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Hasta la vista baby – the termination of the legal profession

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Later this week I’m running a session for a group of leading technology lawyers which will explore the future of the profession.

Withington & Co's new M&A lawyer was a force to be reckoned with

Why I think this will be particularly interesting topic for this group is that I believe technology will be the  single biggest driver of change  for the legal sector in the long term.

Sure, globalisation, outsourcing, commoditisation, changing procurement patterns are all shaping the market now, but technology has the potential to change it to a much greater degree.

Here’s why.

There are a number of technology trends that have already influenced the profession to a greater or lesser degree:

  • The Internet has enhanced communication speed and accessibility which has fundamentally changed client service expectations and the response times in the market
  • The vast amount of electronic information available has made search and retrieval a vastly different affair to that of twenty years ago, when a trip to the law library and a long afternoon was required to get oven an overview of the latest law in an area
  • Collaboration software is allowing the process of working with internal stakeholders and external parties to become more efficient (not least by reducing the number of times documents are passed backwards and forwards)
  • The sharing of information between law firm clients has become far more widespread (intensified by social media) so that emerging client buying patterns such as the rejection of hourly billing become more adopted more quickly
  • Technology supports the standardisation of work – with more and more firms focussing on efficiency and improving process, tools like workflow software can support and enhance changes to the way lawyers work
  • The automation of low complexity work, most visible in the consumer space (think automated wills online), is also beginning to see wider adoption in the B2B space as more complex work gets disaggregated and the low complexity components get packaged up and automated (standard due diligence report anyone?)

However, to my mind, this is really only playing on the edges of what’s possible.

Where I’m really interested is the area of law where lawyers believe they add most value. The high-end, complex work. The work that NEEDS a specialist. A true expert.

Lets go right to the “business end” of the legal value chain.

Think about the legal sector and what it actually does.

Law is made (the government legislates, courts decide a case etc). This law is recorded and at a high level interpreted (often by academics and other commentators). The combination of these two steps provides a shared view of generally what the law is.

By and large, and the moment the value here is really only accessible to legal practitioners – the public  can get access to certain statutes and cases for free online, but the public’s ability to understand what they mean remains limited – although this is beginning to change.

The next step is to turn this information into a broad set of tools (largely documents – agreements, policies and other commercial instruments) and for the lawyer to use these tools and his or her understanding of the law to interpret the high level meaning and apply it to a particular set of facts, and in doing so create some further value for which the client will pay.

S0mewhat simplistic, but in very basic terms, the majority of the value that the market will pay for is in this interpretation and application of the law to increasingly complex situations. There are other factors that drive value such as the scale and risk involved, but generally speaking, more complex work means higher fees.

Looking a bit more closely at what lawyers actually do in this high value phase, in the vast majority of cases it will take  two forms – advising and creating documents. We already know that technology is starting to shape document creation (have a look at Epoq, Rocket Lawyer, legal Zoom and LexisNexis if you don’t believe me), but surely (SURELY) technology couldn’t actually start to creep into advising clients?

Could it?

This is the skill honed over years of hard-earned experience. The ability to steeple fingers, sit back in chair and let the cogs turn. To casually drop a Latin phrase into an argument. Those uniquely human abilities to find meaning and similarities between cases and facts. To both synthesise, analyse and structure highly complex information.

The skill that requires (in the UK) a three year law degree, a year of practical training, a two year stint of on-the job training, before the brightest and best graduates can call themselves qualified and enter the profession fully to “start” their career and their real learning.

Surely not.

Think about this, from a BBC article on the impact of technology in the City:

“Trading floors were once the preserve of adrenalin-fuelled dealers aggressively executing the orders of brokers who relied on research, experience and gut instinct to decide where best to invest.

Long ago computers made dealers redundant, yet brokers and their ilk have remained the masters of the investment universe, free to buy and sell wherever they see fit.

But the last bastion of the old order is now under threat.

Investment decisions are no longer being made by financiers, but increasingly by PhD mathematicians and the immensely complex computer programs they devise.”

While there are many differences between this activity and the legal profession, there are also plenty of similarities.

Once you start really looking at what lawyers do, and begin to grasp what technology is already capable of, a real threat to the profession as we know it doesn’t seem so far fetched.

Entity recognition (understanding, finding and cross-referencing individuals and organisations in documents) is already well established, and software like Autonomy (“the leader in meaning based computing”) can do magical things in terms of identifying relationships between “things” and deriving meaning from raw information (think “facts”).

Look at recent developments in ediscovery and contract management software, and have a read of Jason Wilson’s great post on lawyers “I am now an app” for lawyers, and of course, whether you agree with him or not, do revisit Susskind’s work .

For me, rather than the commentary in the area, what makes me really believe big change is coming, is what I hear and see when I talk to some of the leading technology thinkers in this area.

To hear them describe the law by talking about decision trees and statistical probability (based on historic data and future trends), to hear them explaining rules engines, logic and information structures, really makes me pause for thought.

It’s a different language, but with the same objective of solving problems and creating value for clients.

This type of technology promises paradigm shift in speed, accuracy and cost reduction that goes far beyond what an LPO could offer with a human based process.

Of course it’s not that simple. Apart from the very real time, effort and money required to build the technology, aside from the judgment required to apply the law, there is of course a truly human element in providing legal service (that word is a clue). This service wrapper is likely to keep large chunks of the profession safe for a while, and of course as one work type is automated, the opportunity for the profession is to find a new, higher value area of law to explore.

