The Legal Whiteboard

The Connection between Coaching and Mentoring and Great Lawyer Careers -- Sporkin's Kids and other Examples

My previous post excerpted the introduction "How to Solve the Legal Profession's Diversity Problem." The article suggests that our diversity challenges are rooted in a systems problem. First, our systems for selecting and developing lawyers is seldom grounded in science.  Second, the functioning of these systems are seldom viewed as critical to organizational success. Hence, the systems often poorly tooled, and the resulting data are under-analyzed.  These background conditions make it very difficult to understand and solve the diversity problem. 

In response, my article provides a baseline theoretical model for the creation of high performing lawyers (see figure below). This model operates with equal force for diverse and majority lawyers, albeit for reasons explained in the article, systems failures tend to have larger negative effects on women and diverse lawyers.

My favorite part of the article is the discussion on component (5) Coaching & Mentoring, which is excerpted below.  This is the least technical section and also demonstrates that applied research can derives its initial theories from simple historical stories that are associated with extraordinary results.

This portion of the article references, among others, Walter Carter, Paul Cravath, Judge Stanley Sporkin, and some of the heaviest hitters in the SEC and corporate governance bar. Among these lawyers, coaching and mentoring launched tremendous careers.  My primary point is that if we understand the power of these relationships, we can channel it toward the benefit of diverse lawyers.

---

 (5) Coaching and Mentoring

The fifth and final component in my model is coaching and mentoring. A strong coach and mentor is often the vehicle through which a young lawyer receives developmentally rich work experience (3) and high-quality training and feedback (4). Yet coaching and mentoring is its own freestanding component because when it is done well it becomes an intense personal connection where talented professionals choose to allocate their valuable time and resources toward the success of others. Conversely, understanding the nature of the investment being made, the person being mentored experiences a mixture of heightened motivation and gratitude that enables him or her to persevere through virtually any professional hardship in order to reach long-term goals.

One of the best examples of the power of mentorship is New York City business lawyer Walter Carter, who served as a mentor to many of the leading corporate lawyers of the early 20th century. Carter’s accomplishments on this front were chronicled in a 1954 book entitled Walter S. Carter: Collector of Young Masters. According to the book author, Otto Koegel, Carter’s gift was spotting promising young talent and bringing them along as corporate lawyers who were capable of counseling executives of large financial and industry enterprises.

An appendix at the back of Koegel’s book is a folded poster with a family tree of Carter’s lawyer progeny. One of the first nodes on the family tree is Paul Cravath, who worked for Carter as a junior lawyer. The subsequent branches document Cravath’s departure and movement to a firm that would later become Cravath, Swaine & Moore, where Cravath designed and implemented the “Cravath system.” According to the firm’s history, the Cravath system is largely credited with the firm’s eventual leadership position among Wall Street firms. The firm history also cites Walter Carter’s training principles as the basis for the system. Other branches on the Carter family tree connect founders or leaders at many familiar powerhouse firms of the 21st century, including Milbank Tweed, Willkie Farr, Cadwalader, Shearman & Sterling, and Hughes Hubbard.

I have also observed something similar to Carter’s impact on future leading lawyers, albeit within the context of a government agency. Colleagues in the securities bar have observed the phenomenon of “Sporkin’s kids,” referring to the many influential lawyers who worked under Stanley Sporkin during his long and distinguished tenure at the Securities and Exchange Commission (SEC). Many of Sporkin’s SEC protégés lacked the pedigree of an elite law school, yet they went on to become some of the most sought after and influential securities litigation lawyers of their generation. They include Edward Herlihy of Wachtell Lipton (George Washington Law), William McLucas of WilmerHale (Temple Law), and Ralph Ferrera of Proskauer (Cincinnati Law).

After two decades at the SEC, Sporkin became general counsel of the CIA and then a prominent federal judge. In preparation for writing this article, I contacted Judge Sporkin to ask him about this track record of mentorship. He commented that his philosophy was to look for intelligent young lawyers who would approach their jobs “with enthusiasm.” In Sporkin’s view, the law school attended was a poor proxy for these intangibles (Sporkin himself attended Yale). Further, according to Sporkin, it was critical that there be values alignment between the young lawyer and the mission of the agency. Otherwise, the lawyer could not keep up with the demands of working in his office. (Compare Sporkin’s observations to the Motivation factor outlined in this article’s five-factor model.) Judge Sporkin expressed gratitude for the lack of bureaucracy in the 1960s, 1970s, and 1980s, which enabled him to hire so much raw talent according to his own criteria. He related the story of meeting a young Ralph Ferrera, who pleaded with Sporkin for an opportunity to work at the agency. Sporkin lacked the budget to hire him, so Ferrera worked for free until a formal staff position became open. The rest, as they say, is history.

In my experience, law firms undervalue the importance of coaching and mentorship. Carter and Sporkin had the power to make these investments on their own. Yet, today’s modern law firm emphasizes the production of revenues. The cost of nonbillable time can be readily calculated; the same cannot be said, however, about the value of nonbillable time. Partners who have given little thought to the power of professional development are most likely to resist large investments. They lack the systems perspective of Paul Cravath. I have studied lawyer development for over a decade. I think these partners are trading dollars for pennies.

Conclusion

The purpose of this article is to create a roadmap for solving the legal profession’s longstanding diversity problem. The solution is to end the moral handwringing and to create a system for selecting and developing lawyers. Yes, it will be expensive in time, money, and political capital, but not nearly as costly as wasting raw human potential. Glory, and possibly organizational riches, will accrue to the law firm leaders and general counsel who are brave enough and wise enough to demand that we go down this road. The time has come to fix this problem once and for all.

---

Interested readers can download the full article from SSRN.

Solving the Legal Profession's Diversity Problem

Below is an excerpt from an article I just published in the PD Quarterly.  The topic is diversity, one of the hardest and most intractable problems affecting the legal profession.  What makes this article different is that it is draws heavily upon my applied research with law firms.   

In the coming months, I will be writing more about applied research within the legal field -- in particular, the challenges of this work and why, notwithstanding the challenges, applied research is destined to grow in importance and influence.

---

 Here is a familiar fact pattern in large U.S. law firms.

Time 1. Partners come together and agree that diversity is part of their firm’s core values; they review the firm’s bleak statistics, particularly at the partnership level, and agree they can and will do better.

Time 2. Through significant time and expense, they successfully recruit a diverse class of incoming associates.

Time 3. A disproportionately large number of female and diverse associates leave the firm.

Time 4. The remaining associates eligible for partner are primarily white men.

Time 5. Partners come together and agree that diversity is part of their firm’s core values; they review the firm’s bleak statistics, particularly at the partnership level, and agree they can and will do better.

Why does this cycle repeat itself? As a long-time law firm researcher who has seen this cycle play out over several iterations, I can tell you that it is easy for a group of lawyers, especially those new to leadership, to convince themselves that they can solve the profession’s diversity problem through greater moral resolve. Yet, if the root causes are not moral in nature, we won’t make much progress.

In this article, I ask readers to consider the possibility that the profession’s lack of progress on diversity is a systems problem rather than a failure of moral resolve.

What does it mean to have a systems problem? Every firm has a system of recruitment, selection, development, feedback, evaluation, and promotion that enables law graduates to enter as legal novices and, through years of effort, acquire the skills, knowledge, and experience necessary to become partners. At most law firms, however, this system is driven more by tradition and past practice than science. Further, the system seldom places explicit or rigid demands on partner-owners because partner-owners prize their autonomy and are given the greatest rewards for bringing in business. To the extent the system relies on measurement, the quality of the data is uneven and under-analyzed. Stated another way, the “system” for creating successful lawyers and partners is not much of a system at all. And in this ignorance lies the cause of our diversity problem.

For the last several years, I have shifted my focus from academic to applied research. Although academic ideas can be elegant, compelling, and important, their major limitation is that we don’t really know if they will work in actual practice. Applied research attempts to sort this out, usually through social scientists hired by organizations that are hungry for a competitive advantage. The goal of applied research is to find solutions to important problems and then make them cheap and simple to implement. Law has a shortage of applied researchers, partially because the profession has been so prosperous for so long (what’s there to fix?) and partially because lawyers tend to be uncomfortable with data and statistics. Yet, these background factors are starting to change.

