Despite several years of blogging and talking about the need for change and reform within the majority of law firms, you would be amazed…actually let me re-phrase that…you probably wouldn’t be amazed... at the resistance, condescension and sometimes downright vitriol that I get for simply pointing it out. It’s nearly all delivered verbally. (Never in email or blog comments…lawyers are not that daft!)
So here is a distillation of the 3 major things that are wrong with the majority law firms today (and I have to thank Mark Bradley from Marque solicitors for verbalising this so well in his recent talk)
1. They still charge for their services by time, not value.
2. They think they are special and behave and act accordingly.
3. They structure their business in a way that is directly opposite to the best interests of their customers (Clients if you’re an older lawyer reading this!) and that is therefore, in direct contract to their own interest.
Firms that still do that are the reason why the old legal market business model is in terminal decline.
So allow me to elaborate further.
Time: The business of law today is in conflict with market forces. There is much more supply than demand. There are thousands of lawyers and hundreds of law firms and therefore, you have thousands of competitors. So using basic Marketing 101, the simple way to stand out from your competitors is to be different. Differentiate and you will start to capture more business.
A recent survey of in-house counsels showed that over 90% don’t like time costing. Anecdotally, I can tell you that a similar amount of business and private client customers don’t like that method of charging either, but a lot of them think that there is no alternative and that is because the law firms don’t offer an alternative. If you want an alternative, check out this blog article of July 2010.
But, the law firm crowd nearly all behave in the same way.
Special: A lawyers attitude in what is a service industry, seems destined to alienate their customers. This attitude is demonstrated in the culture of their firms and can especially be seen in the relationship they have with their non-legal staff (most of whom are unhappy, but hey, they need a job, so will put up with what can only be described as Dickensian work practices. “No pay rise again this year Mr Cratchit!)
What is wrong with being happy at work and not just when you leave? It’s what makes you human and customers will sense that.
Structure: Buried deep inside every law firm is its purpose and it lies in the way it does business.
Law firms have a vertical structure. Each person’s value is measured only by numbers, usually the chargeable hour (Billable hours for the US cousins reading this).
So success or failure comes down to 6 minute increments and everyone’s job is to deliver these hours.
This leads to intense internal competition which, over the past few years has become a real struggle and in any competition, as Darwin so eloquently put, it’s a survival of the fittest. The “winners” are the ones that bill the most hours. That means in an “up” market when there’s good times, the corporate or commercial and residential property lawyers bill the most and in bad times, it’s the litigation department that become top dogs.
There are two fatal flaws with this;
1. This system has nothing to do with the interests of the customer (client). In fact the focus is on anything but their interests
2. Working in an environment where your work colleagues are also your main competitors is not a recipe for human happiness; in fact quite the opposite. It’s very stressful. It will eat away at your soul - in 6 minute increments. And this is borne out by some facts; mental illness amongst lawyers is 4x the general population.
Performance should not be measured by these numbers. The only incentive should be the happiness of staff and customers.
I’ve heard a lot of lawyers who berate me and tell me that the law can and never should be commoditised. I have news for you, it already is. It is a business factory where the workers churn out a product called time.
Lawyers on this treadmill have a working life that in the most part is devoid of meaning and this creates an emotional void. They are climbing a pole to the top of a big pile of nothing. They may have money but what’s the use in that if you are sacrificing daily happiness to get it. Why not get it and be happy at the same time. It can be done, it is being done and the more law firms that can do it in the right way, the better is it for everyone.
A business that can tell you what it does and why it does it is a very nice place to be.
I strongly suggest more of you strive for it, for your employees sake, your customers sake and your own health…before it’s too late.
Ok, Ok, this is a book recommendation. But bear with me as there's more to it than that. Since talking about making Smart Decisions in a Confusing World at a recent legal conference, the interesting thing is that more people have clicked on the link on my Recommendations page for this book than for any other. Why would that be? I think the answer is confirmation on another subject that I blogged about a while back; lawyers like to give advice and they don't like to be seen to be taking it! The point of the talk was two-fold. The first is that as perceived experts, lawyers exist to perform a vital and valuable function in life. Yet this "expert status" is being eroded, and in some cases, blown away by customers who challenge everything they hear from their lawyer; customers who "research" their particular circumstances and in many cases dispense with a lawyer altogether and construct their own contracts simply because their 30 minutes of internet based research suddenly puts them on a par with their 7-year studied and 3+ year practised lawyer...and why spend money when you can do it yourself? This erodes law firm revenue and profist. The evidence for that can bee seen by downloading law firm accounts from Companies House. Secondly, lawyers and law firms who have taken a decision to invest in their future and who do their own research into contracting with helpful collaborators, coaches or mentors need to be able to see through the information overload and spot the snake oil salesmen from the real deal. They need to make better informed decisions for the sake of their future. And also to justify their decisions to their partners. (Probably the biggest single reason! ) I won't bore you with the full 40-minute transcript here but the gist of the event is summed up in the above two paragraphs and the final bit of wisdom taken from Hertz's book; 1. You make a better decision with a full stomach and a full bladder (The Wise Old Woman, the Jewish Mother and the sages' of the past were right after all doh!) 2. Always have someone to hand who tells you what you don't want to hear! I've always been happy to tell lawyers and law firms what they don't particularly want to hear (check out some of the columns from a few years back!) Some shrug their shoulders, some you never hear from again (the majority) and some decide that they should check it out and do something about it (fewer than I would like) but until I set up the links and directed people to them, I never had any statistical evidence that. I do now.