My (human!) instinct is that it will be lawyers who first use these new generation of tools first, to provide faster, better services to their clients, rather than clients using them directly to replace lawyers.

The lawyers may be at traditional law firms (large or smaller niche players) or LPO or other volume providers. Either way the early adopters will become the Terminators, the firms that resist will be Sarah Connor.

Seems far fetched?

My belief is that the fundamental changes now facing the profession are only the beginning of the beginning, and that technology will shape the end game far more than any of us can probably predict.

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What’s the end game?

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I was with a group of law firm partners from different City firms this week, listening to them discuss a case study about super-profitable US law firm Wachtell, Lipton, Rosen & Katz. Aside from their phenomenally successful business model and profitability (with the Amlaw100 reporting profit per partner of over $4m), one of the points that provoked most discussion was the idea that many of the partners would retire from the firm in their early forties.

Doris was overjoyed to hear she'd finally made partner

One response from the group was “that’s just coming into your lawyering prime”, which really got me thinking about careers in the legal profession, how they’re changing and ultimately what the end game is for many lawyers.

It used to be simple.

When I entered the profession in the mid/late nineties you joined a firm, did your training contract, hoped you’d get kept on, and if you did took your place on the conveyer belt. In the larger firms this often meant increasing specialisation and more often than not, increasing your hours.

In particular it was understood (albeit often unspoken) that the years between two and five years post-qualification were the proving ground. Where firms got to weed out those who were not suitable for partnership, and consequently lawyers were competing to prove they were up to the job.

This ethos, coupled with the leverage dynamic (with a smaller number of equity partners generating huge fees from supervising and managing junior lawyers) and chargeable hours model saw associates happily prepared to work all hours as they strived for partnership. The pot of gold at the end of the rainbow.

Every year their increased experience meant law firms could up their hourly chargeout rate, meaning in turn that as long as their chargeable hours stayed high, a nice chunky payrise was available, thus providing a short-term incentive for the associate to stay in the game.

Now this approach certainly had its faults, but it was largely understood and accepted and as a result it worked. Hell, early in my career I was certainly prepared to play by those rules.

But things have changed.

That model is breaking.

Firstly, the concept of work/life balance arose. Slowly, softly at first, it began to gnaw at some of the Generation Xers. Marriages came and went and at both points, people began to pause for reflection. Children brought matters into even sharper focus. None of these events were new, but society’s attitudes were changing and the legal profession was not immune from this.

With the emergence of Generation Y, the trend began to accelerate. I vividly recall a conversation with a managing partner of similar age to myself a couple of years ago, where he shared his frustration that many of his assistant solicitors wanted to leave work at 6pm. He understood this, but having put the hours in himself at that stage in his career, found this attitude difficult to reconcile with the drive and focus he expected from his young lawyers.

At the other end of the spectrum, change was also afoot. Many of those partners who had put in the hard yards and had been through the grinder were looking round and asking “is this it?”. Some had migrated into management as this was seen as the only upward progression, but either didn’t like it or weren’t suited with it. Others began to see the downside of their high levels of specialisation by craving a broader workload.

The model was also being tested by the market. A growing rejection of hourly rates, and more sophisticating procurement of legal services caused clients to question firstly whether hourly rates were suitable, and secondly, if they were, why they should be paying more for a particular resource than they paid a couple of months ago (simply because they had another year PQE and their rate went up) when the value delivered was exactly the same.

As the career model began to crack, the consequences began to emerge. Moves to in-house roles, into venture capital and private equity companies became more common, and law firms began to adapt by creating different career paths and non-partner senior roles such as “Of Counsel”, “Legal Director” and of course “Consultant”.

But with the structure of the profession fundamentally changing due to trends such as outsourcing, technology, commoditsation and globalization, is this enough?

While the supply of law students far outsrips demand, the answer I suspect is that the slow changes to the status quo will probably be sufficient in the short term, but ultimately as the profession reconfigures to meet the changing needs of the market, new and better career structures must emerge or I believe traditional law firms may begin to lose heavily in the global war for talent.

 

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The Joy Of Secs (secondments)

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I’ve been hanging out with a lot of in-house counsel recently, and one thing’s clear.

They love their secondees.

Really love them.

The working environment on secondment wasn't quite what senior corporate associate Sarah was expecting

Whether it’s a GC who is relying on a specialist skill set that he or she can’t quite find the budget to recruit, a mid-level corporate counsel who is working with a junior lawyer from private practice who helps with the “heavy lifting” on a big deal, or a small in-house team that find having a secondee gives them much broader access to their external law firm’s resources than their usual interaction – the sentiment is unanimous.

For law firms, secondments offer some incredible benefits too. Time and time again, clients point to knowledge of THEIR business as a critical factor in selecting their external lawyers. The insight secondees getting living and breathing in that environment can’t be gained from market research or reading up on the company. Plus, alongside the knowledge of how a client works, their culture, their pain points comes the opportunity to build broader and deeper relationships – not just with the in-house teams, but with their internal clients too.

Where a secondment programme has a rolling element (whether trainees or more experienced lawyers) and the firm puts in a continuous series of lawyers over time (for example a change every six months), this can build an incredibly strong connection over time between firm and corporate team and build a powerful competitive advantage for an incumbent law firm.

