In June of 2019, Burford Managing Director David Perla posed a series of questions about innovation in the business of law to a small but respected group of legal pioneers and business of law influencers. Their answers are gathered and excerpted below.
Bobbi Basile, Managing Director, HBR Consulting
Leslie Brown, Director of Legal Process Innovation, Greenberg Traurig LLP
Sanjay Kamlani, Co-Founder & Managing Director, 1991 Group
Sally F. King, Chief Operating Officer, Akin Gump Strauss Hauer Feld LLP
Susan Raridon Lambreth, Principal, LawVision
Mark Medice, Principal, LawVision
There’s a lot of data—including research conducted by Burford—indicating that GCs want more innovation from their outside counsel than they are currently getting. Why do you think law firms have lagged in delivering on the innovation their clients expect, and how should they set a different course?
Sally King: The billable hour model is a disincentive to efficiency—and will be until there is a culture change that does not require young associates to bill a certain number of hours each year, and until GCs really are willing to lead the drive for change.
Sanjay Kamlani: There are two dynamics involving financial risk that preserve the status quo. First, while many GCs say they want innovation from outside counsel, many of them fear moving out of their comfort zone on hourly pricing. They want to see the efficiencies and quality improvement from technology innovation, but they often want to pay lawyers for hours because that is what they know how to monitor and budget. Second, the lawyers are caught up in the historically embedded construct of compensating partners and associates for hours. The profitability of a particular client, engagement or work product is a concept many lawyers fail to adequately consider. Most people don’t get excited about the prospect of making less money. So, in most cases, driving adoption of tools whose primary purpose is to improve efficiency (i.e., fewer hours billed) requires a compelling explanation about how a new model of pricing, lower input costs or other dynamic can generate more profit and a better result for the client. In addition, there is usually a compelling case that failing to deploy such tools will result in a practice ultimately becoming uncompetitive. Unfortunately, for many lawyers their time horizon doesn’t extend beyond their next partner compensation determination. This often makes the competitiveness argument less persuasive than the more immediate prospect of improving margin.
Bobbi Basile: Law firms are hampered by a partnership business model that requires at least partial consensus in a profession enamored with centuries-old precedent. It’s a wonder we’re not still using stone tablets. Joking aside, change is hard. Change is emotionally linked to risk. The legal profession is inherently risk averse. The rest of the business world operates in a much more technologically and otherwise evolved manner. That situation is beginning to change, however. New market entrants siphoning revenue from law firms, fears of a financial downturn, impacts of alternative fee arrangements, new attorney expectations and elevated client demands are converging to motivate law firms to embrace transformation.
Susan Lambreth and Mark Medice: Many if not most law firms are lagging on delivering the innovation their clients expect for several key reasons. Among them, innovation takes resources (time, money, etc.). When law firms pay out all their profits each year to keep publicly published profits per partner high, they lack the funds to invest in innovation that the Big 4 and other investor-backed alternative providers have. Capital is a topic that the industry is wrestling, and it will be interesting to see if a broad set of partnerships, consortia and other means to enable new capital models emerge.
Other economic factors work to preserve the status quo. Partners in BigLaw have been tremendously financially successful working in the current business model. To invest out of their pockets directly to change a model that is still generating higher profit margins than most businesses in the world is counterintuitive. There are also biases toward the legacy processes both in law firms and in many clients. Even in the most centrally run law firm, the firm management still has little power over individual partners and over the most significant rainmakers. Those rainmakers often want to maintain the status quo and few in firm leadership roles want to undertake approaches that might cause them to leave with their multimillion-dollar client base.
Finally, the success of BigLaw over 20-plus years has bred a lot of complacency. Even though many sense that the current models are not sustainable there doesn’t seem to be any disaster looming for most firms. With 2018 another banner year in law firm profits, most are not feeling enough pain to be willing to spend their money on innovation, much less change the ways they do things.
It’s 2029 and innovation has led the business of law forward. Describe what that looks like.
