Law’s Odd Couple – Will New Law Recruits Transform Traditional Law Firms?

Baker McKenzie, progenitor of the global law firm, created a buzz recently with a spate of “new law” hires. First, it tabbed David Cambria as its inaugural Global Head of Legal Operations, overseeing strategies for pricing, legal project management, and other “business of law” functions. Cambria, a corporate legal ops veteran, will, in the words of his new employer, bring a “voice of the client” to the firm and the clients it serves. Cambria is now joined by Casey Flaherty and Jae Um, well-known consultants and “new law” evangelists, to serve as director of legal project management and director of pricing strategy. As Roy Strom notes in a recent article, the  Baker hires, are “ indicative of a broader trend in the legal industry to build out professional service roles.”

Will an infusion of “new law” talent in management and operational roles transform traditional partnership model law firms into client-centric providers that integrate the practice of law with the business of delivering legal services?

As the British say, “it’s early days” but it’s certainly not too soon to identify internal obstacles that confront them.

Law Firm Odd Couple: Rainmakers and Business Professionals

Law firm management long consisted of a cadre of rainmaking partners—predominantly white and male—who ran firms as the restricted clubs that they were. Law firms sold one thing: practice expertise and lawyers managed lawyers. That dynamic has changed in recent years because legal practice is no longer synonymous with the delivery of legal services.

Technology, process, and the evolution of global, complex, fast-moving business have changed the legal buy/sell dynamic. Legal buyers, under pressure to “do more with less,” are demanding that practice be leveraged, streamlined, and supported by methods, operations, data, and standards, common to business. Most law firms have lagged in this transformation and have continued to focus on practice to the exclusion of enhanced delivery capability. Apart from a handful of elite firms that perform a disproportionate percentage of the highest-value “practice” matters, many firms are starting to pay for their stasis. The past several years have witnessed a steady migration of work—in volume and complexity– in-house and to law companies. This is context for why many large firms are hiring business, technological, and other highly-trained professionals to facilitate the integration of practice and delivery. The “new law” professionals serve both internal and external functions. They are tasked with cutting internal production costs and improving efficiency to sustain profit-per-partner (PPP) as well as working with clients to enhance provider/consumer alignment, performance, and satisfaction.

Several large firms have created “C-Suite” roles in response to elevated legal consumer expectations and a new buy/sell dynamic where lawyers no longer exclusively control legal buy and sell. A sampling of new roles includes Chief Executive Officer (CEO), Chief Operating Officer (COO), Chief Marketing Officer (CMO), Chief Innovation Officer (CIO), Chief Knowledge Officer (CKO),  Chief Pricing Officer (CPO), and Chief Strategy Officer (CSO). While firms still lag in diversity representation and gender wage gap, the new hires suggest they are taking steps to integrate core practice expertise with enhanced delivery capability. Firms are hiring talent with new skill sets, backgrounds, and functions. The question is: how effective will the “new law” talent be in what remains a traditional law firm culture?

The Partnership Model Is A Strong Headwind For Material Change

The C-Suite roles and titles, now common among large firms, suggest their transition to corporate culture. Even with an infusion of “business of law” talent and management responsibility, the traditional law firm partnership model remains intact and is a strong headwind to new law managers and operators. Law firms retain their traditional culture, structure, and economics. Each is a powerful change inhibitor, and collectively they make material firm change a formidable undertaking.

This sustains, among other things, firms’ “short-term” approach to meaningful investment, creating a “take the money and run” environment. It also militates against structural reform and succession.

There is no residual equity in firms upon retirement, so greying partners have virtually no long-term financial incentive to reinvest. Firm profits are whacked up at the end of each fiscal year, and that means that “the future is now” for most senior partners. The firm’s capital comes from lawyers because the self-regulated U.S. legal industry has repeatedly thwarted efforts to liberalize ownership, investment, and “corporatization” of law firms and to separate practice from the business of law. This sustains, among other things, firms’ “short-term” approach to meaningful investment, creating a “take the money and run” environment. It also militates against structural reform and succession. What kind of budget will the new law hires be given to invest in their firms’ long-term future? They must contend with these and other structural issues—not to mention whether they are given a clear mandate—to effect real change. That’s a tall order.

Traditional Firm Culture Is Lawyer-Centric, Individualistic, and Change-Averse

Culture does not change overnight; it is a difficult, protracted process that does not occur simply by creating new roles or pronouncements of “embracing innovation,” “partnering with clients,” and other buzzwords. So it is with law firms. During the past decade, firms have ceded their hegemony of legal talent and delivery of legal services. They have long sold one thing: legal expertise. Their culture was forged by lawyer-centrism, the myth of legal exceptionalism (a world of “lawyers and ‘non-lawyers’”),  a regulatory scheme designed to protect the legal guild from “outside” competition, a “scorched-earth,” labor intensive approach to delivery designed to produce the best legal work possible—no matter the time, cost, value, or importance to the client.