In this article, I am going to share what I have learned through my applied research as it bears on the problem of law firm diversity. The bottom line is that the problem is fixable. If we design and implement a better system, out the other side will flow successful diverse attorneys in roughly the same proportion as the number we managed to hire several years earlier. Further, the stakes are hardly academic. Organizations with a reliable system for creating diverse lawyers will have a competitive advantage for attracting clients and the best entry-level talent. Likewise, esteem and accolades await the leaders who finally make a breakthrough on law firm diversity.

You Have to Start with a Theory

An intelligent system is invariably built upon a theory drawn from multiple sources. One high quality source is published empirical research. A second is one’s own professional work experience: “When I have tried X, Y usually happens” — so we rely on X. Finally, a subset of our theories will be based on pure reason: “Based on our collective knowledge and experience, this is the best approach for this problem.” Figure 1 is a summary of my own theory for creating high performing partners.

Figure 1. Elements Need to Create a High Performing Partner

In narrative form, I am saying that the creation of high-performing partners is influenced by five factors: (1) aptitude, also known as cognitive ability; (2) motivation, which is primarily a function of values alignment between the lawyer and the substance of his or her work; (3) the type and quality of work experience that a lawyer receives during his or her early career; (4) the quality, quantity, and timeliness of training and feedback; and (5) the presence and quality of a mentoring or coaching relationship.

The model can also be broken down into selection and development components. A law firm optimizes elements (1) and (2) through a process of accurate selection at the point of hiring. The less accurate the selection, the higher the lawyer attrition due to poor fit for aptitude and motivation. A firm can optimize (3), (4), and (5) by designing and implementing systems for professional development. The better the design and execution of the interconnected systems, the faster and higher the lawyer’s growth trajectory.

What is the relative importance of these factors? This is a good question that no one can answer with any degree of precision, primarily because we are in the early days of applied research within the legal profession and the required data has not yet been collected and analyzed. The best we can do is to start with a theory that is consistent with the data we do have and continuously improve our knowledge through measurement.

It has been my experience, however, that lawyers often have strong opinions on what does and doesn’t matter. These views on lawyer selection and development essentially create a series of default settings based on conventional wisdom and past practice. I have enough knowledge of the social science literature and enough experience doing sophisticated applied research in law firms to conclude that many of these default settings are wrong.

Below is a summary of what I know about each of the five components in my five-factor model. One by one, and cumulatively, these model components provide me with optimism that law firm diversity can be dramatically improved, particularly at the partnership level.

---

Interested readers can download the full article from SSRN.  

Family Tree of Some of the Great NYC Law Firms

Holiday down time enabled me to dust off some gems in my home library.  Below is a fascinating family tree of the law firms associated with Walter S. Carter. This meticulously drawn chart is an appendix from Otto Koegel's 1954 book, Walter S. Carter, Collector of Young Masters. 

Walter Carter was prominent a 19th century business lawyer who began his career in Milwaukee and eventually migrated to Chicago. After the Great Chicago Fire in 1871, Carter had so many lawsuits against bankrupt insurance companies that he moved to New York City and began hiring able young law graduates to help him with an enormous surplus of legal work.  Carter prided himself on his ability to identify, hire, and mentor exceptional legal talent.  Koegel's book is about "Carter's kids."

From 1888-1891, Carter's firm operated as Carter, Hughes & Cravath, with Paul Cravath and Charles Evan Hughes as the other two name partners.  Both Cravath and Hughes began their careers as associates in Carter's firm.  Cravath left in 1891 and by 1899 eventually landed at the firm that would become Cravath Swaine & Moore.  Other major NYC firms on the family tree include Milbank Tweed, Wilkie Farr & Gallagher, Cadwalder Wickersham & Taft, and Shearman & Sterling.  Carter's legacy firm split for the last time in 1937, creating what is now the present day Hughes Hubbard & Reed and Dwight, Royall, Harris, Koegal & Caskey (where Otto Koegel was a name partner).  The latter firm subsequently evolved into Rogers & Wells before being swallowed up by Magic Circle firm Clifford Chance in 2000.

[Click on family tree to enlarge] 

The relatively large number of branches in the tree may be attributable to disagreements over how to divide firm profits.  As observed by one former partner, Carter "picked his partners as Connie Mack picked ball players, usually dropping them after they demanded or earned as much as he did" (p. 91).

This coordination problem was eventually solved through the "Cravath system", which enabled partners to scale their firms to meet the needs of the nation's most sophisticated business clientele. In the Cravath firm history, credit is given to the training principles of Walter S. Carter.  With this system, which was designed to create a "better lawyer faster", the Cravath firm became a magnet for both clients and talented young lawyers. Rising profits presumably reduced acrimony over how they should be divided. This ethos gave rise to the modern large law firm.  

Although it does not appear on the family tree by name, Carter began his career at the Milwaukee law firm that would eventually become Foley & Lardner (then known as Finches, Lynde & Miller).   He then went on to become a name partner in Carter, Davis & Flanders, which would later evolve into Michael Best & Friedrich.  Readers will no doubt notice other familiar connections on the Walter Carter family tree.

"PwC expands into legal market"

That's the headline from the Financial Review, a leading Australian business newspaper.  The plot is nearly identical to a September post regarding accounting firms in India. See India, Big 4 and Elite Law Firms in Direct Competition for Highly Lucrative Advisory Work, LWB, Sept 16, 2015.   The salient point is not that accounting firms are outmaneuvering the law firms -- they're not, as both stories report a robust flow of laterals in both directions.  Rather, it's that the accounting firms are in the game at all. 

The story reports:

"There are bigger issues - alternative legal providers, the changing demands of what our people want in terms of non-lineal career paths, the cost pressures on our clients and the demands they place on their lawyers," Baker & McKenzie national managing partner Chris Freeland said.

"That's what keeps me awake at night," he said.

Behind closed doors, however, [the law firms] are genuinely worried about the accounting firms cutting into compliance, due diligence, employment and taxation work, and mergers and acquisitions advisory particularly in infrastructure and inbound investment.

Large law firms identified the accountants as their main rivals in a recent Macquarie Group legal benchmarking survey.

Some law firms are quietly shifting work to boutique accounting firms because they refuse to be in bed with their emerging adversaries.

The Australian legal market liberalized several years, making it possible for nonlawyers to own and control legal enterprises.  In contrast, India has rules that are much closer to the U.S.  Yet, when it comes to the accounting firms, the official rules don't seem to matter much, as the competitive dynamics vis-a-vis big accounting firms in these two countries are very similar.  

A simple explanation is that bar authorities in any country are loath to pursue unauthorized practice of law actions when the clients are multinational corporations and the providers are large accounting firms.  That is too big a fight.  Further, the rules on unauthorized practice are in place to protect clients, not the guild.  Thus, it is not surprising that the accounting firms are getting bolder.  

 The chart below (from The Economist) put things into perspective:

See Attack of the Bean-Counters, Economist, Mar 21, 2015.

What's driving the demographic gap between BigLaw leaders and their CEO/GC clients?

Las Vegas, NV.  The illustration to the left was just published in The American Lawyer.  It accompanied a story on how law firm leaders are significantly older than leaders in the large corporations they serve. See MP McQueen, The Generation Gap:  BigLaw's Aging Leaders, Aug 24, 2015. 

At least for me, this is a jarring graphic because it conveys so much truth.  Today's Millennials are so underwhelmed with the BigLaw model.  They like the pay and the perks, as it enables them to live well in attractive large market cities.  They can also quickly pay off their law school debt.  But precious few of them are all in. Illustrator James Steinberg totally nailed it.

There are numerous reasons for the culture divide, but as shown in the chart below, the most obvious is a very large age gap between leaders and entry-level workers -- it tends to be a lot larger in BigLaw than almost anywhere else: 4% of AmLaw 100 leaders are Gen X compared to 33% of NASDAQ-traded companies. 

These data beg the question, why are large law firms so out-of-sync with the institutions they serve?

