Last updated on September 14th, 2015 at 03:33 pm
During a prolonged exchange of emails and phone calls earlier this year with the chair of a mid-sized but fast-growing law firm in a large metropolitan area, it became apparent fairly quickly that he was intent on realigning the organization. He wanted to meet the changing client demands, competitive pressures and business model squeezing that is affecting nearly every firm of any size.
But it was just as apparent that he wanted a quick and easy solution, perhaps hoping for a “turnkey” answer that I – or some other advisory service – could promise to deliver. He didn’t mind paying serious money for the outcome, he just didn’t want to take a lot of time or effort that arriving at a solution would require.
“There must be dozens of firms with 200 lawyers and less than a half-dozen offices trying to do the same thing,” he said during one of our last conversation. Frustration in his voice was mounting, the drumming of fingers on his desk grew louder and more incessant; I could hear them banging at me through the receiver. “What works for them can’t be that different than what would work for us.”
For better or worse there is no pre-packaged “McLaw” solution for firms wanting to make the transition.
Moving from a traditional law firm model to “NewLaw” isn’t like opening a fast food franchise where someone plugs in the location and square footage of the store into a computer program, and what gets printed out is a thick binder showing where to put the counter, where to place the catsup dispensers, tables, chairs and kiddie swings, how many people are needed to staff each shift. But that was precisely what he was after.
In Search of NewLaw
In the law industry, there’s been a lot of talk about so-called NewLaw. The problem comes because it means different things to different firms – and their clients. Just as there isn’t one off-the-shelf model that a firm can adopt, there is no single definition of what the term means.
Generally, though, it can include one or more of a number of component pieces:
- Not relying entirely on hourly fees alone as the basis for charging clients, instead looking for “alternative” arrangements. This may mean a fixed fee for a project, quoting a narrow, minimum-maximum range, or agreeing in advance to use only lower-priced clerks, paralegals and junior associates on some aspects of a file.
- Some firms decide to split its business into multiple parts, with different cost and profitability structures to better accommodate the needs of a range of clients.
- Other firms have started over from scratch. For example, FisherBroyles is the largest cloud-based law firm in the US yet it has no offices to house its 100+ lawyers around the country.
Basically, NewLaw means finding a solution that is appropriate for the firm, its client base and the businesses it wants to serve.
A Discovery Process Lawyers Should Follow
I don’t know if the midsized firm found someone who claimed that for enough money they would be able to install “NewLaw” for it over a long weekend. I hope not. The effort would be doomed to failure and the result a mish-mash that would end up being the antithesis of what realignment is all about.
But take heart: Although there isn’t a template for the end result there is a path for getting a firm to NewLaw.
It involves a discovery process that, in some indirect ways, resembles what litigators do when beginning to prepare for defending against a large lawsuit. When we began working with a client where the managing partner understood he needed to transform his firm from its OldLaw roots, outlook and mentality, we needed to review everything. So, he gave us full access to client lists, business plans for each of the previous three years, financial data including revenue and a detailed cost breakdown, compensation information and other material we needed to understand the firm’s business.
Working with the head of the firm and a select group of partners he identified as “leaders,” we developed four broad objectives for the assessment and any recommended shifts in the existing business model:
- Protecting the high value, premium work the firm was known for doing while finding a way to continue handling low value work for on-going clients yet while lowering the cost of handling the files. The end result would need to be less costly to clients yet profitable for the firm.
- Recapturing work some clients had begun sending to lower cost providers, were keeping in-house, or had begun giving to consulting firms where the law came into play but not in a way that required lawyers to provide advice or opinions.
- Exploring whether the firm could offer non-traditional services where it had the expertise but its business model and cost structure made providing such services currently unaffordable to clients.
- Looking for an approach that would foster innovation in the organization, whether by technology or inventing new processes for offering legal and law-related services.
The crucial element is that leadership was able to review, debate, agree upon and articulate a broad vision of what they wanted the discover process to uncover. They recognized that the answer to some of the four points on the wish list might be “Forget it, not possible” and that for others there would be a destination with a roadmap and detailed driving directions. We all agreed that keeping an open mind and not falling victim to preconceived ideas or desired outcomes would be crucial to the success of whatever came out the other end of the process.
Basic Research 101
As much as anything, talking to clients – and non-clients that were in a firm’s “sweet spot” – about their expectations and requirements is a critical component of any assessment.
In this case, the firm provided a list of more than 100 chief executives and general counsel, and we supplemented this with another couple hundred names. From the combined list we selected some 40 at random to interview by phone.
Surprisingly, fewer than a half-dozen were unwilling to speak with us. When we booked each appointment, we said we’d need a half-hour and our outline was designed for a 20-minute discussion. Yet frequently, the executives wanted to talk at length and when I would remind them that we were nearing the 30-minute mark and there were still questions on my list, all but one echoed what one CEO told me: “Don’t worry about the time, this is important to me and no one has ever asked me these questions.”
At the same time as the interviews were being conducted, we employed a proprietary computer model that we had developed several years earlier to examine the profitability of specific types of clients. This involved comparing fees by client for the past four years of various practice areas, laying billings against lawyer compensation, and uncovering what kind of work the firm was losing to non-traditional sources. At the same time, the model accommodated examining specific costs, not all of which were laid against files or clients except on a gross basis.
The assessment took some nine months, and interim reports were prepared and discussed them with the managing partner on a monthly basis.
It took 10 months but in the end the firm ended up with a “bespoke” solution. In many respects, it was unconventional in that less than half the recommendations suggested that the organization resemble a traditional law firm.
But the solution met the needs, the financial resources and goals, and the culture of one particular firm. Although phase one is just being implemented in the second half of 2015, the overall plan was well-received by the partners because they understood not just the need but accepted the process by which the recommendations were developed.
In all, it took nearly a year to create a strategy and roadmap to get the firm on the road to a NewLaw structure, in part because of the firm’s size – it’s on an AmLaw list. Smaller firms with less diverse practices would likely need less time.
The key point, though, is that regardless of a firm’s size or what kind of clients it serves, specific changes have to be developed based on the specific situation of the law firm.
NewLaw is coming to the business of law but, by definition, each firm will have to chart its own path. There is no template, no “one size fits all” solution. It can’t be installed over a long weekend, no matter how much a managing partner may want that to happen.