Is legal operations a discipline or a job within a legal department? The market just provided an answer.
Last Friday, David Cambria, the Godfather of legal operations, left his secure post at ADM (#46 on the Fortune 500) to become Global Director of Legal Operations at Baker McKenzie. To be clear, Cambria’s title is not another name for “Chief Operating Officer,” an established role in law firms that focuses on internal cost and efficiency. This is an outward-facing role designed to attract and cement client relationships.
Per the press release:
Cambria will be responsible for ensuring that the strategies for pricing, legal project management, and other commercial activities are closely matched to increasingly sophisticated client needs and expectations. He brings a unique “voice of the client” to the leadership of Baker McKenzie and will work directly with major clients to both help shape delivery of the Firm’s services and to assist clients in addressing the development of their own operations.
It is hard to predict whether this is the beginning of a trend, or a one-and-done experiment. It all depends on whether the desired benefits show up within a reasonable period of time. In this instance, there are only two certainties: (1) Cambria is being compensated for the risk, and (2) the Fortune 500 will take him back if the boulder gets too heavy or the mountain gets to steep.
This is also a valuable learning opportunity for everyone else. This is because David Cambria is both an innovator and opinion leader within the legal operations field. As discussed in the foundational posts on diffusion theory, these attributes, particularly when combined, accelerate adoption.
Cambria’s move threw a wrench into our editorial calendar. Nonetheless, it was too significant to ignore. This post attempts to answer three questions relevant to this important industry milestone.
1. If legal ops is a discipline, where will it get maximum traction?
“Legal operations is a multidisciplinary field where professionals collaborate to design and build systems to manage legal problems.” That was my conclusion back in 2015 as I observed three legal innovators — Connie Brenton at NetApp, John Alber at Bryan Cave, and Andrew Sieja at Relativity — all solving similar types of problems, albeit at different points in the supply chain. See Henderson, “What the Jobs Are,” ABA Journal, Oct. 2015.
A couple of weeks ago, we analyzed the ULX Partners, UnitedLex-DXC, and ElevateNext deals. See Post 053. But in retrospect, one question drove the whole 4,200 word essay: “where will legal operations get maximum traction?” Is it BigLaw, NewLaw, legal departments, or legaltech? Several hundred legal innovators with the technical skills to deliver better-faster-cheaper are very interested in the answer. What they long for is a stable, resource-rich environment where they can build the systems that are already in their heads.
Thus, BigLaw tends to drive innovators nuts, as it struggles to play an essentially perfect hand: (1) longstanding relationships with industry-leading clients; (2) a business that requires very little operating capital yet generates significant cash and profits; (3) an established brand that makes it the safe choice against upstart new entrants. See Post 039 (discussing Innovator’s Dilemma within law firms); Post 053 (discussing psychology that precedes law firm failure); see also MacEwen, TomorrowLand 26 (2017) (discussing the very real possibility that some firms “would rather fail than change”).
NB: This post frames a structural problem from the perspective of organizational clients. For this group of clients, the problem of lagging productivity is leading to market-based responses, including the hiring of David Cambria by a BigLaw firm. For individual clients in the PeopleLaw sector (roughly one-quarter of the legal market and shrinking), lagging legal productivity manifests itself through self-representation or people failing to seek any type of legal-based solution. See The Decline of the PeopleLaw Sector 037; Legal Services and the Consumer Price Index (CPI) (042). In short, these are two distinct problem sets. Improving PeopleLaw is an important topic that we will continue to focus on. Just not today.
There are three contenders to create the new paradigm for organizational clients:
- Legal departments through more legal operations and in-sourcing;
- Law firms by skillfully playing their superior hand; or
- NewLaw, which has data, process, and technology as its core competency but has the challenge of being new and unfamiliar.
Right now, I see no clear winner. Yet, from a human capital perspective, the solution set is the same for all three.
2. Is there is human capital model for legal ops?
Yes. David Cambria and his legal operations colleagues are “legal integrators.”
Below is a graphic first generated by Bill Mooz and I in the fall of 2015. The occasion was a presentation to a group of legal operations professionals in Chicago led by David Cambria. See Creating Legal Integrators (Sept. 2015). David was curious about the curriculum of the Tech Lawyer Accelerator (which Mooz founded) and wanted to understand its connection to legal operations.
The legal integrator model we created contains the DNA of the original partner-associate pyramid. But it has also moved on, reflecting the types of human capital needed to deliver both bespoke one-to-one legal services and one-to-many systematized/productized legal solutions.