One reason is certainly the ownership structure.  Any Fortune 500 or NASDAQ-traded company that got this top-heavy in its senior management would be getting killed on its stock price.  Under the Rule 5.4 prohibition on nonlawyer investors, law firms are spared the anxiety of having analysts and short sellers constantly evaluating their business. Yet, the absence of a public market means that law firm owners and managers cannot fully monetize the enterprise value they create. So what's the effect?  Very little enterprise value gets created.  Instead, lawyer/owners  focus on maximizing this year's net distributable income.

It is important to not knock the BigLaw model too hard.  For about a century, it worked extremely well, as US law firms steadily grew with their clients.  Each unit of economic growth produced some larger unit increase in legal complexity, so demand for sophisticated legal services was a steady upward sloping line. By following a simple model -- hire more associates, promote some to partners, lease more office space, repeat -- equity partners in the AmLaw 100 became millionaires.  

Today, BigLaw is getting grayer because the 100-year old gold factory is breaking down. Law firms' portion of corporate legal spending is no longer growing, as in-house lawyers, NewLaw managed services shops (United Lex, Axiom, Counsel on Call), and technology are all curbing demand for traditional law firm services.   The best economic play for 55- or 60-year old equity partner is to ride out the existing model with the dwindling but still substantial number of Baby Boomer senior in-house lawyers who are themselves not too anxious to change.  

This is not the story equity partners tell themselves; it's the logic that underlies the inertial path.  It's where we end up when we are no longer deeply invested in the places we work.  It's become a job.  I am not judging here; I'm describing what I have observed through hundreds of conversations with large firm partners.

The result of this dynamic is that a large proportion of BigLaw--but certainly not all of it--is just tinkering at the margins of change. A law firm can become more cost-effective for clients, at least in the short to medium term, by reducing reliance on associates.  Associates are expensive and are, by definition, getting paid to learn.  For the last 15-20 years, firms have shifted their leverage model to counsel, staff attorneys and nonequity partners, where (a) there is little to no training, (b) the margins are higher, and (c) the clients can't complain about inefficient associates. This is the Diamond Model, which substantially cuts out the entry-level lawyer.  See The Diamond Law Firm: A New Model or the Pyramid Unraveling? (Dec. 2013); Sea Change in the Legal Market, NALP Bulletin, Aug. 2013.

Unlike the original Pyramid Model, invented by Paul Cravath circa 1910, the Diamond Model is not a carefully conceived business strategy. Rather, it's a way to maximize this year's and next year's net distributable income without making difficult strategic tradeoffs. Yet, in the longer term, which is no longer too far off, the Diamond Model is a disaster.  The few associates who make it into large firms are grateful for the high pay and the training.  But very few if any are impressed with the business model.  Among Millennial lawyers, in-house is the new brass ring.

Law firms are filled with brilliant people. Why are they going down this road?  Three interrelated reasons:

1. Lack of Experience. Today's law firm partners have little or no experience with strategy--for a hundred years, intelligence and hard work worked just fine.  This is not a change in strategy--it is having a strategy.  Then executing.  That's hard.
2. Incentive Structures. Virtually all incentives inside firms today favor revenue generation; as a result, few partners have the mental whitespace to understand, much less think through, the changes that are occurring within the broader industry.  To fix the bridge, you have to slow down the traffic.
3. To Big to Fix.  The first strategy mistake for the current generation of AmLaw 100 leaders was to become bigger without becoming measurably better.  Big firms filled with laterals is a difficult environment to share risk. Maximizing this year's distributable income becomes one of the few things people can agree on.

That said, I am not counting BigLaw out.  I am writing this blog post from the International Legal Technology Association (ILTA) conference in Las Vegas.  From far away, it is all too easy to treat BigLaw as a monolith--it's not.  At ILTA, professionals from several of the most innovative law firms are willing to pop the hood and share what they doing.  See Ahead of the Curve: Three Big Innovators in BigLaw, Aug. 25, 2014. Suffice it to say, some firms are several years into strategies that have the potential to take market share from peer firms.  Further, the innovation teams inside these firms are having the time of their professional lives because the work is so collaborative and creative--the antithesis of billable hour work.  What is also clear is that many competitors just can't muster the leadership nerve to make similar investments. 

In the years to come, some BigLaw firms are going to pull away from the rest, becoming a magnet for talent and then clients.  Younger lawyers are going to thrive there.  Another portion of BigLaw is going to gradually fade away. 

Metrics and Legal Ops Professionals

In a recent post, I urged readers to visit a legal department with a large legal operations staff.   The goal?  To see the future of modern corporate law practice.  Fortunately, Bloomberg Law recently videotaped a legal ops panel moderated by Amar Sarwal of the ACC.  It contains a conversation rarely if ever heard in law schools or bar associations.

The three legal departments profiled are AIG (insurance), Marsh & McLennan (diversified financial and professional services), and GlaxoSmithKline (pharma).  Note the enormous emphasis on metrics, data, and technology.  Note also how the services of law firms are being put through a procurement process. 

"Solicitors 'in denial' about threat from accountants"

That's the headline from today's Law Society Gazette, the publication of record for solicitors in England and Wales.  The UK is fairly far along in liberalization of its legal markets, progressing from the Clementi Report in 2004 to the Legal Services Act 2007 to the licensing of Alternative Business Structures in 2012.  Now several hundred entities have obtained ABS status.  

The Gazette article reports that accountants are poised to be large players in the ABA space:

Accountants will soon be competing directly with solicitor firms ‘on every high street in the country’, according to a leading financial advisor to the legal sector.

Ian Muirhead, chairman of Solicitors Independent Financial Advice, said he expects 750 accountancy firms – three times more than first envisaged – to move into probate work after securing an alternative business structure licence.

The Institute of Chartered Accountants in England & Wales has accredited 113 entities as an ABS since last October, having been accepted as an approved regulator almost a year ago. A further 34 applications are being processed.

Speaking at a Westminster Legal Policy, Muirhead said too many solicitor firms are ‘in denial’ about the threat from the accountancy profession.

‘Success will go to those who can manage businesses and I query whether that’s going to be the solicitors or whether solicitors are going to be the back room boys,’ he said.

Muirhead argued that law firms’ response so far has been focused on consolidation, mergers and acquisitions – but this risks playing into rivals’ hands.

‘[The response is] safety in numbers, more of the same, not thinking outside the legal silo, and therefore missing the opportunity of which many new ABSs are availing themselves, of providing a more diversified and holistic client service,’ he added. ... 

Some U.S. lawyers believe that liberalization won't come to the U.S. because the legal industry is too balkanized by state bar authorities.  

I think this view, however, is likely naive. The market can change because regulators change the rules (the UK). Alternatively, the market can change because clients change their buying habits in favor of nontraditional legal service providers that are financed by sophisticated nonlawyer investors (the US).  See, e.g., Is Axiom the Bellwether for Disruption in the Legal Industry, LWB, Nov. 10, 2013.

In the US, it is probably true that regulators lack the stomach to initiate a regulatory action where the client ostensibly being protected is a Fortune 500 corporation.  If the action ends up in federal court, the bar officials risk looking like protectors of the guild and have a decent chance of losing.  The prohibition against nonlawyer investment (MR 5.4) is based on the assumption that the nonlawyer profit motive will compromise lawyer independence, thus harming the unwitting and unsophisticated legal consumer.  But that does not describe IBM's or JP Morgan's relationships with sophisticated LPO or analytics shop (or any general counsel charged with stretching his or her legal dollar). As a result, the venture capital money flows in.

When liberalization is viewed in this light, there are probably more similarities between the US and UK than we might want to acknowledge. 

Ahead of the Curve: Three Big Innovators in BigLaw

Nashville, TN.  It is time to put down the broad brush used to paint BigLaw as inefficient and out of touch.  At least for me, that is the big takeaway from the 2014 International Legal Technology Association (ILTA) conference, which took place this past week at the Gaylord Opryland Hotel in Nashville and included nearly 2,000 lawyers, administrators, staff, and vendors from around the world.

My takeaway is based on what I saw during the presentation session for the ILTA Most Innovative Law Firm Award.  The three finalists all qualify as big:  Bryan Cave (985 lawyers), Seyfarth Shaw (779 lawyers), and Littler Mendelson (1002 lawyers). Presenters from each firm had 15 minutes to share their innovations followed by 5 minutes of Q&A.  Afterwards, ILTA members in attendance casted ballots for first, second, and third place.