During a chat last week with a lawyer in his office about business development, I noticed that he was distracted by something. His mind was not on the task at hand. I asked him if anything was wrong. He insisted there wasn’t. But you know that way when someone says something but their body language says something else?
This was one such time.
I persisted by simply saying that if there was anything “anything” bothering him at all, he should consider asking for my opinion. I might be able to help if he would share what it is.
OK. He agreed. He had started a small IT solutions company a couple of years back and had fallen out with one of the early suppliers who also happened to be a lawyer.
The gist was that for about three months they had traded emails that had descended into threats of legal action. He showed them to me.
I suggested they talk to each other on the ‘phone but they had tried that and he said it didn’t work. They just ended up shouting at each other and the verbal threats had all been confirmed to each other in yet more emails.
Through all the legal jargon and quoted clauses, I thought the solution was actually quite simple. I suggested a possible solution to my man. It wasn’t completely what he wanted but he could live with it if the other guy could.
Well, there was only one way to find out; let’s ask him. Rather than me getting involved, I proposed that I should write the email. I did. He sent it. The other chap agreed, subject to my man doing something first. Again, it was something he could live with and not all that important to the overall scheme of things, so he agreed. Email to confirm. Job done. The relief on my mans face was almost palpable.
He had fretted about legal action, had copied in litigation lawyers in emails to the other side (to show how serious it was getting) and all that was doing was winding up the other guy.
A fresh pair of “commercial” eyes on things and it was all over and agreed probably in the time it’s taken you to read this.
I didn’t really analyse it until now but I have seen similar situations before.
As lawyers we sometimes get totally caught up in the legal aspect of business. This clause means this or this clause means that and I’m determined that you (on the other side agree or acknowledge that fact)
The thing that makes things work in business is not the absolute legal meaning of an agreement, but does the agreement work for both sides? It did when it was signed but things have moved on and something that has happened has caused a new look at a clause through a different pair of eyes.
A written agreement after all is there to smoothe out the path to commerce, not to stop it or be a burden. It should not BE the business, merely a part of it.
The legal solution to the problem would have been litigation. The cost in time and money would have been silly money.
The commercial solution was there for all to see but the letter of the law had blindedthem from seeing it.
Life is too short. If you can’t find a solution, let someone else take a look at it. Get a second opinion from a non-lawyer. Someone with commercial experience and nothing to lose or gain. You might not like the answer…but I bet it works!
There have been two great books about the future of the legal profession that I have thoroughly enjoyed.
The End of Lawyers? and Tomorrow's Lawyers.
It's safe to say that I pretty much agree with almost everything he writes about in The End of Lawyers?...and have done so since 2008 as you can see from historic posts on this site.
His most recent book Tomorrow's Lawyers was quite good but I do have to put it on record that I disagree with his claim that High Street Lawyers are going to be pretty much dead in the water in the immediate future.I can see why he would say that and recent evidence might go someway to justifying his position...but for the firms that organise themselves and sort out their business model, I think that his prediction will be totally wrong. In fact, they will flourish.Some of the big legal firms' financial coats are on a shoogly peg right now and the ones in the middle are dithering over what to do next. But the smaller, one, two, three or four man firms who's demise has been predicted are bucking the trend.They are the ones least hit by the ban on Personal Injury referral fees and are coping with the banks' inability or reluctance to lend. But they are also the ones that are taking action. They are not sitting it out. They are upgrading their cms, gathering their wip and going out looking for business and giving their services on the terms that the client wants at a price they want."Illegitimi non Carborundum" is their motto and they are doing well for it.
