alt.legal: The Biglaw 'Caste System' -- An Impediment To Innovation?
The artificial divide between lawyers, other professionals and staff has long had pernicious effects, as Ron Friedmann explains to columnist Joe Borstein.
Ron Friedmann
This was a fun interview!
This week I sat down with Ron Friedmann, NYU-trained lawyer turned legal consultant, who has more personal experience in the traditional legal market and alt.legal market than anyone I have met. Today, Ron leverages that experience to advise law firms and corporate legal counsel on how they can innovate, deliver value, and grow during this period of massive technological and market change.
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While I suggest that anyone who is interested in alternative careers in the law should take a look at his bio (and call him!), I’ll summarize the highlights: summer associate in Biglaw; litigation and practice support at WilmerHale; C-Suite officer at Mintz Levin; VP at legal outsourcing company, Integreon; and, today, a widely known partner at the prestigious legal consultancy, Fireman & Company.
We covered a lot of ground in our chat, so read on for Ron’s take on: (1) the dangerous artificial divide between lawyers and other professionals at law firms (the “caste system”); (2) how law firms can attract business in a “flat” market for legal services; and (3) how Biglaw can get in the alt.legal game, or at least join the party through partnerships. Enjoy!
Joe Borstein: Ron, you’ve witnessed firsthand all sides of the legal ecosystem, so I have many questions, but let’s start with the low-hanging fruit. If you could convince a Biglaw firm to change one thing, what would it be (and why can’t they see it on their own)?
Ron Friedmann: The one biggest and hardest thing I would change is the caste system. The artificial divide between lawyers, other professionals and staff has long had pernicious effects. Certainly those in law firms on the wrong side of the divide suffer. Clients also suffer because lawyers alone cannot deliver the value clients demand.
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Today, large firms should want to do away with the caste system. Here’s why… Biglaw is still adjusting to a flat market. In a flat market, firms must battle for share of market and wallet. Clients assume good legal outcomes. To gain share, firms need to do better than competition. Absent a unique market position, which only a handful of firms have, the only sustainable way to be better is via improved service delivery.
Better service delivery includes legal project management, better use of technology and knowledge management. Better service delivery reduces cost to client and improves profits for firms. Law firms must change their staffing mix to achieve better service delivery. That includes hiring pricing professionals, project managers, knowledge managers, and others who can work at the intersection of law practice, business and tech. This creates opportunities for JDs who do not want to practice and for other professionals.
Joe Borstein: You mention that it has been a “flat market” for law firms, and that in such a market, firms must battle for share of market and wallet. My question is do you think that flat market is here to stay? If so, do you think that alt.legal businesses can help law firms tap new demand and help them serve pockets of demand that are currently being left behind?
Ron Friedmann: Yes, all evidence points to a flat market – at least for large law firms.
The demand for corporate legal services, however, continues to grow. The rise of alternatives to large firms explains the disconnect between growing demand and a flat market. Players other than law firms fulfill the growing demand: law departments continue to bring work in-house and rely on alternative service providers. The alternatives include managed legal services, legal process outsourcing (LPO), boutique law firms, and a range of staffing providers.
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Biglaw can tap the alt.legal demand. But will they? Tapping that demand means moving away from the traditions of billable hours and partners and associates. Firms can – and some indeed do – hire lawyers not on the partnership track. These lawyers, often called staff attorneys, bill at rates sometimes significantly lower than associates. The Citi 2015 Law Firm Leaders Survey found that 71 percent of law firms expect this type of position to grow. Growing the ranks of such lawyers – and then managing them effectively – can help firms compete with lower-cost providers.
Some law firms also now tap the alt.legal market with technology. As I noted in my recent blog post Automating Legal Advice: AI and Expert Systems, more firms now offer expert systems that serve clients via web-based Q&A. It’s hard to say right now though how big a trend this is. Separately, I have long wondered why law firms do not compete with managed legal service providers on contract management. I think they could, but doing so means difficult changes to the business model.
Firms recognizing that much of their work is not rocket science and is relatively routine are best positioned to pursue alt.legal – if they can adjust their business models.
Joe Borstein: Interesting. I would agree that most Biglaw firms don’t want to start their own alt.legal divisions or subsidiaries, but what about partnering with alternative providers? Could that allow firms to unlock demand without changing their model? Is there appetite for that?
