Thursday Jun 18, 2009

Change

I shake my head whenever I read articles like this that suggest that the legal services profession will continue unchanged. It feels like so much "whistling past the graveyard." The reality is that we are in the early stages of a seismic shift in the traditional cost and delivery model for legal services. I see it every day in my interactions with the law firms that support us and in my discussions with peers at other companies. This change is the result of three major factors: the current economic downturn, the rise of alternative legal service providers and the lifestyle choices of the newest members of our profession.

The global recession is causing all commercial enterprises to scrutinize their cost structures. As part of this, in-house legal departments are expecting their legal service providers to provide similar efficiencies. Recently, we asked one of our partners, Howrey, to represent us in some corporate litigation. As part of this engagement, we had an initial meeting with two partners from the firm, Robert Gooding and David Lisi, to discuss case strategy and also the anticipated cost of defense. To my surprise, Bob and his partner proactively offered a variety of cost structures (including flat fee and quarterly fee caps) as alternatives to the billable hour. They were also happy to work with the legal staffing vendor we use for litigation support and offered other suggestions for lowering our litigation costs. I can tell you that this is a conversation that would never have occurred with any firm five years ago. At least, not without significant prodding on our part.

The availability of alternative legal service providers in lower cost geographies is also increasing competition in the legal services market. In part, this is due to the almost frictionless ability to transfer legal work around the world via the Internet. The result is that legal service providers in lower cost locations are able to use price to more effectively compete for work. Over the last few years, we've seen this in the way important, but more routine and repeatable work, is being handled in lower cost areas in the U.S. and other countries. As professional licensing regimes are harmonized, this trend will continue and, as these lower cost providers gain greater experience and training, they will move "up the stack" providing increasingly more valuable and higher margin services.

The career perspective of the newest generation of attorneys is an additional factor in driving these changes. They desire a different lifestyle than what was offered in the past. I know this from first hand experience. As I'm writing this, I'm sitting in a conference room with a number of our law school summer interns. They work differently than I did when I was in law school - collaboratively, in communal spaces, streaming music, while interacting with peers via Twitter, Facebook and other social networking sites. To many of them, flexibility, mobility, a collaborative environment and interesting work are paramount - and not always what law firms can currently offer.

Interestingly, I had lunch yesterday with the managing partner of one of the larger firms that support our company. (I'd disclose the name, but I feel that much of what we discussed was in confidence.) It's clear that he understands where our profession is heading. His firm is automating routine work like the creation of incorporation documents; increasing it's use of cost accountants to better understand his firm's cost structure enabling it to more effectively price work; and encouraging clients to use flat fee and other alternative billing models. His firm is also actively exploring ways in which they can better meet the career desires of their newest generation of attorneys. Some of the things that are being considered include abandonment of the traditional partnership track structure (based in part on graduating class year); training partners to be more effective managers; and creating a career path for those attorneys who are more interested in lifestyle balance than a corner office. At the end of our discussion, he expressed certainty about the changes to come, but with some wistfulness for the past.

Change is always difficult. But, all of us in the legal profession - whether in-house or firm - need to embrace it. For as Benjamin Franklin once said: "When you're finished changing, you're finished.

For those of you that are interested in being part of the conversation, here's a good place to begin.

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