Outside of the particular secondment relationship, lawyers often return to private practice with a broader skill set and a better understanding of clients at a more general level, and are much better placed to empathise with the in-house community as a result. Plus in-house experience, even at a secondment level, really does does count when pitching for work with corporate counsel.

So it’s all sunshine and light?

Hell, let’s try and stick everyone on secondment and then we’ll never lose a client. Right?

Alas, it’s not quite that simple.

The major challenge law firms face is economics.

The basic premise of a secondment being that if a client has enough of the right type of work (generally consistent in terms of volume, skill and experience required), but not enough to make permanent recruitment an option, then taking a single lawyer on secondment will be cheaper than paying for that resource on an hourly rate basis. In return the law firm gets guaranteed utilisation of the lawyer, a degree of certainty of revenue and predictable cash flow.

But the world has changed. Because the competitive intensity in the legal market is increasing rapidly, and because firms have wised up to the broader benefits of secondments (set out above), the price that in-house teams have had to pay for a secondee has fallen rapidly.

As the economy tightened, putting secondees in “at cost” became more prevalent. At a superficial level, this again made sense – with firms restructuring and struggling to find work to keep all their lawyers busy (and therefore employed), farming them out to clients allowed them to retain their good people while keeping clients happy.

But in reality, often the exercise often ended up costing the firms more than they anticipated. Questions arose to what “at cost” actually meant. Was it salary cost (and if so did that include benefits, bonus etc)? What about a proportion of overheads (often asked as the finance director walked past the secondee’s empty desk in an expensive City location)? Who picked up the tab for the upgraded laptop that was required to get on the client’s network? What about the opportunity cost when another project turned up unexpectedly and the firm was struggling for a particular resource profile to do the work efficiently?

As the requests for secondments increased, difficult decisions had to be made – who can we say “no” to? If we say “no” will another panel firm put someone in? Is it an investment rather than a revenue stream, and if so, how do we calculate the return on that investment?

Competition for resource within firms, already fraught with politics in many cases, heightened.

The pressure on resources is made worse still when a secondee doesn’t return (not as sinister as it sounds!). Two common outcomes are that the secondee “goes native” and is simply recruited by the client. If the relationship with the law firm is financially material, the firm will have limited ability to negotiate any form of compensation, irrespective of terms in the engagement letter. The other alternative is that the secondee gets a taste for in-house life, and after returning to the law firm simply finds another job with a corporate legal team as quickly as possible.

Speaking from experience, while I had already decided that an in-house role  was probably the next move for me, three months I spent on secondment a year before I made that move did help to crystallise my thinking when the time was right to make the change.

Another challenge is for longer term secondments, how does the law firm effectively keep the connection with the secondee? I’ve seen this challenge at several levels – from the junior associate living out of a hotel for nine months, disconnected from her peers and far from her family, to the partner slowly becoming marginalised in the partnership and losing the emotional connection to the mothership.

Pros and cons.

Swings and roundabouts.

To my mind however the overall value equation is clear. If the engagement is structured well, the economics thought through and the fit between secondee skill set, personality and appetite with the in-house team’s culture and need is good, a secondment is a winner every time. The key is not to assume every secondment fits this model and to put the time in up front to get to a working relationship rather than to simply react and throw resource in at every opportunity that comes along.

Happy seconding.

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Why sorry is the hardest word

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I had a very interesting conversation with a colleague yesterday around a workshop he was facilitating for a fairly sizeable group of lawyers. As part of the discussion he asked the question “how many of you have ever been the subject of a client complaint”.

Our subsequent discussion centred around the fact that the solitary hand that was raised did not seem representative of the either the statistical probability of the number of complaints from the group (there was probably well over 150 years of cumulative PQE in the room) or the amount of unspoken discomfort in the room.

Adam readied himself to discuss his drafting mistake with the head of department

I’ve written before about why lawyers find it difficult to admit they are wrong (a training based on hiding weaknesses in your client’s arguments and exploiting your opponents, and a pathological fear of negligence claims), but the point I want to explore here is how much harder it is to deal with the consequences of a mistake, if you can’t admit it in the first place.

My starting point is that mistakes will happen. I don’t care how good you are as a lawyer or a law firm, while legal advice is predominantly a human activity (as opposed to automated or process based), the human factor remains fallible.

You, me, none of us are perfect.

Now of course you can minimise the risk of mistakes – quality checks, supervision, training, best practice etc, but at the moment I’ve yet to come across any law firm partner that can hand on heart tell me the firm has not made a single mistake in the past 12 months.

And as work becomes more complex and has to be done at ever increasing speed, the possibility of mistakes may well increase.

So mistakes are going to happen. The question is, how are you going to deal with them?

The majority of larger law firms and corporate legal departments have some type of relationship. Some are more transactional than others, but I’ll make an assumption that the mistake happens in the context of some type of broader relationship, not least because that’s when both parties are likely to care more about it.

My experience both in law firms and in-house tells me firms can deal with mistakes really well, or get it spectacularly wrong.

