is hovering in the middle-40’s of the AmLaw 100 paying the same salaries for Associates as a top-5 firm? The talent pool isn’t shrinking, but the amount of talent that is being pulled out of that pool is. So, there is a lot more talent available for the picking… and many of them are not going to wind up in a big firm. Add to that the huge amount of talented 3rd, 4th and 5th year associates that are still looking for work, and you’d think that firms would be sitting pretty in getting talent at salaries closer to 1997 levels than at 2007 levels. My co-blogger Toby is the one with the Masters in Economics, but even I seem to understand a little about supply and demand (which seems to have alluded some firms out there.)

It just seems that adding levels and evaluating the talent of Associates is a good start, but if you’re just going to continue the same recruiting, hiring techniques used in the past, coupled with the “pay whatever the top guys are paying and we’ll get equal talent” idea, that you’re just not dealing with the reality of how to manage talent, manage salaries, manage billing rates, and manage client expectations. Perhaps these steps are coming in the next phase of the Associates Attributes Model?