Working with Law Firms is great fun. Once they finally decide to implement a development programme a strange thing occurs. The strangeness comes not from the Firm itself but from individuals and the sheer number of lawyers who finally open up and admit that they never really wanted to be lawyers in the first place.
There’s a crucial point in the timing of these “confessions.” It’s usually after the initial consultation has completed and the first step of the programme begins when it finally sinks in with some that the business of law needs to be delivered in a new way and that “change is on the horizon”.
Now no one except a wet baby likes change. And the thought of “change” and all that it may bring seems to initiate an internal conversation.
The internal conversation may go something like this: “oh no, we’re going to have to change the way we do things around here. I can see that now and it looks as if I may have to work harder/smarter/more efficiently. I’m already billing as many hours as I can I can’t see how to squeeze more time out of this, already squeezed, life of mine. Heck, I never really wanted to be a lawyer in the first place. My dad/Mum/brother [add to the list and take your pick] made me do it. I always wanted to work outdoors/be a lifeguard/start my own business [again, add to the list and take your pick]. Well, if I’m going to have to change I may as well bite the bullet and start my own business/learn carpentry/ hairdressing/to be a chef [etc] now. This Firm are planning to merge/take over/be taken over and there will be upheaval anyway. I may as well go through all that for my own benefit. That’s it, I’ve had enough, I’m leaving. It’s now or never.”
Of course there will be variations on that theme, but you probably get the gist.
I’ve thought about what to do to help these people in their transformation and short of encouragement to do what they love (as you’ll never work a day in your life if you do) I always wanted to be able to make a more concrete suggestion or point to some great insight that can help.
Recently when reading a new book (Just out 27 April 2013) calledThe Inside Out Revolution by Michael Neil, I came across the following;
“Imagine a man comes to you for coaching. He’s about to turn 30 and he’s decided that it’s time to “grow up” and take over the family carpentry business. He wants you to share innovative marketing techniques, work with him on how to make better personnel decisions and coach him to incorporate technology to bring the business into at least the new millennium.”
"But even as you’re speaking together, something’s bothering you about the conversation. He’s saying all the right things and seems willing to do all the right things and yet something still feels out of alignment.
Following your intuition, you go back and review the client intake form he filled out when he first came to you and to your surprise you see that his name is Jesus and he’s from a small town in the Galilean region of Israel called Nazareth."
Here’s the question:
Do you really want to work with him on becoming more successful in his carpentry business?
What if every man, woman and child you meet has the seeds within them to become who they truly are?
What if that includes you? What if?......
Like most denizens of the legal profession, we were somehow both completely shocked and at the same time not at all shocked by the recent reporting on alleged bill-padding at the global law firm DLA Piper.
The firm insists that such wrongdoing doesn’t exist, at least not within its mahoganied walls: “While we will make no effort to defend the foolish emails generated by the lawyers involved in this matter, we will defend vigorously the firm’s track record of delivering high-quality legal services at a fair price.” Dismissals aside, the fact is that featherbedding—the nuanced art of throwing multiple and improperly resourced bodies at clients in the interest of maximizing revenue—is alive and well. It’s distasteful but not at all surprising. What leads top-end global law firms to engage in this type of behaviour? On the one hand, how could the lawyers involved so blatantly work in opposition to their own clients’ interests? But on the other hand, given the framework of incentives and structures within which they operate, how could they not? he litany of perverse incentives in the law firm business model is all too familiar at this point, but let’s briefly enumerate the problems and how they result in the “churn that bill, baby!” mentality. And then let’s talk about how we get out of this mess. First of all, law firms bill hourly for the most part, and that’s just indefensible in this day and age. Any economist, or really any businessperson, will stop you right there and point out that your incentive structure is inherently adversarial and zero-sum. Bad behaviour is going to result. Why on Earth is anyone still doing this? Look a little deeper, and the structural problems get worse. Law firms are run by partners who have worked for decades to reap the rewards at the top of the pyramid. Any client-friendly change or investment in efficiency during their brief tenure at the top is self-destructive. Younger lawyers may want change, but by the time they’re in a position to do anything about it, they’d be crazy to follow through. Beneath even the institutional structure (which is set up badly for clients) and the billing approach (which is even worse) is another level of perversion in the prevailing mindset of Big Law. Of all the outrageous statements in the DLA emails, the one most likely to be overlooked was the one made when a partner bemoaned the inefficient use of associates: “Perhaps if we paid more money, we’d have skilled associates.” This is a quintessential misdiagnosis