Let’s deal with some classic unhelpful responses ( Twitter would categorise these law firm #custservfails) first:

  • Refusing to the acknowledge the problem – “advising around it” – effectively providing remedial advice to sort out the problem before the consequences become significance (“I see your point, we’ll add some additional wording in here, just to clarify that”)
  • Blaming the client – implicitly or explicitly (“well, if they’d given us clearer instructions this never would have happened”)
  • Glossing over the problem (“lucky we caught that in an early draft”).
  • Sorting the problem out without any sign of good grace or contrition (“leave it with us”)

Perhaps my favourite example was a conversation I had with a law firm where I’d had a repeated breach of my company’s outside counsel policy (which explained among other things, who in the business could instruct external lawyers, and what involvement the legal department had to have with a matter). After the third clear breach since I drew the point to their attention, I asked for a meeting with the relationship partner to get to the bottom of the issue.

I have to admit to being amazed when the partner turned up with two of his peers from different departments, with a clear plan to try and turn the meeting into a cross-sell pitch. I was certainly expecting the “S-word”, but it wasn’t “sales”.

  • No apology.
  • No self-awareness.
  • No more instructions.

But it’s not all doom and gloom. Several firms I worked with were very good at managing the occasional mishap.

One of the most telling signs was where the law firms brought a mistake to my attention, particularly as there was a chance the error might not have got noticed. For example, I’ve had that happen when there was no chance at all of me noticing, because the error arose as a result of a translation from Arabic (where the law firm had arranged the translation).

This builds a huge amount of confidence, and in every case where that has happened, the firm also presented an explanation of why the problem arose, and (critically) a plan to make sure it didn’t happen again. Viewed in this light, problems can be an opportunity to improve the service for the future, and build genuine trust with the relationship.

To me, as a client, that open dialogue is critical.

It works both ways too. Rather than bitch and moan about poor service (which can be more than a simple mistake, as it involves performance measured against expectations, which in some cases may not be explicit), I believe it’s in both parties’ interest for the client to raise the matter with a law firm, and to do so in a clear and specific manner which allows the firm to take action.

I’ve done that in situations where this has helped the law firm have difficult performance management discussions with under-performing staff and also improve processes that have benefitted multiple clients.

Now if this sounds like some sort of rose-tinted utopia, let me be clear – it’s not. Not all of these conversations are easy, (“Difficult conversations – how to discuss what matters most” is a great read by the way) and at times can be uncomfortable, but I do believe that putting in the effort beats the alternative for both parties – a dysfunctional relationship benefits no-one.

There are also times where the scale of the screw up is so monumental, that the relationship simply can’t be saved (for example the reputation damage to the law firm within the client business is so great that the in-house lawyer would lose the confidence of his or her clients by using the firm again), but those cases are few and far between.

In most cases, starting an open, honest and productive dialogue is the best way forward, and saying “sorry” might be a good place to start.

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Lawyers – ask why they buy, not why they didn’t

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Have you ever thought about the reason people choose to buy legal services from a particular firm?

Sure, if you’re a lawyer in practice (or a business development professional at a law firm) you may have spent some time debriefing why you lost a tender, but have you actually talked to some clients to find out why they chose to use you in the first place? If you have, do you know why they continue to instruct you?

The firm's sophisticated accounting system registered another sale for the IP litigation practice

I was pondering this as a post from Mike Ames really reminded me of some of the timeless  fundamentals of the buying process that it’s good to revisit. It’s perhaps easier to look at the reasons why you don’t make the sale than the reasons that you do. The post addresses this imbalance, and is set is below in italics, and you can find the original post along with more solid business development ideas on Mike’s blog.

Strange really. We all buy things every day whether it’s a sandwich at lunchtime, petrol for your car or a £4m computer system the process is pretty similar but what makes us do it?

  1. Need. If you think about the obvious starting point is having a need that is either immediate or anticipated. Sometimes we may not be aware of that need (which is why the advertising industry exists, in case you ever wondered) and it needs to be brought to our attention.
  2. Capability. Who is going to buy anything that is not fit-for-purpose? Well actually loads of people but nobody does it willingly. So as a business developer you must demonstrate that your offering can meet all of the client’s needs. This can be tricky; a sort of a catch 22 – they won’t hire you until they know and they won’t know until they hire you. These are the ways round this dilemma: references; case studies; testimonials; site visits; risk and reward work; what you have said and written; you!
  3. Beliefs. People tend to buy from people who match the same beliefs as they hold (for more on this watch this brilliant TED video of Simon Sinek). It’s how all great brands work. They convince us that their beliefs are the same as ours and we buy. What do you believe in I wonder?
  4. Differences. Let’s face it if we were confronted buy two offerings that we could not differentiate between in any meaningful way which one would we select (drum roll) the cheapest of course. This is how commodities work: something that is purchased solely based upon its price. A nasty place to be and one to be avoided at all costs. Now being different is easy but being different in a way that benefits our clients is a lot harder however, dear readers, this is exactly what we have to do. We must show we are different from our competitors and that these differences somehow provide tangible benefits to the client. or we could just be the cheapest I guess.
  5. Value. We don’t always buy the cheapest but we all buy according to our own cost/value equation. Audi cars are brilliant: reliable, stylish, hold their value and make us feel cool but they are definitely not cheap and yet we still buy them by the boat-load (quite literally in fact). The reason is that Audi have provided those people who have sufficient money with a balanced cost/value equation – basically they are worth the money. We must do the same.
  6. Trust. Occasionally we are forced to buy from people we don’t trust. We don’t like it but we do it when we need to. What we really like though is to buy from people we trust so if you can build trust you increase the chances of getting a sale. Here are a few ideas: always deliver on your promises no matter how small; be open and honest at all times even if this is not in your best interests; be consistent. There are other contributories but these are the most powerful.
  7. Rapport. Probably not as important as you might think but having rapport with a buyer can swing the deal your way when its a close call. A lot of rapport stems from trust of course but try smiling more (recent research by Bangor University proved you will sell more if you do)  and just be you. When the American businessman Lee Iacocca was asked by a group of students what his best piece of advice was he answered “don’t fake it”.
So there you have it. To be successful at sales, find a client who has a need you can satisfy, demonstrate your credentials, show how you are different and how these differences can benefit the client, establish common beliefs and present your offering in such a way as the benefits outweigh their investment. If they trust you and there is a rapport between you start and draw up the engagement letter.
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The in-house law firm – the future of corporate law departments?

