Source: Rob Saccone, Nexlaw Partners

We’re on the ground floor of digital services.

I didn’t like Alexa at first. If she were my assistant, she would have likely ended up on a performance improvement plan had our working relationship not improved.

Over time we grew to better understand each other, and we now converse multiple times a day about news, weather, sports, music, and impulse purchases. My wife and kids have also become everyday users, and in a twist of fate, I occasionally find myself scolding my teens for yelling at Alexa as if she were a family friend instead of a glowing tube of snark and overnight deliveries.

These interactions make me think more about how we all interact with technology in our personal and professional lives.

For example, the chart above is meant to illustrate what would happen if some version of Alexa was integrated into the traditional law firm leverage model.  Thus, some portion of work now going to associates, staff attorneys, paralegals, and allied professionals, etc., would be “delegated” to Alexa, who happens to work very fast and never sleeps.

The advent of digital services in law—of Alexa joining the team—enables a professional service firm to increase its output with little or no increase in its cost structure.  Indeed, by treating technology assets as teammates within a leverage model, a firm begins to breaks free of the constraints of time and labor.

Imagine being a law firm with traditional human leverage competing against another law firm that has a robust level of digital services. They can undercut your price and, because of their lower cost structure, make a larger profit.

The key insight here is that the future of the legal industry is a better blending and balancing of talent and technology, as it provides a reliable pathway for a group of legal and allied professionals to do more with less.  Those organizations who figure out how to do this sooner will enjoy a tremendous commercial advantage, as they will become a magnet for both talent and clients.

Accepting Alexa

The insight described above will not get us very far.  Although the endpoint is clear, we are in the early days of figuring out the right intermediate steps to get there.

Succinctly stated, we need to advance our thinking about how humans and technology can better work together, as humans alone are not going to be able to compete against humans + technology.

Let me repeat the key part:  we need to advance our thinking.  As a long-time legal technology executive, this is difficult admission.

As technologists, we invest significant effort toward experimenting with and driving adoption of new tools in the name of innovation and efficiency. Yet, we rarely see any material gains in usage or value that keeps pace with market demand to produce greater value.  Whether driving digital transformation or simply helping professionals recognize that traditional human-based services can benefit from digital assistance, we need new mental models and frameworks to help us move forward.

Digital Services Platform

Below is a framework I’ve sketched out for thinking about our future.  It depicts a digital services platform, which I define as a modern operating environment in which teams and technologies work seamlessly together to deliver consistent outcomes and value at scale.

Source: Rob Saccone, Nexlaw Partners

Drawing upon the discussion of Alexa at the beginning of this essay, one of the key insights is that in a digital services platform, People and Technology are doing all the work (hence the dotted line around Processes).  In effect, People and Technology are teammates in a leverage model where everyone is pushing down work to the lowest cost, fully competent service level. Processes are things we do to make the teammate experience more harmonious and productive.

One might correctly describe some organizations as platforms – for example, most law firms are platforms that support and enable a broad range of partners and their clients via shared business services and tech infrastructure. I submit that a digital services platform as defined above is a more useful way of discussing how technology (teammates) can fit into a services organization while addressing the need for greater scalability and carefully considering interoperability between humans and technology alike.

A proper platform takes care of the back end so that people can think more about delivering end results. It provides the services and scaffolding, if you will, to ensure that platform components are well connected and supported. A digital services platform does this by combining the right people with the right technology teammates to deliver more and better results at scale.

An expansive view of “interoperability”

I need to emphasize here that I’m using the word “interoperability” in a very expansive way.

Much of the current conversation about platforms and, thus, interoperability, focuses on tech-tech interop, digging deep into Application Program Interfaces (APIs) and standards for information exchange between systems. Separately, we have increased our focus on human-to-tech interop under the banners of user experience and human-centric design thinking. Both are useful and important, but alone they do not offer a complete solution in a professional service environment.

We must invest equal energy in addressing the other digital service platform components; in particular,  the formidable human-to-human interop challenges in legal services. Whether it is lawyers and non-lawyers seeing eye to eye, or disconnects between buyers and sellers/providers, or even breaking down organizational silos and communication barriers within businesses across the supply chain, these are challenges that better technology or a better process alone  cannot solve.

We fix human-to-human interop challenges—arguably the biggest challenge in a digital services platform—by right-skilling our people.

Rightsizing: the current state of the art.

These are fairly big ideas. Thus, to ease our cognitive load, let’s return to the traditional law firm leverage model and sketch out the current state-of-the-art practices. After that, we can ask the question, “what modest steps can we take to move closer to a digital services platform and its corresponding competitive advantages?”