Kudos to Bryan Cave, Seyfarth Shaw, and Littler Mendelson for publicly sharing their innovations, as it demonstrates a commitment to the broader legal profession.

In this post, I will describe the salient points of each innovation. I will err on the side of detail because, when it comes to innovation in the legal space, there is a short supply of “guts of the operations” commentary.  I will then offer some macro-level observations.  As it turns out, BigLaw has on balance a surprisingly good hand to play.  Many will thrive, but at the expense of taking market share from the rest.

Bryan Cave

Presenter: John Alber, Strategic Technology Partner

Bryan Cave has developed an ingenious and highly efficient way to educate its lawyers on the economics of its business.  Prior to the presentation, I was familiar with the firm’s investment in a rigorous cost accounting system to guide the firm’s strategy and operations.

Yet, to get the full benefit out of such a system, the understanding needs to filter down to the individual lawyer-timekeeper level so that each lawyer-timekeeper can use the superior data to allocate time and effort in ways that strengthen the enterprise.  Even in the year 2014, many successful and skilled BigLaw lawyers confuse revenues with profit. And the confusion is understandable because portable books of business, which tend to be measured in terms of revenue, drive the valuation of lateral partners.  See Henderson & Zorn, Of Partners and Peacocks, Am. Law., February 2014.

Based on what I saw at ILTA, such confusion appears to have been substantially eliminated at Bryan Cave.

The core Bryan Cave innovation is a simple dashboard that tracks a variety of statistics at the lawyer, practice group, and firm level.  What is most striking about the Bryan Cave initiative is the sensitivity shown to the large percentage of lawyers who are not comfortable processing numbers (“arithmophobia” was the term used in the presentation).  The Bryan Cave innovation team dealt with this constraint in two ways.

1. The Octagon.  The Octagon is a data visualization technique that communicates eight key metrics in an octagon-shaped graphic.  Wondering what the term "data visualization" means? It's finding graphical ways to communicate complex multivariable data in a format that requires the end user, such as a lawyer, to have very little technical training.  The Octagon is a textbook example. It uses colors and distance from the center of the graphic to convey essential information related to origination, client relationships, matter management, days to bill, days to collect, hours billed, leverage, and profit margins. (There may be other octagons containing other metrics--the one we were shown appeared to be geared toward partners.)

Each lawyer each month gets a new updated Octagon; and that graphic communicates, through its shape, the lawyer’s relative contributions to the firm.  Specifically, there are distinctive patterns well known within the firm that tend to signal rainmaker, service partner, project manager, technical specialist, or some blend thereof.  The features of the Octagon also communicate how well a lawyer is performing in his or her various roles relative to his or her peers.  So, on a monthly basis, self-image confronts hard numbers.

This type of transparency is bound to have a profound effect on behavior.  (During another ILTA session I heard, from another Bryan Cave presenter, that since the introduction of the Octagon a couple of years ago, the average days to collect has fallen from 60 to 44.)

2. The Rosetta. Some lawyers are bound to prefer a story rather than a picture.  For these lawyers, the firm has created a narrative, referred to as the Rosetta, that translates the numbers into a diagnostic story of strengths, weaknesses, and, most importantly, specific prescriptive advice on how to improve.

But there is an interesting catch—the stories are all written with a computer algorithm.  How is this possible?  It’s a technology pioneered by a company called Narrative Science.  Note that computers that are fed nothing but a traditional baseball scoring sheet now routinely write sports stories that summarize the game for the local sports page.  This narrative summary accompanying the Octagon removes any lingering ambiguity regarding what the diagram means.  Further, all report generation, including practice-group level Octagon and Rosetta reports, has been entirely automated.

I am told that the Octagon and Rosetta programs can handle, and properly incentivize, work that is done on either a billable or alternative fee arrangement basis. If this is true, Bryan Cave has an innovation designed for the legal market of the future.

Some readers may be turned off that the Bryan Cave innovation may seem, on the surface anyway, entirely focused on law firm financial performance.  I am not. To my mind, this type of technology is valuable for communicating the fundamentals of the business.  This reduces the myths and false narratives that routinely take hold in data-poor environments.  This innovation is also timely because it is getting harder to give clients superior value while also delivering a strong return to the firm's owners -- the best of whom could lateral to another firm tomorrow.

The challenge of every BigLaw firm is getting all of the firm's stakeholders to row in the same direction. The combination of the Dashboard, Octagon, and Rosetta is a breakthrough in lawyer communication and, by extension, change management.  Bryan Cave attorneys have the information they need to both build their practices while also advancing the broader goals of the enterprise.

Seyfarth Shaw

Presenters: Kathy Perrelli, Chair of Litigation Practice; Kim Craig, Global Director of Legal Project Management.

Seyfarth Shaw’s innovation is the creation of a true Research & Development Department staffed by lawyers, project managers, technologists, and software developers.  The charge of Seyfarth’s R&D Department is to build solutions in advance of perceived client needs.  As the presenters mentioned, “we are not doing this because our clients are asking for these solutions; we are doing this because our clients will ask.”

Continue reading

What Ails the Large Law Firm? Will the Real FutureFirm Please Stand Up

Five years ago this April, I helped organize a novel experiment on how to reengineer the modern law firm.  The occasion was FutureFirm 1.0, a collaborative competition in which teams of law firm partners, associates, and in-house lawyers to create a strategic plan for the fictional firm of Marbury & Madison (M&M).  The goal was a new business model that would enable the firm "to survive and thrive over the next 20 years."  See M&M Fact Pattern.   

We planned FutureFirm 1.0 in the fall of 2008, but by April 2009, things looked pretty unstable.  Deal flow had ground to a halt, and corporations were reluctant to fund noncrucial litigation.  Law firms in turn were rescinding offers to thousands of law students.  Further, the specter of law firm failure hung in the air.  Suffice it to say, the timing was not right for sharing the results of FutureFirm.  As a result, my analysis of the event, "What Ails the Large Law Firm?  Will the Real FutureFirm Please Stand Up," was never published or circulated.  

With five year anniversary of FutureFirm 1.0, I decided to uncork my time-in-a-bottle essay and post it on SSRN and JDSupra.  

Having not read this essay for five years, I am surprised at how well the FutureFirm analysis holds up.  Yet, the biggest takeaway from my FutureFirm experience is not the specifics of the analysis, but acclimating myself to the permanence of new change dynamic, much of which I can see through the participants of FurtureFirm 1.0.   

• Two law firm partners subsequently left to start their own boutiques, one of which is aggressively moving into managed services in South Africa.  
• Another law firm partner became a judge in King County, Washington (Seattle).
• Several summer associates joined BigLaw only to leave within three or four years to become sophisticated in-house lawyers who are themselves driving change.
• Several people in all roles have switched over to the business side.  Indeed, new legal businesses are actively being planned.

In the spring of 2014, the new normal is here to stay, and it has no froth.  FutureFirm was probably a fringe activity back in 2009.  Now, an event like FutureFirm would be one of the key places to go for answers.  Indeed, I have very serious senior in-house lawyers at Fortune 100 companies who want to run this type of colloborative competition to help better design tomorrow's legal departments.  So stay tuned for that.

I hope you are sufficiently curious to do a bit of time travel and give "What Ails the Large Law Firm?" a read.  I would welcome your thoughts and feedback. 

Did the Market for Law Firm Associates Peak 25 Years Ago?

Based on the chart below, which reflects 35 years of large law firm data, the answer appears to be yes.  The chart enables us to compare two very simple trendlines: the percentage of lawyers in NLJ 250 law firms who have the title of Associates versus the percentage with the title of Partner. 

The chart above was generated by my colleague, Evan Parker-Stephen, who is Director of Analytics at Lawyer Metrics.  I asked Evan to crunch these data after some of research I was working on revealed a 50% decline in Summer Associate hiring between 2002 and 2012 at the ~600 law firms listed in the NALP Directory (11,302 to 5,584). In other words, 2008 is the wrong reference point. See Sea Change, NALP Bulletin (Aug 2013).  Something more substantial was (is) happening.