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I’m a big fan of Tom Peters. Not just because he genuinely interacts with his followers on Twitter, not just because he’s passionate about what he writes about, and not just because he presents (presentations, books) in some pretty cool ways. I’m a fan because he has some great ideas.

Corporate counsel Sedgwick took his boss' advice to "be a rock star" seriously as he began to address the board meeting

If you look back to his book “Re-imagine, business excellence in a disruptive age”, which was written nearly a decade ago, so much of it remains fresh and inspiring (and you should buy a copy if you’ve not seen it – it was required reading by my General Counsel when I was an in-house lawyer!).

But there’s one concept, right at the heart of the book, that seems more appropriate than ever in the legal marketplace right now. Tom describes the principle as “From cost centre to stardom – the professional service firm (PSF) transformation”.

Let me outline some of the detail behind this principle, and then I’ll tell you why I think it’s SO relevant right now.

Tom starts by ranting (his words!) that aiming to improve departmental efficiency and effectiveness is no longer enough. Heard about effectiveness and efficiency in the context of corporate law departments recently? It’s the opening paragraph of pretty much every report about General Counsel these days. Hell, I’ve written about it myself!

He goes on to assert that working 50 hour weeks in a cost centre is not sustainable – rote work will be outsourced  and the core that remains will be the traditional domain of the PSF – the accumulation and application of creative intellectual capital. With the amount of publicity the legal process outsourcing business is getting these days, this shouldn’t seem far fetched for General Counsel either.

So what’s the solution? Tom breaks it down into the following four key parts, to which I’ve added a law department spin.

  1. Outsource it – if the work can’t be done economically or the law department isn’t demonstrably great at it, outsource it.
  2. Now in a legal department this might be “volume work” which can be systemised and done off-shore cheaply, or it might be more complex but the legal team doesn’t have the skills in-house to do a great job, in which case the work might be passed to a retained law firm (or even another internal department).
  3. Productise it – if the work can be done in-house, break it into a “product” that someone will pay for. Now for lawyers care needs to be taken here as while there are certainly plenty of tasks that internal clients will pay for (doing deals, litigating etc), there are some jobs where the key beneficiaries may be the shareholders who won’t have a notional budget to cross-charge. The key point to me however is that the work creates real, demonstrable value for the organisation.
  4. Web-ify it – Tom challenges us to put everything (policies, procedures, contracts) on the web. Now many lawyers will no doubt be holding up their hands in horror here, but the reality is that this concept is already starting to take hold in the more progressive corporate legal departments. Use up a lot of bandwidth drafting standard sales contracts for the business? Take instructions, do a first draft, internal client reviews and makes changes, lawyer reviews changes, lawyer clarifies, lawyer redrafts, internal client reviews….. you get the picture. How much time has that taken? What’s the internal client satisfaction score looking like? Never mind that of the lawyer or the external client. By contrast, how about this – automate the document, internal client follows online guidance and prepares good quality first draft, lawyer reviews and amends, internal client sends document out.
  5. If it’s great, celebrate it. This to me has two important themes. The first is about communicating value to the business. There are plenty of legal departments that are really good at this, and are highly valued by their business colleagues. But there are plenty who don’t communicate success and value, and in my view they need to start. The second theme Tom mentions is more interesting – if an in-house legal team can become genuinely world class, could they start to provide services outside their company?
This is the idea that got me starting thinking about this topic.
With the Legal Services Act allowing non-lawyer ownership of law firms, is it conceivable that some in-house teams might think of converting to a law firm?
At a recent conference for in-house lawyers, the very progressive GC of a company with a global brand indicated that he was thinking using this type of framework to provide legal services to the company franchisees. Another GC joined the debate and floated the idea of pooling compliance resources with other companies in the industry – sharing the overhead for work that was mandatory but provided the company with little competitive advantage.
This is a time when radical thinking is possible. Sure, there are undoubtedly regulatory questions to answer, and professional ethics issues to resolve, but what is clear is that the future can look very different.
The obvious question is how this might it affect your legal team? Tom talks about “Exciting [legal] departments selling their creative services far beyond the company’s border”.
The more interesting question is how might it affect law firms? Will they find themselves competing with their clients? What about collaboration opportunities.

As Tom would say – to improve is not enough, now is the time to transform.

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The Tao Of Law Firm Strategy

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Differentiation is getting harder for law firms. We all know that.

Botchit & Co were delighted with the originality of their new logo - there was something fresh yet timeless about it

Clients constantly state that they want their lawyers to have deeper knowledge of their business and environment.

As the market changes, more and more firms are re-examining their business model and questioning how they are going to compete and win in the future.