When optimizing any labor-based service business (for scale, profit, quality, throughput, or something else) you can change (a) the labor mix, (b) the process, or (c) the tooling. All three must be considered equally, but only one (tooling) is untethered to hard limits on time, effort, and skills required.

Most firms’ growth strategy is focused on size and leverage (the labor mix) while tinkering a bit with the process and ignoring tooling (and unknowingly forgoing the benefits of scale).  As Bruce McEwan recently wrote, law firms “[respond] to the growth of scale by throwing more lawyers at it.”  We Have a Scal(ability) Problem, AdamSmith Esq., July 6, 2021. More demand? Hire more fee earners. Less demand? Let them go or pay the price of overcapacity. Worse yet, firms buy inorganic growth and “demand” from the lateral market, which actually reduces scalability and stability in my experience. So, the cycle of upsizing and downsizing continues.

At present, the state of the art for adjusting the labor mix is what I will call “rightsizing.”  Over a decade ago, following the financial crisis, a large number of law firms rapidly downsized by shedding thousands of jobs, which had serious operationally consequences when, a few years later, the economy finally rebounded. More recently, the COVID-19 pandemic triggered a spat of rightsizing in which firms attempted a smarter rebalancing of capacity and anticipated demand.

This rightsizing appears to have worked, as many firms posted material gains in hours worked and partner profitability despite a reduced workforce. See, e.g., Brenda Sapino Jeffreys, “Despite Pandemic, Profits At Am Law 100 Firms Leapt to New Heights,” Law Journal Newsletter, May 2021.

For some firms, these rightsizing efforts have extended into the post-pandemic reality. Am Law 100 firms Reed Smith and Fox Rothschild have offered voluntary separation packages to large groups of staff as part of radical restructuring efforts to right-size support teams and associated costs. See Debra Cassens Weiss, “2 BigLaw firms offer voluntary separation packages to staff members as part of reorganization,” ABA Journal, June 22, 2021. Both firms announced new firmwide remote team structures that each support a much larger number of attorneys per resource, and it has been reported that more firms are planning or doing the same.

In parallel, we are witnessing yet another bidding war for associate talent as top-tier firms raise associate salaries and sign-on bonuses. See Meghan Tribe, “New Set of Law Firms Match Davis Polk Associate Salaries,” Bloomberg Law, June 16, 2021. This has added to an already frothy lateral market for partners and associates alike as movement between firms grows.

In short, rightsizing strongly favors traditional high-dollar fee earners and strongly disfavors support staff and related allied professionals.

Throughout my career as a technology executive selling into law firms, I have observed the amount of institutional knowledge and subject matter expertise these support resources can hold. Is the potential “brain drain” and subsequent business impact from the loss of hundreds of support staff worth the cost savings?  And does raising the bar for associate labor costs when the buyers are increasingly less willing to pay for it?

Clearly, rightsizing is not the road to a leverage model that incorporates digital services.

Choose “rightskilling” before “rightsizing”

If we want to move closer to the digital services model, which as noted earlier, untethers us from the hard limits on time, effort, and skills, we need to choose rightskilling before rightsizing.

What is rightskilling, you ask? It is giving the right people the right skills to do the right work at the right time. Might be a mouthful, but it’s right. And there are many implications to getting it wrong. Profit losses due to value, price, and cost mismatches is one. Restrictive career paths and dead-end roles are others.

But, to tie this into the digital services platform, rightskilling is the primary way we solve the vexing problem of human-to-human interoperability.

The most egregious, but unfortunately fairly common, example of getting rightskilling wrong is when partners do work themselves that can be performed by others. The result is underutilization and undervaluing of more junior resources, including non-lawyer / allied professionals. For some firms, this is and will likely remain the de facto standard, as the comeuppance for complacency sometimes comes in the form of multi-decade decline. See, e.g, Post 231 (discussing prolonged decline of US auto industry and comparing it to legal). Yet, for others, it is an opportunity to design a modern work environment and team structures better matched to today’s supply and demand.

One can argue that firms have been rightskilling legal staff from the beginning, albeit in an organic and time-consuming fashion.  New associates don’t simply earn their JD and get busy. They learn from the work they do with more senior attorneys in different scenarios, and over time develop their skills through their experiences.  It’s a slow path to expertise (or partnership) but it’s the path offered if you choose a career in legal services. And the more experience you gain, the more opportunities you are presented.

The same applies to non-lawyer professionals in my experience. The most knowledgeable and effective business, technology, finance, or strategy experts I have worked with in the legal ecosystem earned that knowledge much the same way associates do. Different (but increasingly intertwined) subject matter, same organic school of hard knocks and lessons learned. Rarely is either group educated on the working realities they will face or, more importantly, how to best work together. It either happens as a result of culture and circumstance, or it just doesn’t happen.

