Photo of Bill Henderson

For this week’s post, I’m pleased to introduce guest contributor Evan Parker, Managing Director of LawyerMetrix. In Post 074, Evan tackles the profoundly important topic of diversity in the legal profession. After presenting compelling evidence that (1) clients want more diversity, (2) diverse legal teams produce better results, and (3) diverse firms make higher profits — what’s not to like? — Evan argues that clients are hindered by a lack of clear, actionable data — a problem he is working to solve in conjunction with the Leadership Council on Legal Diversity (LCLD).

I have a broad frame of reference to make the following statement: Evan Parker is the most experienced and sophisticated data scientist currently working in the legal industry. From 2013 to 2016, Evan and I worked together at Lawyer Metrics (now LawyerMetrix).  Before joining LawyerMetrix, Evan was on the faculty of Texas A&M and Stony Brook University, where he specialized in quantitative methods.

Perhaps the most important lesson that Evan and I and the rest of the LM team learned is that when it comes to lawyers and data, the challenging part isn’t the analysis; rather, it’s finding a results format that puts lawyers at ease and enables them to grasp and understand the key points in little more than an instant. Cf. Post 008 (innovations are much more likely to be adopted if they are simple and culturally compatible; high relative advantage is not enough).  Over the last couple of years, Evan has taken this skill to the next level.  Some of this is now on display in Post 074.  Enjoy.

What’s next?  See Missing in Action: Data-Driven Approaches to Improve Diversity (074)


“In hindsight, the new solutions are all going to look obvious” — Paul Lippe, circa 2010


Sometimes a technical innovation languishes on the innovator’s shelf despite working perfectly and doing everything the innovator hoped. What’s missing is a business model that can coordinate a fair exchange of value. Continue Reading PartnerVine and Last Miler’s Club (072)


Innovation hype is alienating too many practicing lawyers. This is because we forgot that lawyers innovate in the realm of substantive law.  It’s time to fix that.


Last year I was at a conference on law firm innovation organized by the Ark Group. To close things out, the event’s chairperson, Patrick McKenna, walked attendees through an insightful 30-minute flipchart session that could have been the centerpiece of the entire conference.

Above is a depiction of what McKenna drew on the first page of the flipchart (I’ll call it the McKenna Lifecycle of a Practice Area). Patrick was making the point that legal work moves along a time continuum that starts with lawyers building relatively lucrative practices by becoming experts in difficult and emerging areas of law.  Yet, at some point a substantial portion of that practice area becomes relatively mature.  Notwithstanding one’s level of mastery, the market is filled with other lawyers with a similarly deep skill set. As demand flattens and starts to decline, what was once a cutting-edge area of practice becomes a commodity.

Patrick McKenna

Patrick gave the example of synthetic biology as an emerging practice area.  As Patrick pointed out, synthetic biology raises extremely complex and novel issues of intellectual property, regulatory law and consumer safety to name but a few. In the growth area, Patrick suggested googling “virtual reality law practice” to see that lawyers from Cooley, ComputerLaw Group, and Kelley Drye have planted their flag in this important new practice area. Securities law is a good example of a practice area that has reached relative maturity — complex but sufficiently settled that portions of it can be brought in-house.  Finally, Patrick pointed to debt collection as an area that has become fully saturated and thus subject to pure commodity pricing.

I have been studying the legal market now for more than 15 years. For the last ten years or so, I’ve tried to refine the tool of just talking to lawyers about their practices. In each conversation, I’m listening for novel or recurring patterns.  In my experience, very few lawyers or law firm leaders attribute their success to catching the right practice waves. Instead, conversations almost always focus on the abilities and intellect of individual lawyers.  Perhaps this is because the waves of change in law move slowly and are hard to decipher without a lot of additional effort. As a result, we fixate on the surfer (and the surfer fixates on the surfer) and overlook the importance of the powerful waves that hurl them forward.

In this post, I’ll explain how McKenna’s Lifecycle of a Practice Area is a remarkably useful tool for delineating between two types of legal innovation: Type 0 innovation (substantive law), which is the engine that powered the rise of the world’s most successful law firms, and Type 1 innovation (service delivery), which is crucial for reigning in the problem of rising costs and complexity in a highly regulated, interconnected and globalized world.  Type 0 remains as important as ever, but clients would also like help with Type 1.