Some think about doing more of the same. Some think about doing the same thing but cheaper. Some think about doing the same with a twist.

But how many think of doing less?

Actually stopping doing a lot of work types and focussing on a core that they can do better than anyone else?

  • Drop the unprofitable work.
  • Drop the work that doesn’t fit with the core.
  • Drop the work no-one likes doing.
  • Drop the work that can be done better or more efficiently or in other ways (automation, offshore etc).

What’s left? Could it work as a business?

With so much focus on consolidation in the market, who is looking for the gaps?

Where are the agile players that can really own market segments?

Finishing with a (very!) different approach to any I’ve done before. Inspired by verse 80 of the classic of Chinese culture, the Tao Te Ching (Ralph Allen Dale translation), I give you “The way of the niche”

Let us create small firms
With genuine specialists
Who, without stress, can produce
More than their clients expect
Who are so happy with their practice
They have no thought of moving elsewhere

Who forgo billing targets
Because they have no need of them
Who return to honest forms
Of serving clients,
And the simple enjoyments
Of practising law

Although these firms
May be so close to each other
That they hear the tapping
Of each other’s keyboards
And the ringing of each other’s blackberries,
Living profitably, they will have no need to invade each other’s markets.

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The five skills of highly effective in-house lawyers

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I spent some time this week with a group of in-house lawyers facilitating a discussion around the skills and capabilities that corporate counsel need to be a success, particularly if they are just making the transition from private practice.

The advanced finance for lawyers class was not well attended

The group itself was very diverse, ranging from a FTSE100 GC to a very recent convert to in-house life, after six years at a magic circle firm. However, despite this diversity, a number of key messages shone through. These are the skills that you need to learn to make it in-house, and very few are taught comprehensively in law firms, fewer still during academic training. 

I’ve hacked, shortened, edited and distilled further to come up with the following magic formula…. 

1. It’s all about the business stupid!

At the heart of everything, is a genuine understanding of their own business. Plenty of private practice lawyers talk a good game about being commercial (and to be fair, some of them do have an excellent grasp of their clients’ businesses), but there are plenty who glaze over when faced with a discussion of what’s really important to their clients. I’m not talking about their views on IP ownership, or liability clauses, I’m talking about how the business makes money. What’s the difference between a really profitable deal and an average one? What activities drive the profit margin? Where are the big chunks of cost and how can they be managed?

The discussion highlighted that this business understanding has a number of different levels. Perhaps the most important is an understanding of the commercial basics of the business – in particular how it makes money. But wrapped around that, but subtly different, is an understanding of the business environment in which the organisation operates. This encompasses (amongst other things) competitors, customers and the supply chain. Some private practice lawyers who have a deep understanding of a vertical sector may well be able to demonstrate this, which is why true industry specialists really can add value by placing their advice in context. However, as I’ve written before, many law firms’ vertical strategies only run skin deep.

Two other types of business understanding which were highlighted were firstly a solid grasp of the operational or technical detail about what the organisation does (this will be important for commercial contracts and litigation) – this is the classic “the devil is in the detail”. The old approach of “we’ll leave the contract schedules for the commercial folks” no longer works when you are in-house, because you soon realise that when there’s a problem, the chances are that it’s the service credit schedule or the payment mechanism that’s at the heart of it, and claiming that you only drafted the front end of the contract simply won’t cut it.

Secondly, for more senior lawyers particularly, an understanding of the organisation’s strategy will be important. Not only will this help the legal function start to think ahead and assess the legal implications of the business’ plans, but it will also allow alignment of legal objectives with business objectives, which is critical if the legal team is going to maximise its value to the business.

2. What language are you speaking? 

 The most fundamental rule that in-house lawyers need to learn early is the need to stop “speaking legal”. Using legal jargon and concepts is a sure-fire way to alienate business colleagues. Internal clients and other stakeholders are likely plenty bright thank you very much, but have not had the benefit (or pain!) of years of legal training, so rather than using legal shorthand because it’s quicker and easier for you, engage brain and translate into plain English. As with drafting, it’s harder and takes longer to begin with, but the end product is far more useful to a non-lawyer.

The sting in the tail is that in-house lawyers shouldn’t rely on their business colleagues to translate the “management bullshit” that permeates the corporate world (and let it be said, you can probably find a fair smattering of that in my blog posts, so I plead guilty!). A good working understanding of business terminology will make communication much faster and also facilitate communication with the consultants that will invariably appear on large projects. While easy to dismiss as “management speak” the widespread adoption of these phrases, particularly in large organisations, means in-house lawyers need at least a basic understanding to ensure key concepts are not “lost in translation”.

Aside from the actual language used, the presentation of the advice was also seen as being really important. As a general rule, avoiding really long notes of advice was seen as a good starting point, but there was also an acknowledgement that good in-house lawyers are able to tailor the presentation of their advice for their audience. This doesn’t mean compromising the advice in any way, rather that it is presented in a form that is appropriate for, and easy to understand by, the particular internal client.

One way in which the communication gap can be closed at a more general level is for the in-house legal team to train key internal groups on how to use a legal team effectively. This type of “soft” education may require an up-front time investment, but can pay dividends over the longer term and also help build relationships.

3. Cut to the chase!

A key point that emerged was that in-house lawyers need to have the ability to prioritise the issues. This helps their internal clients understand what is most important, but also if time is limited, will also make sure the lawyer focuses on the items that will have the biggest impact on the business.