of a problem, and I submit that the same mistake would have been made by a broad cross section of big firm leaders. The problem is not that the associates are unskilled. In fact, they’re among the best educated and hardest working professionals in the economy. The problem is that they tend to operate in a professional environment that has simply ignored all of the investment in technology, tool creation, and efficient workflow that have made the rest of the economy more productive. Partners with little management training deploy expensive associates in a haphazard manner against ill-defined tasks within an incentive structure that motivates waste and anti-client behaviour. Giving those associates another raise is definitely not the solution. The solution is, finally, to fix the game, rather than waiting for the players to behave differently. It doesn’t matter if law firm attorneys are paid more, or overseen more carefully by clients, or badgered by the press. To solve this problem, the focus has to be on how legal work gets done, not simply on who is doing it, no matter their ethics. The legal industry must rid itself of its vestigial attachment to hourly billing and pyramid incentives, and its aversion to technology investment. Law firms, which benefit from deep client relationships and access to great talent, should be completely rethinking their business models to mimic the best-of-breed companies that have evolved in almost every other professional services industry. This will require financial sacrifice on the part of many law firm leaders, so why would they do it? Simple. Because the alternative is worse. General Counsels, at least the enlightened ones, are fed up. Mark Chandler, the general counsel of Cisco, has called law firms “the last vestige of the medieval guild system to survive in the 21st century.” Clorox’s general counsel, Laura Stein, said “the law firm’s leverage-attrition model isn’t working, and corporate clients, and therefore shareholders, are paying for it.” The calls for change from general counsels must be answered if for no other reason than they, and they alone, control the hundreds of billions of dollars spent on corporate legal services annually. And because, for the very first time, that’s a muscle they are willing to flex. Indeed, if we’re going to see real change, then clients must allocate their business accordingly, as many are starting to do. How does that saying go? Fool me for 100 years, shame on you. But fool me for another 100 years . . . This article is by Mark Harris, the chief executive of Axiom, a 1,000-person new-model legal services firm.The Article first appeared in Forbes magazine Here
A Law Firm "Merger" Yesterday!
Let’s be honest about this, most people will want totry and avoid lawyers. They are in the samecategory as the police; you don’t want one until youneed one. Which is probably why a lot of their marketing comes to nothing. It’s very much a “distressed” purchase for most peopleunless of course you are in business. In that case, you will need lawyers at some stage.
Through my connection with Angels Den, I deal with a lot of new businesses and start-ups and there’s plenty of anecdotal evidence and articles written about how lawyers ruin deals at the due diligence stage or even how they can stall innovation.
But while individual lawyers might be seen as obstacles, the legal profession and the legal industry in general still represent great opportunity. This sector, which historically has been ignored by entrepreneurs and investors, is starting to experience a start-up invasion.
In his book The End of Lawyers? Richard Susskind suggested disruptive technologies would be the key to massive change in the legal sector.
Here are six key facts
that make the legal industry ripe for disruption and innovation. 1. The UK Legal Services Market is worth £26 billion a year.
The Business to Business (B2B) section of that is worth 89% or £23 Billion. The largest 3% of firms, that’s under 900 firms, generate 55% or nearly £13 Billion of that.
That means that there are almost 29,000 “firms” chasing the remainder. And since 2006 there has only been a compound annual growth rate of 2%
You can get the full UK Legal Services Sector report here: http://tinyurl.com/cvnwkt4 2. Technology is Still in its Infancy.
New tools and platforms that have reached many other sectors are only now beginning to enter the legal marketplace. For example, data analytics – while massive in other commercial markets – is barely existent in the legal sector. Data is abundant in the legal profession – everything from a company’s entire email archive to the information that exists in all the filings and briefs that lawyers create. Lawyers work with and create data every day. Currently, the vast majority of this data sits idle, untapped and unused. What resides in this data is the potential for creating products that predict outcomes in cases, quantify and qualify lawyer performance, and create transparency within the legal process itself. For some examples, see LexMachina
) a company putting analytics to work in the IP realm. Also www.Trademarken.co.uk
and UK & Ireland companies House information for free at www.duedil.com
There is an abundance of technology available, but it’s the reluctance of the sector to use it. 3. There is a definite supply and talent problem.
Whilst roughly 15,000-20,000 students will graduate with a law degree every year (this may be declining in coming years), in England and Wales approximately 6,000 will go on to seek a training contract with a firm, in Scotland there will be approximately 600 doing the same. A law degree is only the starting point to becoming a lawyer. Graduates still need to gain a one-year Diploma place and then a traineeship.