Legal consumers are challenging law firm culture by recasting law’s division of labor. Legal buyers–not firms– now determine what’s “legal” work, when lawyers are required, from what delivery model their value is optimized, and at what price. This is what firms—finally—are responding to with their new hires. Firms have focused on internal cost-cutting measures in recent years—reducing staff and incoming classes of newly-minted law grads, “de-equitizing” partners, hiring big-book laterals, decreasing the number of internal promotions to equity status, and reducing real estate costs. Firms have often turned to “non-lawyers” to take the lead on many of these efforts designed to sustain high profit-per-partner (PPP). These practices have had little impact upon practice, delivery, or clients; they were internal belt-synching and did not require the “non-lawyers” to “tell lawyers how to practice.” We are now entering a different phase.

The influx of new law professionals represents something different—firms getting serious about changing the delivery of their services. This is a more client-driven focus and one that potentially comes into conflict with the firm’s traditional practice modus operandi. For example, automation of tasks, sourcing work to other legal providers, and assigning project managers to take responsibility for delivering legal projects on time presents and at budget poses a threat to many lawyers—especially partners—and a challenge to new law managers and operations professionals. Even if there is senior-partner buy-in for change, that does not translate to  widespread rank-and-file acceptance and implementation.

A voice at the firm’s management table is another obstacle. Firms will differ as to the authority, status, compensation, and partner support given to the corps of business professionals. Many partners—especially rainmakers—have been given a wide berth by firms to keep them happy, and they often pose vocal opposition to altering the way they practice/deliver their services. Most firms are decentralized, as to rainmaker (read: firms are often fiefdoms), practice areas, geographies, and client relationships. To be effective, the new law hires must be given a broad mandate that applies across-the-board and can be enforced on a centralized basis.

A cultural divide exists between legal practice—the lawyer-centric, traditional legal mindset—and delivery of legal services.

Practice has historically focused on “being a lawyer”–risk aversion, labor intensity, time and price insensitivity, legal—not holistic—solutions, and other lawyers. The business of law springs from different DNA. It is about business, process, efficiency, predictability, multidisciplinary solutions, speed, data, metrics, alignment with business, automation, scaling, “right-sourcing,” collaboration, transparency, customer satisfaction, and delivering measurable results for business challenges. In sum, practice sees things through the narrow prism of lawyers and legal solutions; the business of law—legal operations—sprung from law firms’ languid response to technological and process adoption to leverage practice expertise.

That cultural divide will present formidable challenges to business and technological professionals operating in the law firm environment. Even when functioning in the more corporatized in-house setting, many legal operations professionals complain about the blowback and marginalization they often encounter as well as their second-class status to practicing attorneys. It’s that much worse in law firms where origination, billing, collection, and the threat of defection typically confer authority, autonomy, and resistance to change. Where are things different? Law companies, spawned by the market void created by law firms and forged with different cultural values more aligned with business than law firms, are such places. That’s one reason why they are snapping up so much of the new law talent.

Conclusion

Are firms’ new law hires window dressing or recognition that they must change to remain competitive? This might just be the most important “bet the company” issue that firms will ever engage in.

This Article first appeared on Forbes.com and is featured here with Author permission.

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Mark A. Cohenhttp://legalmosaic.com/
MARK has had a long and distinguished career as a lawyer and innovator in the legal vertical. His unique perspective on the legal industry is derived from roles he has had as an internationally recognized civil trial lawyer, legal entrepreneur, early large-scale adopter of technology for the delivery of legal services, partner at one of the largest law firms, founder and managing partner of a national litigation boutique firm, outside General Counsel, federally appointed Receiver of a large, international aviation parts business with operations on four continents, (Adjunct) Distinguished Lecturer of Law at Georgetown University Law Center, writer, speaker, and acknowledged global thought leader at the intersection of law, business, and technology. Mark currently serves as CEO of Legalmosaic, a company that provides strategic consulting to service providers, consumers, investors, educators, and new entrants into the legal vertical. Prior to founding Legalmosaic, Mark was Co-Founder of Clearspire, a groundbreaking legal service provider whose disruptive, proprietary IT platform and reengineered legal model garnered international acclaim. This followed his founding of Qualitas,an early entrant into the LPO space. Earlier in his career, Mark was an internationally recognized civil trial lawyer. He was an award-winning Assistant U.S. Attorney and the youngest partner of Finley Kumble prior to founding his own multi-city litigation boutique firm. Mark is widely known for his blogging and speaking on a range of legal topics focused on changes, challenges, and opportunities in the current legal landscape. Mark maintains an active speaking scheduled, both domestic and international. He has been a keynote speaker at Harvard Law School’s Speaker Series, Reinvent Law, 3M’s Global Legal Alignment Summit, LegalZoom, University College London, and, in May 2017, The German Bar Association’s Annual Conference. He writes a weekly column for Forbes and has been published in major legal and business media sources around the globe. Mark has been active in sports and the arts throughout his life, and this is reflected in his writing and speaking on legal issues where he frequently makes references to those topics. He enjoys mentoring students and young lawyers and is known for his colorful sense of humor and candor.
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