The concept of “good enough means good enough” was discussed – the idea that in-house lawyers often do not have the time to do a “Rolls Royce” document review, and that there was a need for lawyers moving from private practice to become comfortable with the idea that it was better for them to spend 15 minutes looking at a document to highlight the key issues before a meeting, than either (a) for no-one to look at it at all; or (b) to wait for enough time to do a “proper job”, only to find that the business couldn’t wait for the advice and has gone ahead without any advice at all.

4. Get stuck in son!

Although not a skill, a can do, pro-active approach was seen as a valuable characteristic for an in-house lawyer. As one lawyer commented – “you’ve got get stuck in”. This might mean picking up more basic tasks that might be delegated in a law firm environment, or it might mean stepping out of the comfort zone to advise on an unfamiliar area of law, in both cases to allow the business to move faster.

For transactional lawyers, commercial expectations have risen and the in-house lawyer is now expected to have good project management skills and work collaboratively as part of a wider team (it might sound simple, but let’s not forget private practice lawyers often work in a very competitive environment, particularly when chasing partnership, and we all have stories of disfunctional cross-departmental teams). These are table stakes. The very good in-house lawyers can go a step further, and help really drive deals through, using a combination of sound transaction management, good commercial nous, and that “can-do” attitude.

5. Don’t bring me problems – they just make my head hurt

Good in-house lawyers, like the best private practice lawyers, are recognised by their businesses as problem solvers. By giving advice that is focussed on finding solutions and using their creativity to overcome roadblocks, lawyers can really help their internal clients. Making sure advice is practical and not too abstract helps achieve these goals, but it’s also a combination of many of the factors above that can lead to break-through solutions.

Take a good understanding of the business and the commercial context of the project, a pro-active attitude and the ability to prioritise the key issues, mix in the ability to communicate effectively and work collaboratively, and you’ve got in-house dynamite, capable of blowing away even the most stubborn legal problem!

Surely there must be more to it?

Well, yes, of course. There were plenty of other skills and capabilities mentioned, from understanding the organisation and its culture, through to stakeholder management, relationship building and influencing skills. But there was also recognition that if a lawyer didn’t get the five basics right, it may well be that their in-house careers wouldn’t last long enough to allow them to develop the additional skills that sees the very top in-house lawyers rightfully claim their seat at the top table of the world’s best organisations.

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A shiny new law firm

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With deregulation of the market looming here in the UK, opinion varies wildly over what the likely impact will be.

  • Some speak of decimation of the high street, and the end of the traditional law firm as we know it.
  • Others are more conservative and see a simple acceleration of the move from a traditional profession to a collection of more business orientated organisations.
  • Some see different changes in different market segments, underpinned by core drivers such as the increasing role of technology, globalisation, vertical market focus and more specialisation driven by a need to differentiate.
  • Finally, some bury their heads in the sand, unwilling or unable to contemplate large scale change in a profession that once was conservative and safe.

Simon paused a second to consider a future without his office in the most prestigious street in the City. Then he went back to work because the thought was just too horrible

So, against that backdrop, the question I ask you today looks at the changing market from a different perspective. If you were a new market entrant, free from the constraints and history of existing law firms, what would you do differently to build a successful legal service provider?

Here are some thoughts to get you started….

1. Real Estate

For a start, I wouldn’t invest vast amounts of capital in plush, city-centre offices. Sure, there’s definitely a need for an accessible meeting place both for internal and client meetings, and the space should be highly functional and consistent with the brand. But no massive atrium, no marble or fountains, and definitely not hundreds of expensive people crammed into premium real estate with the sort of eye watering rent that causes agonised soul searching within two years of every rent review.

I’m not saying all law firms should be virtual, and I’m not saying that firms should be central, but there are plenty of big, impressive organisations that work just fine without all their people in a building in a premium post code. A firm’s cost base matters, and people and property make up a pretty hefty chunk of a law firm’s cost base – avoiding the big numbers here could make a huge difference to long term profitability.

2. Technology infrastructure

Often years of under-investment, and a patchwork of applications and networking have meant maintaining and upgrading law firm systems is a nightmare. The ability to add a new application, device or method of access can be hugely time consuming and expensive. Being free of that legacy a new law firm could start afresh with proven, enterprise class software platform, that had an open architecture to allow maximum interoperability and future proofing.

The march to the cloud seems unstoppable at the moment, despite the fact that within the profession questions remain around resilience and security. Whatever the choice, a new entrant could have a fully functioning platform and a clean set of data to reside within it, all without the pain of a huge data cleanse and migration project.

3. Resource profile

Freed from the current business model of gearing and billable hours, a new law firm could sit back and work out what resources it really needed to service the work it was planning to generate.

How many partner level people does the firm really need? Are they managing client relationships, project managing or providing complex/strategic advice? If they are not doing the high grade legal work, are their other professionals who could do the work better or to a similar standard but cheaper? What is the right blend of junior lawyers? Would supervision and quality control be a separate function? What about training? What other skills would you bring to the organisation? Project management? Process expertise? Social media and digital marketing experience? Lower cost legal resource?

There are so many options, and the right combination would of course depend on the firm and the type and volume of work, but I think it’s fair to say that not many firms would start with a large number of equity partners, add a bunch of assistant lawyers and trainees to generate the fees to pay them, and then add a support infrastructure around them.