Indeed, the 35-year graphic above provides a true wide-angle view, which in turn reveals an absolutely remarkable story.  Associates were most integral to the large law firm model over 25 years ago.  Although large law firms went on a hirng spree at various points during the 1990s and 2000s, the firms themselves were simultaneously adding a new layer of human capital that was neither associate or partner/owner.  And in the process, associates were gradually being marginalized. The graph below (also NLJ 250 data) reveals the growing middle section of the so-called Diamond Model:

So what does all this mean?  

My best analysis is set forth in a short research monograph I wrote with Evan, entitled "The Diamond Law Firm: A New Model or the Pyramid Unraveling?"  The punchline is that large law firms appear to be chasing short-term profits at the expense of longer-term sustainability.  It would not be the first industry sector to lose its competitive advantage through myopic strategy -- as the saying goes, nothing fails like success.  See Henderson, Three Generations of U.S. Lawyers: Generalist, Specialist, Project Manager.  Large firms are not going extinct.  But as a matter of demographics, they are greying.  If BigLaw were trading on the Nasdaq, the analysts would be very critical of this trend.  

From Big Law to Lean Law

In 2012, Bruce Kobayashi and the George Mason Law & Economics Center organized an ambitious conference series entitled, "Unlocking the Law: Building on the Work of Professor Larry Ribstein."  The collective work product has recently been published in the International Review of Law & Economics.  

My contribution was an essay entitled "From Big Law to Lean Law."  It is a  review of Larry's seminal "The Death of Big Law" article, with the benefit of three years of data and the gradual realization that the entire legal profession is on the brink of a major structural transformation.

The "Death of Big Law"  first appeared on SSRN in the fall of 2009.  The following spring, I attended the annual Georgetown Center on the Legal Profession conference, where Larry's analysis and conclusions were presented to a large audience of Big Law partners, including managing partner commentators.  Suffice to say, the reaction was one of polite bafflement.

"From Big Law to Lean Law" was my best attempt to serve as a translator, albeit with the benefit of three years of market data and hindsight.  Here is the abstract

In a provocative 2009 essay entitled The Death of Big Law, the late Larry Ribstein predicted the shrinkage, devolution, and ultimate demise of the traditional large law firm. At the time virtually no practicing lawyer took Larry seriously. The nation’s large firms were only one year removed from record revenues and profits. Several decades of relentless growth had conditioned all of us to expect the inevitable rebound. Similarly, few law professors (including me) grasped the full reach of Larry’s analysis. His essay was not just another academic analysis. Rather, he was describing a seismic paradigm shift that would profoundly disrupt the economics of legal education and cast into doubt nearly a century of academic conventions. Suffice to say, the events of the last three years have made us humbler and wiser.

This essay revisits Larry’s seminal essay. Its primary goal is to make Larry’s original thesis much more tractable and concrete. It consists of three main pillars: (1) the organizational mindset and incentive structures that blinds large law partners to the gravity of their long-term business problems; (2) a specific rather than abstract description of the technologies and entrepreneurs that are gradually eating away at the work that has traditionally belonged to Big Law; and (3) the economics of the coming “Lean Law” era. With these data in hand, we can begin the difficult process of letting go of old ideas and architecting new institutions that better fit the needs of a 21st century economy.

(SSRN link.)  In the service of explaining these complex market dynamics to lawyers, legal educators, and law students, I am posting the figures used in the paper, which can be downloaded from Slideshare.

From Big Law to Lean Law from William Henderson

An Update on Milbank's Big Bet

Two years ago, when all other large law firms were slashing expenses to prop up partner profits, Milbank Tweed went in the opposite direction and invested heavily in an executive education program for midlevel associates. The program, called Milbank@Harvard, required all 4th, 5th, 6th, and 7th year associates to spend one week per year at Harvard University taking course work from HLS and HBS professors along with Milbank partners.  At the time, I wrote an in-depth analysis for the Am Law Daily. See Milbank's Big Bet, May 11, 2011.

In the video below, Bloomberg Law provides an update on the program via an interview with David Wolfson, the Milbank partner who oversees the firm's professional development programs.  Here are three takeaways from Lee Pacchia's interview with Wolfson:

• Two years in and its a big success.  Law firms are innovating these days, but they don't always advertise what they are doing lest their failures become public or their successes get copied.  Why is Milbank talking about this very expensive program?  My best guess is that the firm's bet is paying off.  Thus, the firm is in an ideal position to use the program to differentiate itself in the minds of clients and prospective recruits, including laterals.  In short, this is the branding component of a longer term strategy.  To get his payoff, Milbank started three years ago and invested--back of the envelope calculation--$20 million, which amounts to $150,000 to $200,000 of forgone profits per equity partner. 

• The skills gaps are primarily in business and leadership.  Wilson criticizes law schools for not doing more in this area, particularly in the collaboration and leadership areas.  But he also acknowledges that the biggest part of hard skills gap, financial literacy and acumen, requires learning in context.  At year four, the associates know what they don't know.  The original Cravath System was a lawyer development machine.  So is Milbank@Harvard, albeit the specifications have been updated.

• The idea for Milbank@Harvard came from a German partner.  One of the many fruits of globalization is getting an outsider perspective on old problems.  Perhaps U.S. law firm partners are too embedded in the year-to-year AmLaw league tables to see and appreciate the power of a longer-term strategy based on aligning the needs of clients, partners, and associates.  That said, the American brain trust at Milbank was smart enough to listen their German partner.

The video:

In this book, Tomorrow's Lawyers, Richard Susskind predicts that the market for high-end bespoke legal services will consolidate to "20 global elites."  That said, 50 to 100 US and UK firms are hoping to make that cut.  This gradual winnowing process is what is causing all the groaning these days from millionaire BigLaw partners.

Milbank is one of the few firms, however, that is pursuing a unique, public strategy:  (a) attract, develop, and retain mid-level associates who know they need business training, (b) impress clients through improved value in the mid-level ranks, and (c) as I noted in the original Milbank's Big Bet essay, make Milbank the preferred recruitng grounds for in-house legal talent. 

To my mind, that is a compelling and likely winning strategy.

Is Axiom the Bellwether for Disruption in the Legal Industry?

I think the answer is yes.  For the last several years, I have been an avid watcher of Axiom's growth, but this article in Friday's Houston Business Journal finally convinced me that the top-end of the legal industry is changing and that Axiom is setting the standard for disruption.

On a surface level, many of the facts in the HBJ article are unremarkable.  Axiom opened its Houston office back in May 2012.  Since then, it has grown to 30 lawyers  and expects to add another 15 over the next 12 months.  Yet, during this same period, the boom in the energy sector has caused several national and international law firms to also open offices in Houston, including Reed Smith, Dentons, Katten Muchin, and K&L Gates, 

Axiom and large law firms are definitely targeting and servicing the same clientele -- Fortune 100 legal departments. The substance of their work is also very similar -- sophisticated, complex legal work related to disputes, transactions, and compliance.  But in many cases, the solutions offered by Axiom are radically different.

Okay, now a reasonable expectation of any reader is likely to be, "Now explain that difference."   Back in 2010, Axiom's CEO Mark Harris told Law Practice magazine that Axiom was "trying to invent a whole new category of law firm.  When you’re doing that there is no vocabulary [to describe your business model]." 

In my experience, the opaqueness of Axiom's business model actually works to its advantage.  Specifically, it encourages Axiom's primary competitors (large law firms) to put Axiom in a box based on an outdated caricature.  That, in turn, gives Axiom more running room to fully implement the "whole new model."  Let me start with the caricature; then I will do my best to explain what the company actually does. 

The Inaccurate Axiom Caricature

In its early years, Axiom was described by many as a high-end "temp" service for legal departments. See, e.g., Peter Lattman, Axiom: A Different Kind of Legal Practice? WSJ Law Blog, Nov. 27, 2007 (describing Axiom as having developed "a niche as a provider of high-end temp services to blue-chip corporate clients").

The simplified version runs like this.  Lawyers working in large law firms trade-in their partner status, or shot at partnership, for more autonomy and a better work-life balance.  By brokering relationships between legal departments and skilled but disaffected lawyers, Axiom ditches the "class A" overhead and reduces the allocation of legal fees that would otherwise support record law firm profits.

