People have a tendency to see things through their own perspective. I know because I have lived in Washington, D.C. for nearly two decades. DC personifies our increasingly fractionalized society in two respects: (1) the major political parties rarely compromise; and (2) people inside the Beltway mistakenly believe their views are shared by the vast majority of Americans who live outside it and those “outsiders” have an equal disinterest—if not antipathy—for DC.
So what does this have to do with the legal vertical? Each of its three key stakeholders, law schools (suppliers); law firms and legal service providers (purveyors); and clients (consumers) typically view the legal ecosystem through their own (often narrow) prism. Law schools tend to pay lip service to change, but those in command are confronted by an entrenched constituency bent on preservation of the status quo. If that sounds like the traditional law firm model and the handful of equity partners determined to stave off its extinction, it is. As for clients, they hold the power of the purse strings and can drive change among law schools and legal providers should they elect to. But this would cause a disruption in the way they do business and, as we all know, change is uncomfortable for most people. Besides, if one is doing well under the status quo—and in-house lawyers have certainly improved their status and economic clout within the industry during the past couple decades—why drive material change any faster than the C-suite demands it?
Reshuffling More than Material Change
True, the ACC has produced its “Value Challenge”, exhorting law firms to narrow the cost/value chasm. Likewise, the ABA has tepidly recommended cosmetic change for law schools. And law firms have made some changes—albeit designed principally to preserve PPP rather than to change their fundamentally inalterable economic model. All this has resulted more in a reshuffling of the deck—work moving from one firm to another, each with the same economic model, or firms merging in an attempt to become “too big to fail”—than material change. Some legal providers and a few law firms are providing the marketplace with options to the traditional fare; however, their collective economic effect on the legal marketplace has been relatively small. The “reshuffling” of firms via mergers and free-agent partners and the creation of the “legal 1%”, a handful of “bespoke” law firms who have broken away from the pack economically and brand-wise, are the bigger story so far. But that will change soon.
The Likely Sources of Material Change
Change will likely come from two principal sources. The first is from entrepreneurs and visionaries who have 360-degree knowledge of the legal vertical, credibility within it, sufficient capital, and a core of early adapter clients who will generate revenue, momentum, and “street cred” among other clients and prospective valued attorney recruits. The message will be sounded that “it’s safe to go into the water.” I say that because most lawyers are lemmings.
The second change agent will be clients who have a sufficient amount of business to make a difference in the marketplace and who , to paraphrase T.S. Eliot, are “no longer at ease in the old dispensation.” Translation: they are fed up with the status quo and its lack of real options to the point where they articulate what they are really looking for and then move their business to those who can meet their needs and deliver consistently. This is not to suggest that certain GC’s have not already done so to a degree—and most of us know who they are—but I’m talking about something more fundamental than consolidating the number of firms a client uses or negotiating fixed-fee packages for portfolios. This is about structural change—both economic and process driven—that will alter the way legal services are delivered.
So let me spell out some things I would want as a client. Note: I was a large consumer of legal services for more than a decade, serving as a federally appointed Receiver of an international business with operations on four continents (I have also been an outside GC of three companies as well as a provider and manager of legal services).
- I would expect that for each matter, my counsel’s first question would be: “What are your objectives here?”
- I would want to meet the lead attorney on each case (this could be done remotely, especially if I knew her/him or if time was of the essence) as well as a project manager to ensure the engagement was on budget, on time, and provided me real-time access to procedural and budget issues.
- I would want my firm to integrate the legal supply chain, providing an end-to-end solution (where practicable). This would reduce third-party vendor cost and mark-up; mitigate risk; and reduce in-house oversight time/expense. I say “where practicable” because certain technical expertise might have to be obtained from third-parties. My preference would be to find firms that had expertise in key areas such as cyber-security, IT, data management, and e-Discovery to buttress their core practice areas–to cite a few examples.
- I would insist upon fixed-fee budgets. Naturally, there would be situations where “change orders” were warranted, but this is a matter of common sense, contract drafting, and mutual trust between counsel and me.
- I would partner with law schools to ensure that they knew what I was looking for both for my in-house staff as well as from outside counsel. It’s in everyone’s best interest to foster a practice-ready pipeline. And I would look for law firms who participate in that type of tripartite partnership. After all, it is a legal ecosystem comprised of law schools, legal service providers, and clients (see above). The three should work together and recognize they are all on the same side. I would also encourage a strong public interest component.
- I would insist that my law firm capture institutional knowledge about my business and, more particularly, its legal portfolio, and I would retain lawyers/firms who had implemented procedures to share that information intra-murally, with other firms I engaged (with my prior consent), and with my in-house colleagues.
- I would minimize—preferably abolish—distinctions between my outside counsel and in-house colleagues. Our roles might diverge in certain respects but, for the most part, we share a common purpose: to zealously represent the interests of our (joint) client.
- I would want to see a lower turnover rate for my outside firm than their peer group and know their lawyers are adequately compensated. Peripatetic outside counsel are not good for me, so I would prefer they stay put for a while, especially if they are at a law firm who has most or all of the characteristics outlined above. Why would they want to move to another firm and why would I want them to?
- That goes to alignment of interest, another element I would want as a client. I do not expect to get the best representation—short and certainly longer term—if my economic interests are not aligned with my counsel. The relationship should neither be adversarial nor “zero sum.” It should be one where “everyone wins.”
There’s more but it will be saved for another day. Sound like a utopian construct for the legal vertical? I don’t think so—stay tuned….