For a recent and in-depth treatment of this topic, see McKenna, “The Advent of the Legal Practice’s Micro-Niche, Part 1“, Legal Executive Institute, Oct. 14, 2018; McKenna, “The Advent of the Legal Practice’s Micro-Niche, Part 2“, Legal Executive Institute, Oct. 18, 2018.  It’s noteworthy that McKenna believes that the most important law firm strategy occurs at the practice group level.


Type 0 Innovation

As McKenna explained his diagram, I recalled numerous lunches and dinners with rainmakers who explained to me how they build their practices.  Some fit the profile of the trusted advisor — they were great listeners, excellent at identifying core issues, very practical, and excellent at delegating technical tasks to other lawyers in the firm.

But another group, who were not particularly charming or charismatic, described how a series of assignments early in their careers took them deep into the business and technical aspects of their client’s industry. Eventually they came out the other side with a series of solutions that proved to be very valuable and useful.  As a result, they got more work from their client and others with similar type problems.  These folks caught a wave in the blue or early green portion of McKenna’s lifecycle.

This is Type 0 Innovation. It happens organically when a lawyer has the opportunity to immerse herself in the business and legal complexities of a new or changing industry. Although it often produces the same economic benefits as a major R&D initiative, lawyers and law firms seldom frame it that way.  This is because clients are paying the bill, often by the hour.  It’s just legal work.  The lawyer who develops such an opportunity into a major practice is viewed as a rainmaker and is compensated accordingly.

I call this Type 0 innovation because it is common throughout the legal profession.  Virtually any lawyer has the intellectual tools to do it.  It requires zero additional training. Yet it’s undertheorized almost to the point of being invisible to practicing lawyers.

To illustrate this point, McKenna cites several years of data from law firm retreats where he has polled partners using anonymous clickers. In sessions related to the importance of business development, McKenna asks, “How many of you right now can think of something you’ve observed in your practice that could be turned into a compelling service offering for one or more of your existing clients?”  McKenna says he consistently gets scores in the 65% to 85% range. Next question, “How many of you have shared your idea with firm management?” Remarkably, scores of 25% or lower are the norm.

When asked why, partners explain that they doubt the firm or practice group will support them. Specifically, to “innovate” is to put yourself at risk of being on the wrong side of numerical targets needed to maintain one’s status in the firm. Stated another way, the partners are not sharing risk. As a result, too many partners are stuck trying to sell services in the “mature” portion of the lifecycle, often at prices that cause clients to question the value they are receiving. This is a failure of both strategy and leadership.

That said, some law firms, particularly those that are highly specialized by practice area and/or industry, understand the importance of underwriting the development of substantive law innovations.  For example, one of the attendees of Patrick’s session was Tim Mohan, Chief Executive Partner of Chapman and Cutler LLP, an AmLaw 200 law firm that specializes in financial services.  Tim later told me that Chapman had adopted a system of innovation hours whereby partners and associates could obtain credit on par with billable hours for innovation efforts likely to result in future revenues for the firm.

One area where this approach has paid large dividends is marketplace lending, which is the relatively recent development of non-bank financial institutions matching up borrowers with lenders, often by leveraging technology to evaluate and process loan requests.  Obviously, this has been tremendously disruptive to traditional banks.  Back in 2013, when this industry practice was at best an “emerging” [blue] practice area, two Chapman partners, Marc Franson and Peter Manbeck, wrote a whitepaper called “The Regulation of Marketplace Lending: A Summary of the Principal Issues.”  The first draft (the authors now keep it updated) took several hundred hours to research and write.  But once posted on the Chapman and Cutler website, it became a hotbed of download activity that has led to $10M+ in firm billings. This is pure Type 0 innovation. Far from going away, Type 0 opportunities are growing in number and importance.


Chapman and Cutler is also a shining example of Type 1 innovation.  See Post 039 (discussing the career path of Eric Wood and the founding the Chapman Practice Innovations as a successful example of law firm intrapreneurship).


Once McKenna’s Lifecycle model got into my head, I began to see Type 0 innovation all around me.  Consider the following examples:

Gary Marchant at ASU Law

Gary Marchant is a Regent’s Professor of Law and director of the Center for Law, Science and Innovation at ASU Law.  He is also on the speaker’s circuit, wowing legal audiences with novel questions of law that judges, regulators, and practicing lawyers are grappling with as a result of massive advances in science and technology, from autonomous cars to drones to cloning to global warming to digital data that captures our every move and hence of great value in determining issues of guilt or civil liability.  Several times over the last few years, I’ve had the privilege of being the same program with Gary, where he consistently knocks the ball out of the park.