Under this caricatured model, all parties are made better off -- the client (who gets the same quality work, but cheaper), the lawyers (who get off the billable hour trend mill and are able take vacations again), and Axiom (which collects a fee).  The caricatured model also enables large law firms to dismiss the Axiom model on the belief that only a small tranche of legal work is at risk of being siphoned away.  And that work is lower margin and price sensitive -- so-called "commodity" legal work.  Finally, the lawyers leaving for Axiom are not the heavy-hitter equity partners who control client relationships.  Hence, the analysis is complete: Axiom represents zero threat to the BigLaw model.

Yet, if brokering lawyer services was originally the core of Axiom's business, they have subsequently expanded their offerings.  Back in 2007, Axiom was #73 on Inc magazine's list of fastest growing companies, with revenues of $17 million per year and 1000%-plus growth over three years.   Since then, its revenues have grown another ten-fold.  Earlier this year, Axiom took $28 million in outside investment, which it plans to invest in technology. See Mark Harris of Axiom Answers Hard Questions, Legal Whiteboard, Sept. 25, 2013.

With this kind of growth, and the backing of very serious venture capital funds, perhaps its time to check the assumptions surrounding the Axiom caricature.

The "Managed Services" Business Model

Based on my own discussions with Axiom management and several articles on the topic, see, e.g., Adam Smith,  ABA Journal, Strategic Legal Technology Blog, the fastest growing part of Axiom's business is its "Managed Services" practice. 

Part of the managed services practice is analyzing and redesigning workflows so that in-house lawyers have the cost and quality information needed to make better sourcing decisions. Because Axiom is helping to redesign the workflows, including the specifications for sourcing decisions, it is well-positioned to do much of the resulting work -- indeed, unless it can manage both the design and execution of the work flow, Axiom can't warranty the results.

What is the goal of the workflow redesigns?  To reduce legal risk and legal cost at the same time, primarily through process, measurement, and feedback loops.  Virtually the entire law firm and law school universe is stuck in a mental frame that believes that better, faster, and cheaper are in permanent tension with each other.  This is because our mental frame of reference is based on artisan-trained lawyers working in a traditional office environment with Word, email, and a searchable bank of forms and briefs. 

Yet, when systems engineers, information technologists, and project managers because equal members of the team, "better, faster, cheaper" becomes a straightforward problem that can be solved through a four-part continuous process: design, execute, measure, repeat.  

Much of the key design and execution work at Axiom is done by nonlawyers who formerly worked for global consulting businesses.  See, e.g., this opening in Axiom (Chicago) for Project Management Director of Managed Contracts. 

Indeed, the head of Axiom's Houston office is Brian Bayne, a business development professional with an MBA from the University of Dallas.  Before joining Axiom, Bayne worked for IBM.  Here is how Bayne described Axiom to the HBJ:

"The heart of what motivates us as a company is to be seen as an agent of change ... . We want to be a leading voice for transition in the industry. It really is a new way of doing business and offers a completely different value proposition that most law firms are not in a position to do."

Is Axiom a Law Firm?

Over at the E-Lawyering Blog back in April, Richard Granat did a very careful job trying to answer this question, and concluded that the answer was "no." In fact, Axiom is a Delaware C-Corp with nonlawyer investors as equity shareholders. 

So, how is Axiom getting around the Rule 5.4 ban on fee-splitting with nonlawyers?  The answer to this question has a lot to do with the nature of outsourcing and managed services within legal departments.   A general counsel for a corporation controls the legal functions of the company. Because he or she can't do all the work themselves, they hire in-house legal staff and outside counsel.  In recent years, legal departments have also contracted directly with LPOs, particularly on matters related to e-discovery and M&A due diligence. When it comes to non-law firm options, such as LPOs, the general counsel and his or her staff are "supervising" the work within the meaning of the legal ethics rules.

When a general counsel of a corporation uses a managed service provider, such a Axiom, they are diverting a tranche of work they control.  The value of the managed service provider is process expertise plus economies of scale and scope.  Axiom, through a contract with the legal department, manages some of that legal workflow that supports in-house lawyers in their counseling and compliance roles.  Yet, the buyer of the managed services is himself a lawyer, and that lawyer is ultimately responsible for advising the corporation on legal risk. 

On one level, Axiom is a niche business.  As Granat notes, "If you don't have an in-house counsel, then you can't use Axiom's services. Not being a law firm, Axiom cannot provide services to the public (individuals or organizations) directly."  Yet, this niche accounts for a huge proportion of the entire legal services market.  In this American Lawyer article, one of Axiom's venture capital investors, opined "With a worldwide legal market that is a trillion dollars each year, there is plenty of running room to build a successful business."

Ultimately, the value proposition very simple.  As an in-house lawyer, you can educate yourself on the Axiom managed services approach and be comfortable that, through process and measurement, you have a solid handle on this tranche of the company's legal work, likely within budget.  Or you can have the CYA coverage of a brand name law firm and continue to do battle with your CFO over rising legal fees. If you were an investor, which approach you would bet on?

So Axiom can't help you with your divorce, will, or personal injury case.  Don't worry,  Jacoby & Meyers, Legal Zoom, Legal Rocket, and others are trying to tap into that market.  See Legal Futures, Nov 8, 2013.  In the meantime, Axiom may be gunning to be a service provider to your large corporate employer.

The Last Days of a Bloodless Revolution

I am sure that a state bar regulator, taking a very formalistic approach, can take issue with Axiom's construction of Rule 5.4, which prohibits profit-sharing between lawyers and nonlawyers from income generated from the practice of law.  But the purpose behind Rule 5.4 is to preserve lawyer independence so that the quality of the underlying legal advice won't be compromised by the nonlawyer's pursuit of profit.

In the case of Axiom, however, the person making the buying decision is a highly sophisticated lawyer who is struggling to manage his or her organization's legal needs within a budget.  Stated bluntly, the GC of a multinational corporation does not want the kind of consumer protection that a formalistic construction of Rule 5.4 would provide.

A betting person, such as a nonlawyer Axiom investor, would likely conclude that the bar regulators are not going to pick a fight with the largest corporations headquartered in their jurisdiction.  Why would they?  The subtext of economic protectionism would set them up for ridicule in the legal and mainstream press--who, exactly, is being harmed besides the law firms who are losing market share?  And is there a principled basis to distinguish LPOs from managed services? 

Expect to read more about state regulators in the "risk factors" section of Axiom's S-1 registration statement if and when Axiom decides go public.  I think these risks will likely remain hypothetical, but as my friend Ed Reeser is known to say, "That is just my opinion.  I could be wrong."

Truth be told, the nonlawyer revolution in U.S. legal services is occurring right now.  And there is a good possibility that the whole revolution will take place without a single shot ever being fired.

Back to Houston

The HBJ reporter asked a local Houston legal recruiter about the future prospects for Axiom.  The recruiter commented that he was "[n]ot sure how well they will do in Texas, given the conservative nature of the legal business here." 

In my own experience, general counsel in Texas are among the most innovative and entrepreneurial in the country.  The General Counsel Forum was originally founded in Texas as a state-level organization, and it is now rivalling the Association of Corporate Counsel (ACC) in terms of eduational programming for in-house lawyers and sharing best practices and benchmarking.

Lawyers as a group may be conservative, but within that distribution there is a small cadre of innovators and early adopters.  Although most people don't change their behavior in response to abstract ideas, innovators and early adopters are at least drawn to the possibility.  Not every idea will be successful -- indeed, the trial and error of the innovators is often a basis for dismssing them as fringe players.  Yet, when an innovation produces a significant leap forward, the resulting success eventually sets off a widespread diffusion among the broader population.

There is a rich sociological literature on this topic, which was pioneered by Everett Rogers in his 1962 book, Diffusion of Innovation.  It turns out that self-interest is often inadequate to overcome inertia and prejudice, at least in the short- to medium-term.  The classic example is hybrid seeds, which have a host of advantages for producing more bountiful, disease-free crops.  Yet, that innovation took decades to take hold among farmers.

Looking for another example?  In the early 1980s, Bill James was publicizing the benefits of his stats-driven approach to baseball.  The advertised benefits were clear -- "you can win more baseball games."  Isn't that what every baseball team wants?  But what's the cost?  "Well, you'll have to change the way your evaluate talent."  For nearly twenty years, the implicit answer of the baseball establishment was "no, that price is too high."   Within the last decade, however, the stats-driven appoach has become commonplace in baseball and in other sports as well. The innovation has become diffuse.