Sally King: The organizational structure of law firms is changing, and there is a very different mix of non-lawyer professionals including data analysts who can mine and analyze both firm and client data. Project managers are now part of every client team. There are significantly fewer secretaries and IT infrastructure has been outsourced. There is a greater emphasis on efficiency and pricing based not on the billable hour but rather value to the client. This will of course drive different compensation models. Not sure this will all happen by 2029—but it should!
Leslie Brown: The law firm in 2029 will look very different than it does today. There will be more non-lawyer professionals in leadership roles. Business professionals will play a much larger role in law firm management. Technologists, project management and process improvement professionals and data scientists will not just be “support staff” but will play major roles in firm management.
The way we price and deliver legal services will also look very different. Data analysis will provide more predictability in alternative pricing and legal matters will no longer be staffed solely by the firm’s attorneys.
Legal strategy will no longer be the sole purview of attorneys. The application of predictive analysis will play a much larger role in how legal decisions are made. And speaking of data, data, data: We’ve just discovered the tip of the iceberg of data that will impact the legal industry.
Over the next ten years, the law firm business model will take many forms. The traditional, large lawyer run firms will still exist but new approaches to delivering and enhancing legal services will enter the market. And there will be more partnering between law firms, technology companies and non-traditional providers of legal services. We’re already seeing that in the market. A good example is Greenberg Traurig’s recently announced Recurve, which is a collaboration between legal advisors, clients, technologists and other service providers. The future legal eco-system will be enriched by the diversity of talents that exist in these other spaces.
Bobbi Basile: New categories of legal professionals exist as equity members of legal entities. Legal teams will be comprised of individuals with legal, technical and domain expertise to deliver solutions to business challenges beyond addressing legal issues. Eventually, the contributions of certain non-lawyer professionals will be integral to the perpetuity of the business, requiring fundamental evolution to the traditional business ownership composition. Legal services will be stratified by complexity and many services will be available “just in time” via applications or other self-directed methods. No billable hours. Oh wait, you said 2029? Never mind, billable hours will probably persist—it’s the common enemy we love to hate.
Susan Lambreth and Mark Medice: While this won’t be a surprise to anyone, we expect that the Big 4 will have a much greater presence in the US. It is likely that the regulations will change to allow them to practice law but even if not, it is highly likely they will have absorbed more law firms. Competition from the Big 4 will drive other changes, including different compensation systems in law firms more like the Big 4’s emphasis on team collaboration and contributions rather than personal production. We will see a small percentage of work billed primarily by the hour (maybe 25%). We will see more self-service solutions and many more productized and packaged offerings of services that combine legal, business and technology assistance, like the “integrated service delivery” that the Big 4 are known for. The talent model for servicing clients will not have the “lawyer versus non-lawyer” hierarchy but will incorporate all kinds of professionals including data scientists, technologists and legal project managers.
Sanjay Kamlani: Legal bills no longer list names of lawyers, bill rates and hours spent; rather they list deliverables and unit prices dramatically lower than they are today. The majority of transactional documents are delivered through document automation/authoring tools that are integrated with data analytics tools such that all of the key legal terms and commercials in those documents instantly become part of a dynamic database with a feedback loop that informs the parties how that document compares with the market from a legal and commercial standpoint. The notion of achieving a fair deal is based on the data analytics feedback loop rather than the antiquated adversarial process. Similarly, in the context of litigation, the precedent and outcome for any given litigious circumstance are instantly available to all parties, dramatically reducing the frequency of variant outcomes. It’s the logical result of a massive improvement and equalization in access to information relevant to a transaction or litigation matter. Even today, we see pockets of this standardization brought about by people doing the tedious work of comparing the universe of issues and outcomes that might flow from a contract (e.g., ISDA forms). Technology will allow us to replicate that standardization across much broader areas. I could be off by 10 years. Maybe it’s 2039. But this is the future.
Read more of "Roundtable: Legal innovation":
Part I • Part II
To read the article in full, download the Summer 2019 Burford Quarterly.