But rather than further developing skills (aka, upskilling or reskilling), which perhaps seems daunting and time-consuming, firms often create new roles to address new needs and challenges as they arise, largely ignoring the talent they have.  Further, they layer these new roles upon existing organizational structures and cultural norms instead of properly integrating them.

The result, of course, is greater complexity with no corresponding gains in human-to-human interoperability.

One can often discover an enormous amount of untapped potential amongst rank-and-file firm employees, and many often play unnoticed and unexpected yet crucial roles in service of both firm partners and clients. Some are lynchpins that connect the flow of information and work between teammates and technologies, acting as guides and bridges (or gatekeepers) after developing deep understanding of how to use the tools at hand while translating to their teammates or managers.

Unfortunately, as we’re seeing, these non-lawyer teammates tend to be among the first employees to downsize. This can leave a heavy burden on remaining and often more senior and costly employees. Even worse, it can negatively impact client service and relationships as the guides and bridges are burned. This is wrong-sizing and wrong-skilling at its worse.

This brings me to my point on rightsizing vs. rightskilling: before making organizational or technology decisions firms should carefully consider rightskilling across the business. This is a difficult but crucial step toward optimizing the balance of humans and technology.  Rightskilling is a better and more sustainable approach: upskill or reskill talent while down-skilling jobs into digital services, thus creating scale and opportunities for more talent.

Granted, this requires a longer-term view than is the norm in most service businesses. While rightsizing has immediate effect on cashflow, rightskilling requires investment over multiple months or years before economic and other returns are felt by stakeholders.  If a firm wants the benefits of scale, rightskilling is part of the price of admission.

The same applies to treating technology as a teammate. It is imperative that firms understand current tools, capabilities, and untapped potential before adding more now and integrating later. I strongly believe that most firms have most of the technology they need to operate and service clients efficiently and effectively. The tech just isn’t being used to its fullest potential by the teams and teammates that work with it.  Again, rightskilling is necessary to enable talent and technology to work better together.

Delegating work to technology teammates

Good delegation skills don’t come easily to all people, and not all “knowledge work” is easily delegated. If you are unable to delegate work, or get others to delegate work, then you cannot rely on the leverage model, and you can’t even begin to grow or scale services in a cost-effective manner.

Now imagine that instead of delegating work to a human teammate, you are delegating work to Alexa, Siri, or any other “technology teammate”. Impossible to imagine? I hope not, because you are likely already doing this.  Law firms may be late to the game, but they will succumb to automation as surely as they have already begun. Technology has already transformed the discovery process, is beginning to transform document review more broadly, and is powering a whole new generation of well-funded, digitally transformed legal services.

There are many types of tech tools out there, and we actively avoid thinking of any of them as a means to displace human labor. We need to address this head on and evolve our thinking especially as tools evolve into more capable teammates, assistants, task-doers, and occasional distractions or diversions from jobs to be done. Like it or not, the tech train left the station, and we need to get on board or get left behind.

Viewing task and services automation technologies as teammates may be a more constructive and interesting way to address this, and to address common barriers to adoption and adaptation to existing service models. Leaning into the metaphor, consider that:

  • If your human teammates struggle to delegate work to each other, there is zero chance they will delegate to a technology teammate. This fact causes us to focus as much effort on the dynamics around changing how people work together as on the decomposition of work processes themselves (which we are getting better at thanks to the growth of legal process improvement as a skillset)
  • Tech teammates require similar salary and benefits as their human counterparts. Fully loaded technology costs rarely end at one-time purchases (sign-on bonus) or monthly subscriptions (salary). Software and hardware usually require support and maintenance (health and wellbeing benefits) in addition to setup costs and upgrades (training and development, or upskilling)
  • Tech teammates, like some human teammates, can end up either underutilized or stretched too thin relative to their fully loaded cost. Occasionally, this can result in shelf-ware and requires reskilling or reconsidering the role
  • Bad technology choices, like bad hiring decisions, can result in problems like malware: bad actors that damage an environment or infect other parts of the ecosystem. Whether it’s a bad egg or a bad fit, this requires intervention and possible termination

Leveraging technology in this way transcends the traditional leverage model in a service business to create pathways to scalable growth and profitability. It is the most advanced form of rightsizing and rightskilling, but it requires changes to human behaviors, incentives and economic systems within firms that dare to embrace it.

Alternatively, firms can ignore this and continue to hire and fire as demand dictates while driving their human workforce into the ground – or more likely, to competitors where diverse groups of human and tech teammates work differently together.