Our most recent panel was earlier this month in San Francisco. Fortuitously, we shared a cab to the airport.  Thus, I got to ask Gary, “How in the world do you come up with all these examples of new and emerging issues?”  Gary replied that he teaches seven classes a year at ASU Law (e.g., Law, Science and Technology; Genetics and the Law; Biotechnology: Science, Law and Policy; Health Technologies and Innovation; Privacy, Big Data and Emerging Technologies; Environmental and Sustainability Law; and Artificial Intelligence: Law and Ethics). To scale his expertise, each is taught with a co-instructor. “But they’re all paper classes.  I read and grade 400 papers a years. All my examples come from my students.”

Gary Marchant is astonishing example of how to get the three circles of teaching, service and scholarship to overlap in near perfect unity. Kudos to the enlightened deans at ASU Law who found a way to make this work!

Carolyn Elefant at MyShingle.com

Carolyn Elefant, the clarion voice of the solo and small firm bar at My Shingle, has recently written a book called “41 Practice Areas That Didn’t Exist 15 Years Ago.”  The table of contents can be viewed online here. Elefant is renowned for being a solo practitioner who stays busy doing challenging work she loves.  So, how in the world does she have the time to identify 41 new practice areas?  Similar to Gary Marchant, Elefant skillfully leverages the time of student law clerks she regularly employs in her practice.

Carolyn compiled this list not necessarily for her own practice but to prove the point that new practice niches are growing at an accelerating rate.  As a result, any lawyer can pick an emerging area of law that is causing heartburn for some distinct population of clients and, by dint of some research and writing in an ebook format, translate that know-how into seven figures of income. This is because the community of interest passes around the ebook, building goodwill and credibility with future clients. This isn’t theory — this is Carolyn’s own experience which she learned through trial and error as she created a landowner rights practice.  See “Seven Figure Ebook,” My Shingle, Aug. 23, 2018.  She’s turn this insight into an easy-to-follow methodology for creating a lucrative and rewarding Type 0 law practice.

I know all this because I signed up for one of Carolyn’s webinars this past August — for me, it’s field research.  I greatly admire Elefant because she is passionate about helping other lawyers become successful. She reflects the legal profession at its best.

Kevin O’Keefe at LexBlog

Kevin O’Keefe is the Founder and CEO of LexBlog, which is an online publishing platform that currently hosts 1,400 law blogs, including Legal Evolution and the majority of blogs published by AmLaw 200 law firms.  Arguably, LexBlog has become the epicenter of Type 0 innovation, as the vast majority LexBlog content is focused on substantive law.  In most cases, the unit of production is either the boutique law firm or a practice group inside a major law firm.

Like Carolyn Elefant, O’Keefe spends a lot of time helping lawyers see the abundance of ripe fruit hanging less than a foot off the ground. The only catch is the modicum of effort necessary to reach down and pick it up. This is the world of content marketing, demonstrating through your writing your insights on a set of problems that afflicts some discrete universe of clients. When someone in that small universe goes online in search of relief, your content appears near the top of the Google search (the LexBlog platform aids SEO).  That content builds trust and credibility.  Although some readers will use it for pure self-help, the complex work flows disproportionately to the authors and the authors’ firm.

A good, but far from unique, example is Ballard Spahr, which puts out five publications on LexBlog:

In the year 2018, lawyers can skip the rubber chicken dinners and make rain by developing and sharing their expertise online.

Kevin O’Keefe has an infectious laugh and a life story so inspiring that every year I invite him to Indiana Law to talk with my students. Without fail, Kevin marshals example after example of young lawyers who create life-altering career opportunities for themselves by researching the legal issues around what interests them.  Step 1 is to find the online legal experts. Step 2 is to read their content and the materials they point to.  Step 3 is to contribute to the conversation via social media.  That’s right, to get off the ground, cutting-edge Type 0 innovation often leverages a twitter account.