4. Corporate structure

The benefits of the partnership are clear. Consensual decision making, meaning everyone (well, the partners anyway) has a voice and feels heard. Sharing the profits gives not just a built in performance incentive, but a shared sense of ownership and responsibility. All this builds a tremendous sense of trust and an atmosphere that fosters collaboration.

What?

Your law firm doesn’t work like that?

Really?

Particularly as firms have got bigger and the pace of business has increased, the partnership model has begun to creak a little. Granted, some firms have it cracked, but I’d wager a lot more struggle. Slow decision making, turf wars, those at the top of the lockstep enjoying rewards that they perhaps haven’t fully contributed to and difficulties removing underperformers are not uncommon.

For a new firm I’d think very hard about keeping ownership and management separate, and use a structure that encouraged fast decisions and business agility. Incentives would follow the corporate model, and be performance based (which of course offers a huge amount of options, and can be tailored depending on what behaviours management wish to drive).

5. Sales force

Some lawyers can sell. They are really, really good at it. A great many however cannot.

I’m a huge fan of sales professionals – they generate the revenue that drives the business. Yes I know that other people do the delivery (lawyers in law firms), but first things first, you have to win work to do it.

Now other than the best of the best, the chances are that a lawyer is not as good at selling as a salesperson – and why would they be? The salesperson wouldn’t likely do much of a job advising on the TUPE provisions of an outsourcing deal. So surely if you accept the need to sell legal services, you’d get the best people to do it. It’s likely as well that not only might a salesperson have a lower base salary (although if good can more than make up for it through commission), but it would also free up the lawyers to do what they are best at, and generate the fees from the work that the sales people have won.

A law firm with a professional, well trained and motivated sales force would be a serious force to be reckoned with.

So what?

I know, I know – you’ve already got a law firm thank you very much. And you can’t relocate, rip out the IT and employ an awesome sales force. But, that doesn’t mean you can’t pause a minute to think about these issues, not just in terms of your own firm, but in relation to changes your competitors may make, or crucially what impact a well capitalised competitor might have if they adopted some of these ideas…..

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So you’re an equity partner – big deal!

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Last week I was given a business card by a lawyer I was talking to. On the card, underneath their name, was written “Equity Partner” in a fairly bold, not-to-be-missed font.

Tony showed the proof of his "Legal Jedi Master" card to the managing partner more in hope than expectation

It struck me, that were I ever to hit those heights in a law firm (I bailed out of private practice before putting those magic words in my email signature) I’d probably be pretty pleased with myself. And rightly so. It’s a position many people strive for and certainly for those in the upper tiers of the legal world, can be very lucrative and rewarding.

The title marks you out as an owner of the business and as a result conveys a certain status within the firm which undoubtedly provides very practical assistance in getting things done quickly through the firm’s support infrastructure.

But, the question that troubled me was the message that the title communicates to someone outside the firm.
I posed the question on Twitter, and got some fascinating comments back.

“adds pomposity and confuses clients”

“I think it’s wrong. Many clients don’t know what it means, in the real world.”

“It’s a badge of seniority but non-lawyer clients might not know what it means. Also = unlikely to do much of your actual work.”

” It would make me think, “Ah, so you’re the reason for my large bill” ”

The theme that stood out strongly for me was the internally-focused nature of the title.

Of course for fellow lawyers in private practice, and for in-house lawyers, the title and connotations will be understood. However, aside from the fact that there a huge number of purchasers and influencers who may not know what it really means, I wonder if there is an opportunity lost in not using a job title that is more aligned with the lawyer’s actual role.

There are a number of ways that could be approached. For a start, as I’ve discussed before, a market strategy that is structured around a client’s vertical industry sector is quite common. Would reference to specialism in a vertical sector as well as a practice area (or even instead of…) make sense? What about an alternative based on a description of the relationship with the client, so for example separating out relationship managers (I know the “s” word is maybe a step too far), technical specialists, project leads etc. For large scale project work this delineation of responsibility could also add credibility to the project management ethos espoused by many of the top firms.

Another driver that could force to revisit job titles is the changing career structures that have been emerging over the past five years or so. Many firms now have a senior designation for those lawyers who want to stay with the firm long term, but do not want the additional commitments (time, financial or management) that go with partnership. As the next generation of lawyers move through the ranks with their different cultural approach to work, life and career, will the old hierarchical, largely tenure-based titles still prove effective?

Perhaps the biggest opportunity for fresh thinking in this area (at least here in the UK) comes from the influx of new competitors into the market when the winds of deregulation blow through the profession over the coming months. Much has been written about the potential impact on law firms serving consumers, but make no mistake change is afoot in the world of commercial law too.

Aside from further consolidation, which I believe will be driven globally as well as in response to our own market conditions, the emergence of the LPO model and flexible resourcing models such as those from Axiom or BLP‘s lawyers on demand, will challenge incumbent firms to revisit their business models. This will invariably have implications for resources and career paths, and presents the perfect opportunity to revisit job titles.

While it may seem trivial, job titles do usually matter both to the holder, and in some contexts, to clients and prospects. A new entry to the law firm market will have the chance to think about this afresh, not restricted by history or tradition.
My sense is that these organisations will not default to titles like “Assistant”, “Associate” or “Equity Partner” and in using something a bit bolder and more relevant, will be able to send a signal to the market, both to potential clients and potential employees!

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