Those lucky enough to gain employment with a law firm must rely on the firm to train them to actually be of any use in a commercial environment; a practice that yields anything but consistent and comprehensive training. Outside of firms, these new graduates will need to find alternate paths to becoming competent , and their choices are severely limited. This creates a unique over-supply, limited-talent phenomenon where the available lawyers are not adequately trained to actually be lawyers. Start-up opportunity here lies within edtech and scalable instruction. Is there a Khan Academy
model for new lawyers? 4. Access to lawyers is historically a problematic and costly effort.
UK individuals who actually need lawyers still tend to try and avoid lawyers because they don’t want to pay high fees, nor do they really know how to find a reputable and trustworthy lawyer. Many legal needs are going unmet due to this phenomenon. By lowering cost structures, lawyers would be able to serve this immense market. Through a combination of technology, tools, and processes, platforms are being built to do just that. But the market is in its infancy. Even though http://www.wigster.com/
and in the US http://www.legalzoom.com/
have a head start, they have only scratched the surface. 5. Lawyers used to be the gateways to protected information and knowledge.
They were the conduit through which clients accessed legal information and guidance. With the advent of technology, this information is now more accessible than ever before. The general public is able to locate relevant and helpful information without the assistance of lawyers (or at least without paying fees to lawyers). There are still many resources that lawyers do have control over, but these are diminishing greatly. PlainSite
are two recent plays in this space. 6. Finally, and most importantly, the world is getting more complex, not simpler.
Corporations are burdened with greater oversight and compliance obligations. Some companies even use the legal process (and all its costs and distractions) as a way to punish or hurt competitors (see patent trolls).
Consumers and the public are also more aware of their legal rights and obligations. In our “lawsuit happy” nation, neighbours and friends will sue each other in an effort to gain – rightfully or not. Creating alternate paths to litigation, or avoiding problems altogether, are huge opportunities. There are ways to bypass lawyers and the court system entirely. For example, a former executive at eBay has built Modria
as a platform for dispute resolution that involves no lawyers at all.
There are many other facts and reasons why the legal industry represents real and significant opportunity for start-ups. For a profession and industry that literally impacts every single person in dozens of ways, it would seem that the need and urge to innovate would be palpable. Start-ups need to stop looking at lawyers as a pain, and see them as an opportunity. If you cannot avoid them, disrupt them.
This article was in turn inspired by a great article at: http://tech.co/legal-industry-startup-invasion-2013-03
Mostly about the US legal market. This has been updated and changed to reflect the UK legal market
Great book to read: Mitch Kowalski ; Avoiding Extinction; Re-imagining Legal Services for the 21st Century
It’s interesting the different phases that “change” goes through.
When I was faced in the early 2000’s with a seriously large legal bill I didn’t really mind because it was a percentage of the overall deal. What really got to me was that the final bill ended up being just short of 100% higher than I had been led to believe.
That seriously annoyed me. But guess what? It was actually quite common for businesses to be on the receiving end of final legal bills higher than originally quoted.
Reasons given (or excuses) were, “The other side took longer”, “The deal was more complicated than first expected” “Due diligence threw up some unforseen isues"….etc etc”
When I eventually joined the legal profession it was out of interest and a desire to learn about the law. But I also thought that I could bring some experience as a customer to maybe change a few things.
That was interesting, let me tell you!
I remember suggesting a number to text on the bottom of Property “For Sale” Boards. (In 2005) "Won't work"
Opening a virtual office in London to deal with corporate enquiries. (In 2007) "Waste of time and money" Even though the total cost was less than £1,000 (One Thousand Pounds)
Starting a Twitter account (in 2008) "Why would anyone want to read that?"
Introducing value based pricing. "Can't be done"
Doing Free Wills to build up the client base (Obscenities were hurled at me for that one!) "It will be done over my dead body!"
Or simply trying to get outside assistance for a partner strategy day away from the office and so on…noting immensely radical, but things that needed to be done (or so I thought anyway)
The business of law has gone through an ugly time recently, certainly for the last 5 years…but I'm convinced it means good times ahead to those who take action and more importantly…are prepared to change.
The idea that we may potentially follow the ugliest 5 years we can recall with perhaps the best 10 or 15 years is a bit awe-inspiring for some. Or just plain idiotic to most.
Remember, good ideas about change rarely start out as feeling good.
They tend to go through a few phases: First, something like "You are out of your mind" is included, then slowly it turns to "That guy has a weird way of looking at things" and then it tips over to, "You know, I can kind of see your point ." followed by, "You know, I think you are on to something", "Yes, I am tending to agree with that new thesis" and slowly but surely arriving at, "Well, of course, isn't that obvious?"
Keep in mind that the only compelling differences in those perspectives are: a) how many people in the crowd begin to follow like a, well, crowd and b) how the media starts to change its tune in reporting.