Type 1 Innovation

I hope it’s obvious to readers that the vast majority of Legal Evolution content is focused on Type 1 innovation — i.e., service delivery improvements (data, process, technology, etc.) that chips away at the problem of lagging legal productivity.  For example:

  • Post 001 (lagging legal productivity negatively impacting entire profession)
  • Post 006 (discussing impact on legal education and courts)
  • Post 009 (importance of ODR to solve bottleneck in courts)
  • Post 019 (legal productivity is a “last mile” problem that requires new business models)
  • Post 022 (CLOC is response to lagging legal productivity problem affecting large corporations)
  • Post 036 (discussing dire statistics because of productivity problem in PeopleLaw sector)
  • Post 042 (consumers are coping with higher costs by foregoing legal services)
  • Post 048 (framework to see differential impact on people versus organizations)
  • Post 058 (Landscape report for Cal Bar that emphasized the problem of lagging legal productivity)

Yet, as important as this topic is to the future of the legal profession, it is near impossible to get lawyers to go on this journey when innovation hype ignores or denigrates the innovations routinely occuring at the practice group level.  I hope the Type 0 / Type 1 framework can start to mend this riff.

Definitions

Lawyers value definitions.  I would proposed the following as a starting point:

  • Type 0 innovation.  Adapting law to fit changing social, political, economic and technological conditions.
  • Type 1 innovation. Improving the quality, cost and delivery of existing legal solutions.

[click to enlarge]
We can plot these innovation types on McKenna’s Lifecycle of a Practice Area, with Type 0 (emerging, growth) being in the wheelhouse of skilled artisan lawyers and Type 1 (growth, mature, saturated) being the foundation of one-to-many legal solutions and thus requiring the collaboration of lawyers and multidisciplinary professionals.

Isn’t it obvious that Type 0 and Type 1 innovation are both distinct and interdependent? Further, isn’t it obvious that the legal profession’s tool box needs to include both types of innovation, albeit with lawyers and legal professionals tending to specialize in one or the other but retaining the ability to effectively collaborative across the two types?

Additional Frameworks

As I’ve reflected on Type 0 / Type 1 innovations, I’ve snapped them on to other frameworks.  Below are two examples based on other Legal Evolution posts:

The T-Shaped Legal Professionals graphic (above left) has been discussed in Posts 043 and 048.  Type 0 innovation is enabled by the traditional law school curriculum. If you’re reading the news in the year 2018, it’s obvious that Type 0 innovation is crucial to the functioning of an open society based on the rule of law.  Yet, to address the problem of lagging legal productivity, legal professionals needs a bigger toolbox that includes the ability to collaborate effectively across multiple disciplines. Type 1 innovation is enabled by the disciplines at the top of the “T”.  Solutions to crucial PeopleLaw/Access to Justice issues require quantum leaps in Type 1 innovation. There’s literally no time to waste.  This is why so many of us are working tirelessly to stand up the Institute for the Future of Law Practice (IFLP, or “I-flip”).

Likewise, variations of the Traverse the Pyramid Strategy (above right) have been discussed in Post 010 (the rise of managed services) and Post 055 (law firm strategy that combines substantive lawyering with data, process, and technology). It’s foolish for legal services to migrate away from the pyramid model, as Type 0 innovation is built on the foundation of “mature” law in the operational and commoditized space. It’s also the type of work that law firms have historically used to train junior lawyers. Less than 15 years ago, the process usually began with banker boxes filled with documents as part of the discovery or due diligence process.  Likewise, legal operations and the P3 disciplines (pricing, project management, process improvement) all exist within the Type 1 innovation vertical — though more prices sensitive, it reflects the bulk paid legal work.  Thus, we need to retool the traditional law firm talent model so that it can flex in the direction of both Type 0 and Type 1 innovation. This is yet another challenge that is being taken up by IFLP.

Conclusion

Neither Type 0 nor Type 1 innovation are easy or costless.  Both require continuous learning and an investment of time and resources without a guaranteed financial return.  Yet both add immense value to clients and form the basis for challenging and rewarding careers.  Thus, for both lawyers and legal professionals, the future is bright.

What’s next?  See PartnerVine and Last Miler’s Club (072)


Working class solutions work fine for me.


To celebrate our 25th wedding anniversary, my spouse (Mary Henderson) and I did something we had never done before: we booked a long overseas leisure trip.  We got married in 1993 when I was a firefighter-paramedic for a suburban Cleveland fire department and Mary was a writer for an advertising/public relations firm. I was 30. Mary was 31. Because I changed my career path five years later, I spent too much of the next 20 years in catch-up mode.

The long marriage and the overseas trip connect to LegalZoom. But it will make more sense with some background information. This is Sunday longform, which occasionally tries to connect law with broader themes related to values and purpose.  Let’s see if I can hit the mark here.

I’m in the majority

Mary occasionally reminds me what I told her before we got married. “You’re marrying a firefighter. That’s all I’ll ever be.  I’m never going to finish college.” I dropped out of college in 1984 after my junior year abroad at the London School of Economics.

