I attended a panel discussion on law firm innovation this spring hosted by an international firm. It was full of great anecdotes from the firm, clients and consultants on ways it and others should, could and are changing the business of law. But then one of the firm’s clients stood up to say something.
The client directed his comment to the head of the firm, saying, essentially: “I hear what you and other firm leaders are saying, but I’m telling you that when I work with partners at your firm and others on actual matters, this change management is not filtering down.”
Ouch. Was this just a tough client? Or was it indicative of how clients really feel? Then a few weeks later, Altman Weil’s Law Firms in Transition Survey came out, showing that clients and firm leaders actually share some of the same frustrations. The number one reason that firm leaders cited for why they aren’t doing more to change is that partners resist most of those efforts.
Maybe that has to do with the second most-cited reason for resistance to change: Firms haven’t felt enough pain in their purses to force change. As futurist Richard Susskind has said in his books on the changing legal landscape, “it’s hard to convince a room full of millionaires that they have a business model wrong.”
But you’d think clients would be more convincing. Organizations like the Corporate Legal Operations Consortium have an increasingly loud drum beat for efficiency and innovation in law firms and its members work in some of the largest companies in the world.
A former GC of a major fast-food company who spoke on the innovation panel said she expected law firms to come to her with a pre-packaged suite of services that included partnering with alternative legal service providers. If they didn’t, she’d put one together for them.
And there is no doubt legal services are becoming increasingly disaggregated. According to ALM Intelligence’s report earlier this month on what keeps general counsel up at night, 73 percent of legal work is going in-house, 2 percent is going to alternative service providers and the rest to law firms—who often are left splitting the work among themselves even further.
Despite law firm managers’ frustration with their partners, they don’t all seem to be clamoring for change either. In meetings with law firms this year, I’ve come across a few approaches to innovation, and honestly the interest in change never has reached the enthusiasm for change other pockets of the industry espouse. Perhaps for good reason. I don’t know.
At one extreme, some firms seem to have a feeling that the bespoke work they do will never face the pressures driving innovation elsewhere. For a select few firms, that might be right … at least for a little while longer than for their competitors.
The other common feeling among law firm leadership is the sentiment that every client is different—with varying appetites for change. When we pitch something unique, they turn instead to the old way, firm leaders bemoan.
So should firms implement change piecemeal? Only for a certain set of clients? That’s hard to do. Dabbling in pricing analysis and project management without adjusting staffing levels, for example, just doesn’t work. Profitability models will suffer.
In the Altman Weil survey, only 30.1 percent of respondents said they alter staffing models for matters handled on an alternative fee basis. And profitability rose more frequently at firms that did adjust staffing models, the survey showed.
I’ve told several people lately that the last thing I want to be, or that I want The American Lawyer to be, is the Chicken Little of the legal industry, yelling that the sky is falling when everything is really just fine. After all, how long ago was the billable hour supposed to die? And I’m a firm believer in pendulums. As the world moves to commodity/AI/automated, we may start to crave and value thoughtfulness, human interaction and real-life judgment.
But something about now is different. There is a buzz around innovation and operational changes that matches what we saw at the height of the Great Recession. And back then there was still some fat to be cut. How much more can firms manage financials with the same staff, same prices, same business models?
To be fair, the Altman Weil survey shows that a lot of tinkering and testing is going on. Firms aren’t completely playing ostrich. But there’s no sense that a comprehensive shift is happening. Whether this passivity is the partners’ fault, or stems from the clients’ lack of interest, I’m wondering if we will see any firms say, “Whether the legal industry is ready or not, I’m stepping out on the limb.” Law firm R&D departments anyone?
I’m not sure I’d be brave enough to be the firm that waits for the pendulum to swing back to the old days.