I suspect that Axiom's senior management fully understands these dyanmics.  Looking at the distribution model from Everett Roger's book, if you are trying to sell your unproven innovation, you are literally wasting your time trying to sell to your wares to 85% of the market. Indeed, if you are in the very early stages of innovation, 98% of the potential buyers are likely to be resistant to your pitch. 

The problem here is not economics --  its human nature.  This may be hard for many lawyers to believe, but lawyers, including general counsel, are human beings.  And human beings are prone to a series of predictable reactions when presented with various stimuli, such as new ways to perform their work.  Rather than process the merits of the idea, many human beings, including lawyers, will instead gauge the reactions of the market leaders.  If the market leaders react with approbation, the early and late majority become willing to actually engage with the idea. 

What this means is that the merits of a good idea are not enough to ensure its success, at least immediately.  This is a key practical insight that the reformer/innovator class seldom grasps.  Without understanding Roger's Diffusion of Innovation curve, an innovator's success becomes a function of timing and luck -- that is the story of Bill James. 

But if you understand the diffusion process, it is possible to construct a filter that locates the innovator/early adopter class.  And if you study their beliefs and problems, you can more effectively tailor your pitch. This approach saves time and money and holds the team together in the belief that they will ultimately be successful.

So, where is Axiom on the Rogers Diffusion Curve? 

My best guess is the "early adopters" stage, as Axiom has relationships with roughly half of the Fortune 100 and is working hard to widen those relationships with more ambitious projects.  Their goal, as best as I can tell, is to generate a clear proof-of-concept that they have solutions to the risk/cost conundrum that plagues so many legal departments and causes them to blow their budgets.  With sufficient market testimonials, and as in-house lawyers with exposure to Axiom migrate to other legal departments, the broader legal market will begin to tip. 

I find the Axiom story refreshing, primarily because the legal market has fallen under the spell of the fast follower strategy.  In my travels, I often encounter the attitude "Let someone else prove that it can be done differently and better and then we will follow."  When virtually the entire market adopts this worldview, incumbent institutions begin to relish the false starts of others and a general sense of complacency begins to set in.  Frankly, I find this whole dynamic unprofessional is the classical sense of that word -- i.e., at variance with professional standards and conduct.

Axiom, in contrast, is on the brink of demonstrating the benefits of the first mover advantage in law.  This is bound to have the beneficial, balancing effect on the rest of us.

Related posts:

• "LPOs Stealing Deal Work from Law Firms", Feb 6, 2013.
• Mark Harris of Axiom Answers Hard Questions, Sept 25, 2013.

Legal departments in India and U.S. appear to be evolving in same direction

There is an interesting article in The Times of India business section that says, essentially, large Indian corporations are realizing that legal strategy and compliance are too important to not elevate these functions to the C-Suite.  As a result, the pay, influence, and prestige of in-house positions in India are now very much on the rise.

This is the same evolution that has occured in the U.S. over the last two to three decades, albeit the evolution appears to be occuring in India at a much faster pace.  So any temporal gap in structure is unlikely to be permanent.

This dynamic reminds me of my visit to India in 2009, when Marc Galanter and I spend time with several law firm leaders.  One of the most striking features we noticed is that all the name partners were alive and very much in their prime.  (In the U.S., the equivalant year would have been roughly 1940.)  These lawyers very much enjoyed being engaged on the future of India.  And unlike the U.S. or U.K., where the market is now defined by league tables, the topic of money never came up -- granted these Indian lawyers were all making plenty of it.  

One of the things most on the minds of the Indian law firm leaders was how they could create a vital, useful organization that would survive them.  So, much to our surprise, the India law firm leaders discussed things like Kaplan Balanced Scorecard for determining partner compensation (based on the work HBS Professor Robert Kaplan).  Another leading law firm, Nishith Desai, constructed its entire firm based on the best practices of professional services firms worldwide. This was the result of a 20-year reflection on this topic by the firm's founder, who is also still in his prime.  See Nishith Desai, Management by Trust in a Democratic Enterprise: A Law Firm Shapes Organizational Behavior to Create Competitive Advantage, Wiley Journal of Global Business and Organizational Excellence, Sept/Oct 2009.

It was almost as if the Indian bar was skipping 100 years of evolution and instead decided to converge immediately on the state of the art.  Well, the same may be happening in India legal departments.

Wondering what a Kaplan Balanced Scorecard looks like?  Here is a good sample.

 

Lawyers can use emotion to be more effective

That is the message of Larry Richards, a JD-PhD consultant who runs a company called Lawyer Brain. At the 18th Annual Law Firm Leaders Group Conference here in NYC, Larry made this point with the video below.  Very effective.

Five years ago, Larry told me to read Daniel Pink's book, A Whole New Mind. (Daniel Pink, by the way, is a lawyer by training.) The message of that book is developing the right side of brain (emotive, aesthetic, storytelling) with our left side (analytical, quantitative). That was very good advice.  Thanks, Larry!

What Does a JD-Advantaged Job Look Like? Job Posting for a "Legal Solutions Architect"

Below is job posting for a new type of job called a "legal solutions architect."  

The job post just appeared on the website of Seyfarth Shaw, a large law firm based in Chicago.  Seyfarth was one of the first to embrace the movement toward technology and process.  See Six Sigma at Seyfarth Shaw, Legal Professions Blog, April 14, 2010.  

Before getting to the text of the ad, a few of observations for what this posting is telling us about legal education and the emerging legal job market:

• This is a pure JD advantaged job. "Juris Doctor or MBA with legal industry experience strongly preferred job" (emphasis in original). It is full-time, long-term job in downtown Chicago.  it is not reviewing documents. This is a good professional job doing very sophisticated and challenging work.

• The job is not partner-track.  But it terms of economic potential and job security, does that matter?  In the years to come, folks that understand the overlay between law, technology, and process are going to be great demand and have a lot of options.

• Undergraduate education matters, but the majors are far from typical among traditional law students:  finance, business administration, computer science, or "other technical discipline."

• It is easier to get this job if an applicant has familiarity with "extranets, intranets, document assembly, enterprise search, relational databases and workflow."  Also, it is "a plus" to have "familiarity with Agile and Scrum [two software development tools]." We don't teach any of this stuff in law school.  Perhaps we should.

• The required skills are an blend of technical skills and knowledge plus higher order professional abilities that, frankly, are not explicitly taught in law school.  Law schools need to take notice, as this an order any decent professional school should be able to fill.

Now the actual job posting:

Requisition Number	13-0191
Post Date	10/10/2013
Title	Legal Solutions Architect
City	Chicago
State	IL

Seyfarth Shaw is one of the most progressive, forward-thinking law firms in the world. Seyfarth’s commitment to delivering legal services in a new way through its SeyfarthLean program - with an emphasis on value and continuous improvement - has been praised by the Association of Corporate Counsel (ACC) as being “five years ahead of every other AmLaw 200 firm.”

Legal Solutions Architects anticipate, identify, sell and drive innovative business solutions. Through an understanding of technology, knowledge management, business analysis, process improvement and project management, this role provides solutions that enhance the client experience. These multidisciplinary resources are aligned with Firm strategy and play an important role in driving the Firm’s innovative approach to the practice of law and the delivery of legal services.

This position will report to the Director of the Legal Technology Innovations Office. Seyfarth Shaw recently received awards for 2013 Innovative Law Firm of the Year and Innovative Project of the Year, and the efforts of the Legal Technology Innovations Office played a significant role in earning those recognitions.