Newsweek story from 1984

The short version of what happened is that it was the mid-1980s and the zeitgeist did not mix well with my idealism.  I was a serious student who channelled all my energy into reading and thinking about how to solve the great challenges of our time.  I also observed an attitude of careerism taking hold among my classmates; or at least that was my strong perception at the time. Having zero interest in being a Reagan revolutionary, I wanted to bond myself to a more virtuous path. Dropping out of school seemed like an effective way to do that.  As I told a handful of friends at the time, “What respectable corporation would hire someone who couldn’t even finish college?”

From 1984 to 1989, I made a modest living running a small landscaping business. During this time, I can remember thinking to myself how I spent days upon days, weeks upon weeks, months upon months interacting only with people without college degrees. This is not to say that I wasn’t in regular contact with people of significant talent and character. Like the majority of life, it was a bell curve. I was also in the majority of the workforce that lacked a four-year degree. Yet, that was a very valuable insight — all around me there was no shortage of people better than me on one or more important life skills.

On the eastside of Cleveland, many landscapers got to know one another.  We had the same lunch spots or stored our equipment near one another. One of my peers was Mitch S., who worked as a firefighter for a local fire department. Landscaping was his “B” job — a second job built around the 24 on / 48 off schedule.

Mitch was ten years older than me and earning a much better living.  He had a house, a wife and a family.  I asked Mitch about the fire department, the pay, and how someone got hired.  It all sounded good.  Thus, I began scanning the local community papers for notices of civil service exams.

As I started picking up applications, I noticed the large number of people who had the same bright idea. Before getting hired, I took nearly a dozen firefighter entrance exams. Never once were there fewer than 200 applicants, typically for one or two openings.  Most of the exams assessed general intelligence with an emphasis on spatial and mechanical reasoning.  After that came a physical agility test, a polygraph, a background investigation and a psychological assessment.  I made it through this gauntlet and got offered a job.  My first day was October 23, 1989 — definitely one of the happiest days of my life.

I met Mary about a year later at a fundraising event.  As luck would have it, we attended the same church. We got engaged in December 1992 and got married in June 1993. We bought a house in Lyndhurst, Ohio, less than a mile from the firehouse.


Henderson family house, Farnhurst Rd., Lyndhurst, Ohio, circa 1993. Landscaping by wdh.

Getting interested in law

In Post 068, I discussed how Jason Barnwell felt he was the “nerd” and “odd duck” within the Microsoft Legal Department. That would have been an apt description of me at the Lyndhurst Fire Department circa 1991.  I came to work with copies of the New York Times, Scientific American, The Atlantic, and Harpers in my bag.  In the radio room, I watched Booknotes on C-Span.

During the early part of my firefighter career, I was on “B” shift. The next most junior member had 14 years on the job. That person was also our union president, the late Bob B. I was very proud to be a member of the Lyndhurst Fire Department and IAFF-Local 1676 because my colleagues were very talented and reliable people with no shortage of practical wisdom.  When we headed into collective bargaining in the fall of 1991, Bob asked me to attend the sessions as the official notetaker.  I felt honored to be included and grateful for an opportunity to contribute.

I became interested in law by reviewing our prior collective bargaining agreements and reading old fact-finding and arbitration briefs from the 80s.  I also dug into a book on the Ohio public employee collective bargaining law with annotations to relevant case law.  My regular attendance at union meetings eventually got me elected Vice-President, which meant exactly nothing except for the fact that Bob B. had to retire early due to a work-related injury.  Thus, for the next round of negotiations, I got to take the lead.

When people ask why I went to law school, I sometimes kid that it was “those bastard management attorneys.” The City’s go-to firm was Duvin Cahn & Hutton (now part of Littler). Duvin Cahn was well known–or notorious in the eyes of some–for busting the grocery store unions throughout Greater Cleveland. Suffice it to say, having thoroughly studied their tactics in prior negotiations, we were ready to press our side. It was intellectually challenging work that routinely kept me up until the late hours of the night. I had not been this engaged in something for a very long time.

In response to my newfound engagement, in the fall of 1994 I drove down to the campus of Case Western Reserve to make an inquiry about re-enrolling.  I was informed that the person I needed to talk to was Dean Donald Laing in the Office of Collegiate Affairs. As evidence that some fateful purpose was at work, Dean Laing was the same person who, in August of 1984, summoned me to campus to explain why I was dropping out of college. He remembered that conversation. So did I.