Ron Friedmann: Law firms can partner with an alternative provider to build lower cost and better service delivery. I see two obvious paths: with an LPO / managed services provider or with a staffing company.
Since 2007, I count a dozen large law firms (in the U.S., Canada, U.K., and Australia) that have publicly discussed relationships with legal process outsourcing providers. And I know there are quite a few unannounced partnerships with managed legal services providers. Given the perceived sensitivity around the topic, however, gauging the impact of these to date has been hard.
The advantage of working with LPOs or managed service providers is that they offer industrialized approaches typically lacking in law firms. By that I mean a combination of improved processes, properly deployed and used software, metrics, and right-fitted staff. Such capabilities allow firms that want to offer clients better value on routine legal matters a promising path. Operationally, however, firms need to work out detailed arrangements, including the ethics of marking-up the partner’s fees.
Separately, firms can turn to providers of flex-time attorneys. You recently featured, in this column, Hire an Esquire, which is one example of such a provider. And I recently blogged about Crowd & Co, an Australian start-up that is creating a market in placing flex lawyers. These and other providers can provide law firms with lower cost, more flexible staffing. But law firms need to have a process in place to deploy and manage them effectively. I suspect that will take some trial and error to get right.
Joe Borstein: I see what you are saying, but it still shocks me . . . Why do you think Biglaw firms are so sensitive about partnering with alt.legal companies to provide cost-effective solutions for their clients? Wouldn’t this differentiate their offering and show their clients they are forward-thinking? From my (admittedly biased) view, the major buyers of legal services are aching for change, and would flock to the Biglaw firms looking to break rank and try something really, really new. What’s your view?
Ron Friedmann: I agree with your premise that clients would find attractive a partnering arrangement that really reduced cost and improved efficiency. I’ll offer here three somewhat speculative reasons why we don’t see more of this:
Psychology of Control. When I was on the management team of an LPO and selling to law firms, I saw that partners believed that not owning a resource meant a lack of control. While that was an honestly held view, I think it’s wrong. First, I’ve heard many a large firm COO admit in private that at least one or two staff departments had major problems. In those instances, full ownership by the partners was not yielding quality. And second, with an LPO or managed services provider, firms can sign a service level agreement that should give them sufficient control. In fact, to get to that SLA, firms will need to specify metrics – which they often lack today.
Operational Integration. Few large law firms act institutionally and systematically in allocating lawyers to matters. In many, even if formal systems are in place, a lot of assignments happen via informal channels. Integrating a third-party provider in this environment is hard. The type of alt.legal arrangement we’re talking about is necessarily institutional. But most of the action in a law firm is individual or at the practice group level. Without more central control, I suspect most management committees are reluctant to agree to any minimum commitment with an alt.legal provider.
Brand Perceptions. I’m guessing here, but my sense is that many large firms think that associating with an alt.legal provider would tarnish their brand. Another honestly held belief that is likely wrong.
Joe Borstein: So, to conclude, where do you see the alt.legal market going and what does it mean for traditional law firms?
Ron Friedmann: I think alt.legal has a great future. Clients pressure for value continues to grow so general counsels increasingly engage directly with alt.legal providers. That’s good news for lawyers who do not want a traditional practice and bad news for law firms.
Whether Biglaw rises to the occasion by working with alt.legal or adopting their ethos remains an open question. I certainly see it as a big plus for differentiation, for client value and for higher profits. If Biglaw does not get there, then alt.legal will just continue happening elsewhere. Not getting there won’t disrupt large law firms any time soon, but it will limit their growth potential.
Joe Borstein is a Global Director at Thomson Reuters’ award-winning legal outsourcing company, Pangea3, which employs over 1,000 full-time attorneys across the globe. He and his co-author Ed Sohn each spent over half a decade as associates in Biglaw and were classmates at Penn Law.
Joe manages a global team dedicated to counseling law firm and corporate clients on how to best leverage Pangea3’s full-time attorneys to improve legal results, cut costs, raise profits, and have a social life. He is a frequent speaker on global trends in the legal industry and, specifically, how law firms are leveraging those trends to become more profitable. If you are interested in entrepreneurship and the delivery of legal services, please reach out to Joe directly at joe.borstein@thomsonreuters.com.