Essential Functions

• Partner with clients, Seyfarth legal teams and legal project managers to enhance the delivery and effectiveness of services provided within legal engagements
• Translate stated and inferred needs of clients and attorneys into specific technologies and methods
• Synthesize the needs of multiple engagements and create requirements for systematic solutions that underpin Seyfarth’s varied legal practices
• Team with the Application Development Group to design and plan for custom solutions and oversee the construction and implementation of these systems
• Manage multiple projects concurrently, juggling priorities, deadlines and essential duties for each project
• Collaborate with other Firm departments, including Legal Project Management Office, Practice Management, Finance, Marketing and Professional Development to provide comprehensive solutions
• Act as an effective change manager – keeping client and Firm culture, group behavior and individual habits in mind in order to best circumnavigate roadblocks and pitfalls for solution adoption
• Provide presentations to individuals, small groups and large audiences of clients and Seyfarth attorneys in a persuasive and encouraging manner
• Contribute to continuous improvement, promote the use of technology solutions and help improve the awareness of the impact of the solutions on the business
• Perform vendor due diligence and serve as a point of contact for third-party technologies leveraged by the Firm
• Conduct market, external and internal research and convey results to forward assigned projects and to aid projects lead by teammates, other groups and other departments
• Proactively research and maintain knowledge of emerging technologies and service delivery models and possible applications to the business

Skills:

• Highly motivated self-starter with an entrepreneurial bent
• Uses intelligence, creativity and persistence to solve varied, non-routine problems
• Possesses an understanding of knowledge management, process improvement and legal project management and an appreciation of the benefits to law firms employing these approaches
• Passion for legal technology, including technical platforms, specific technical applications and their impact on the practice of law
• Keen grasp of project management, flexible in project execution and able to meet aggressive deadlines
• Strong business analysis approach
• Visualizes how raw data can be converted into useful information for client and Firm decision-makers
• Pays attention to detail but still maintains focus on the bigger picture
• Comfortable working both independently and in diverse teams
• Excellent written and verbal communicator that is able to distill complex concepts into simple messages
• Familiar with the software development cycle
• Capable of managing and motivating up, down and across the organization
• Appreciation for user interface and user experience design
• Embraces change and seeks to create order from chaos

Requirements

• Bachelor’s degree, preferably in finance, business administration, computer science or other technical discipline
• Juris Doctor or MBA with legal industry experience strongly
• Experience working within a large law firm preferred but not required
• Familiarity with extranets, intranets, document assembly, enterprise search, relational databases and workflow preferred
• Familiarity with Agile and Scrum a plus

Seyfarth Shaw is committed to working with and providing reasonable accommodation to individuals with disabilities. If, because of a medical condition or disability, you need a reasonable accommodation for any part of the employment process, please call (312) 460-6545 and let us know the nature of your request and your contact information. We offer an outstanding benefit package which includes: medical/dental, 401k with employer contribution; life insurance; transportation fringe benefit program; generous paid time off policy; and long-term and short-term disability policies. Equal Opportunity Employer M/F/D/V

Apply online

Send this job to a friend

"Big Data is the Big Opportunity" for Legal

So says a just published article in the Global Legal Post by Sandeep Sacheti, an executive with Wolters Kluwer Corporate Legal Services.   The article is called "The legal industry's new reality."

Perhaps the key insight is that "data by itself is useless. To extract value from it, you need the ‘three Ts’:  talent, technique and transformation.  

• Talent.  "When you start out, you don’t need the top experts to start making sense of your data. You may just need people with curiosity, good statistical skills and a desire to learn. These are the kind of people who will quickly see how data can be managed and packaged to solve problems. And once they do, they will want to get better at it."

• Technique.  "Big Data needn’t mean Big Complexity. ... [A]nalytical techniques can be sophisticated, but it’s also possible to keep it simple – especially at the start of the journey. Get the basics right first, and then you can become more advanced as you get better at it."

• Transformation.  "Becoming a data-driven legal team – law firm or corporate – is a journey. Change is slow, so don’t expect an overnight transformation. The best approach is to bring the whole organisation with you - if everyone from the partners and CEOs to the interns buy into your data strategy, it will start delivering returns faster."

So who will be the big winners when it comes to Big Data?  Definitely some start-ups become they they don't have to transform -- it's a clean sheet operation from the very beginning; they also have more patience and tolerance for trial and error.   Yet, BigLaw is sitting on top of a lot of the essential data, so there will be some winners there too.  To my mind, it will turn on the ability of some BigLaw shops to leverage talent and technique into some early victories that will aid the tranformation project.  If it works, it will be a case study in strategic leadership and effective change management. 

By the way, Wolters Kluwer Corporate Legal Services is a sophisticated place.  They own TyMetrix, which is the perhaps the best current example of BigData operating in the BigLaw ecosystem.  TyMetrix's Real Rate Report is being used to agressively control lawyer billing rates.

A Clockworks Approach to Lawyer Development

Lawyers can successfully adapt to the disruption of the Information Age just like we adapted to the legal challenges of the industrial era -- build a system to create the human capital that is in short supply.  This was original logic of the Cravath System, which created teams of specialized business lawyers who could handle the legal needs of rapidly growing industrial and financial clients in the early 20th century. This Clockworks approach still works, but the specifications of the system need to be updated. At the end of this presentation, I offer a prototype of what we might include in a 21st century Clockworks approach to lawyer development.

Presented at the "Innovations in the Law: Science and Technology" Conference, Oregon District of the Federal Bar Association (Sept 20, 2013)

A Clockwork Approach to Lawyer Development from William Henderson

Empirical Evidence of Competencies Necessary for Advancement in Law Firms

For those trying to better understand how legal education can better prepare law students for the world that awaits them, I would encourage you to take a look at the draft article my colleague, Neil Hamilton, Director of the Holloran Center for Ethical Leadership in the Professions at the University of St. Thomas School of Law, recently posted on SSRN. The article is entitled Law-Firm Competency Models and Student Professional Success: Building on a Foundation of Professional Formation/Professionalism. Here is some of the description from the abstract:

A law student who understands legal employer competency models can differentiate him or herself from other graduates by using the three years of law school to develop (and to create supporting evidence to demonstrate) specific competencies beyond just knowledge of doctrinal law, legal analysis, and some written and oral communication skills. . . .

In Part I below, this essay analyzes all available empirical research on the values, virtues, capacities and skills in law firm competency models that define the competencies of the most effective and successful lawyers. Part II examines empirical evidence on the competencies that clients evaluate. Part III evaluates the competencies that make the most difference in fast-track associate and partnership promotions. These data and analyses lead to several bold propositions developed in Part IV:

1. Law students and legal educators should identify and understand the values, virtues, capacities and skills (the competencies) of highly effective and successful lawyers in different types of practice (one major example is law firm competency models analyzed below in Part I);

2. Each student should use all three years of experiences both inside and outside of law school (including the required and elective curriculum, extracurricular activities, and paid or pro bono work experiences) to develop and be able to demonstrate evidence of the competencies that legal employers and clients want in the student’s area of employment interest;

3. Law schools should develop a competency-based curriculum that helps each student develop and be able to demonstrate the competencies that legal employers and clients want; and

4. Both law students and law schools should understand that the values, virtues, capacities and skills of professional formation (professionalism) are the foundation for excellence at all of the competencies of an effective and successful lawyer.

The article presents far more useful information than can be summarized here, and different readers may be struck by different things discussed in the article. One of the most significant takeaways for me, however, is the convergence around an array of competencies frequently not taught in law school. The article analyzes competency models used to assess associate development at 14 medium to large law firms in the Twin Cities and compares that with some other literature on competencies clients look for in attorneys. The analysis demonstrates that in addition to traditionally understood technical skills – legal analysis, oral and written communication, and knowledge of the law – there is significant convergence around several competencies frequently not taught in law school – 1) Ability to initiate and maintain strong work and team relationships; 2) Good judgment/common sense/problem-solving; 3) Business development/marketing/client retention; 4) Project management including high quality, efficiency, and timeliness; 5) Dedication to client service/responsive to client; and 6) Initiative/ambition/drive/strong work ethic.

Whether law schools are going to be able to find efficient ways to offer students opportunities to develop these competencies, it is imperative that we make our students aware that they need to be developing these competencies to give themselves the greatest likelihood of professional success.

[posted by Jerry Organ]

A Law Video that is Destine to go Viral ...

So we might as well face the music now.  This incredibly powerful video was produced by www.rethinklaw.org.   And who created Rethink Law?  The same folks discussed here.

Rethink Law (US) from Liana Guzman on Vimeo.

The revolution is here.  It is going to happen. For a detailed analysis of the rise of what I call "Susskind's World" and the new legal entrepenuers, see Part II.C of The Blueprint for Change.