Bespoke lawyers remain at the top of the model. But is the top more important than the center? The green center portion is where systems are built to optimize cost, quality, and effort. It is also where expert sourcing decisions get made. This requires a skill set that includes not only substantive legal knowledge but systems thinking, statistics, accounting, finance, and technological literacy. (BTW, there are many allied professionals without law degrees who also thrive in the green zone.)
In this version of the model, I break legal integrators and legal operators into two, with the former excelling at design and strategy and the latter excelling at execution, change management, and continuous improvement. Integrators and operators are yin and yang to each other. Some professionals have these skill sets in exact equal proportion. But that is rare. This is why legal operations is much more a team sport than traditional lawyering.
The rarest legal professional, however, is the bespoke lawyer who understands what is happening in the green and why it is crucial to his or her long-term prosperity. In all likelihood, closing this communication gap will be a substantial part of David Cambria’s new job.
3. What is the law firm strategy that requires the talents of legal integrators?
Several years ago I was hired to give a presentation on the future of the legal profession to an elite AmLaw 25 law firm. The responsibility of shepherding my presentation fell to a small committee of junior partners. Although they claimed that my future-oriented observations were interesting, they really wanted to understand the future of their own firm. They had spent a decade focused on making partner and were now playing catch-up. Well, that was a pretty big change order. Yet, I was happy for the stretch assignment and did my best to deliver.
The key point is that an elite law firm has a choice to make — a choice based on endowments where, for most firms, the dye has already been cast. When a firm has a top of the pyramid strategy, it is focused on transformative events where (a) the outcome really matters and (b) the C-suite executives don’t want to be second guessed. Top of the pyramid can also apply to clients engaged in ongoing complex financial transactions, particularly when legal fees are rolled into the deal and paid for by third parties. A handful of firms fit the top of the pyramid model, and many more would like to be part of this ultra-elite group. To become a top of the pyramid firm, however, you’ll need a time machine.
An alternate strategy is the traverse the pyramid model. Firms that traverse the pyramid can handle large complex projects that include sophisticated bespoke lawyering along with a large volume of operational and commoditized work that is connected to it. It is particularly valuable when the legal work is global in nature. General contracting this work is complex and cumbersome. Thus, clients are willing to play a premium for a law firm to bundle it together. But a premium is not the same as a blank check. Thus, traverse the pyramid firms need to build and maintain sophisticated systems and staffing models.
Baker McKenzie is a credible traverse the pyramid firm, but there are many others. For all of them, the biggest challenge to execution is the large portion of the line partners, and occasionally lawyers in leadership, who struggle to grasp the strategy. Specifically, the core strategic tenet of this model is that work in the operational and commoditized zones can be re-engineered in ways that improve quality and the client experience while also driving down overall production costs. This is a formula for larger and more stable profit margins. It is also why the traverse the pyramid model requires an investment in legal integrators and operators: they can deliver a “whole product solution,” see Post 024 (discussing power of whole product solutions), that is highly defensible and sticky. Once in place, the barriers to entry are (1) brand, (2) geographic footprint, and (3) the large number of client touch points.
However, when line partners are presented with this strategy, they are often drawn to the tip of the small blue triangle because it signifies bespoke legal services at $900 to $1400 an hour. Many seem to be unaware that the operational and commodity work can be done at 30-40% profit margin with very little partner oversight and that, from a business perspective, that is a profoundly good thing. Stated another way, the partners seem to want a model that preserves their ability to sell their own time at a premium price. The traverse the pyramid strategy, however, is designed to build a highly profitable legal services business with a moat around it.
Perhaps partners are stuck in this mindset because, for the last generation or two, compensation structures have rewarded revenue, which is easiest to rack up when partners and pricey associates do all the work. Or it may be the craft satisfaction of personally creating something they believe to be perfect. Regardless, for the Cambria bet to payoff, Cambria needs to overcome this mindset so, when the time comes, he can push more work down the pyramid in ways that delight clients, cement relationships, and improve the firm’s long-term financial prospects.
One of the core insights of the organizational innovation posts, see Posts 015–017, is that, even in law firms, size is correlated with innovation. This is because size brings with it resources, diversity of talent, and more opportunities to run trials, etc. On balance, these benefits tend to outweigh the challenges of implementation within a larger firm, albeit diffusion theory can also help with the latter. See Post 017 (management roles need to switch between initiation and implementation).
It is hard to believe, but large firms are truly capital constrained. See Post 053. However, if all a firm can muster is 1-2% of revenues for innovation efforts, $2.7 billion (Baker McKenzie’s current revenues) yields a lot more than $350 million (the revenue of the firm currently ranked #100 in the AmLaw league tables). This is why David Cambria went to Baker McKenzie — the strategy just might work.
What’s next? See Studying leadership before the big test, Part I (056)