I explained to Dean Laing that I was interested in going to law school, which required me to finish my degree. (It was good preparation for the conversation I had to have with Mary later that evening.)  Dean Laing found the situation amusing.  I did as well but in way that was quite humbling. I was admitting that the strong conclusions I had made a decade earlier were, at a minimum, incomplete. In my own mind, I had crossed this bridge many months earlier. But now, in the presence of Dean Laing, I had to say it out loud. It is hard to overstate how valuable this was; not because it was humiliating (it wasn’t), but because I lost the fear of admitting I was wrong. Having done it once, I could do it again. This freed me up to just learn.

I re-enrolled in the spring of 1995 and graduated two years later.  By that time, our daughter, Lauren, had been born.  So we did the things that young married couples with kids do–we bought life insurance and hired a lawyer to draft a set of wills.

Use your talents

The original plan was to never finish college. Now, the revised plan was to finish college with a stellar academic record that could get me a scholarship to Cleveland-Marshall College of Law, which had a long history of enrolling police and firefighters.

Yet, as I executed on the revised plan, I had moments that gave me pause. In particular, one night I was on an EMS call with two new recruits. The patient was having very bad seizures, making it very difficult to secure his airway through endotracheal intubation (one of the cornerstones of paramedic training).  As the senior medic on duty, my solution was to drive fast to the ER.  However, one of the new hires suggested a nasal intubation–i.e., use a smaller tube, lube it up, and enter through the nose into the trachea. I had read about this technique but had never seen it done; nor had I practiced it on a manikin. Yet, the new hire was sufficiently confident that we encouraged him to give it a try. And it worked.

I was impressed by my colleagues. But I also asked myself if I would ever react in the same way.  The answer was no.  Rather that improving my EMS skills, I was much more interested in union matters, my school work, or whatever arcane reading material was in my duffle bag. I reflected on the possibility that I was taking up a space for a new hire who would bring more intrinsic interest to the work.

Over the two years it took to finish my senior year at CWRU, I enrolled in several classes with Andy Morriss, who is now the Dean of the School of Innovation at Texas A&M and before that Dean of Texas A&M Law. But at the time he was a junior CWRU faculty member with a joint appointment at the law school and the business school.

After one of my classes, Andy said to me, “You’re a really good student.  You ought to go to law school.”

“I am going to go to law school,” I replied. “At Cleveland-Marshall after I finish here.” Andy countered, “You should go to a really good law school.”

“Why would I do that? Do you know the schedule at the fire department?” That was my stock answer at the time, albeit with some self doubt creeping in.  Although I was still on the revised plan, I began to wonder what would happen if I placed a much larger bet on work that better fit my talents. Moreover, the world was changing a lot in the mid-90s. I didn’t want to spend my life as a bystander to all the action.  In 1998, with Mary’s support, I moved on to a revised revised plan, which included applying to University of Chicago Law School. Andy said if I got into Chicago, I should go.

To get off the “hold” list, I had to fly to Chicago to interview with Richard Badger, U of C’s longtime Dean of Admissions. Dean Badger said he had never interviewed a firefighter before. Out of curiosity, he asked, “How hard is it to get a job on a fire department?”  I replied, “As a statistical matter, it is far more difficult to get hired as a firefighter than it is to get admitted into this law school.”  I then explained the numbers.  Dean Badger thought this was hilarious.  A couple of weeks later, I got my ticket.

In late Sept. 1998, I started commuting to Chicago every week via Southwest airlines. After I landed, I took the 59th street bus from Midway to Hyde Park. This was the new routine.


Last days at the LFD (Sept 1998).  Left: Mary, Lauren and Bill behind Squad 441. Right: Bill operating Ladder 421 at Lyndhurst Home Days.

The socialization of lawyers

I like stories, but I’m not a big fan of opaque writing.  So I’ll deliver one of my core points here. Lawyers are hindered by some unhelpful baggage that starts to accumulate during law school.

In my observation and experience, law school tends to socialize students into a new way of thinking and, by extension, a new way of evaluating professional options that is broadly shared by one’s peers. There is no neutral way to put this — it’s a safety-in-herds dynamic. It starts with students competing with one another to gain access to positional goods that signal intellectual ability — admission into the highest ranked law schools, top grades, law review, callbacks, callbacks with the most prestigious firms, judicial clerkships, a hierarchy of clerkships with Supreme Court feeder judges at the top, and then a pecking order of prestige among the nine Supreme Court justices. This socialization is more acute at higher ranked schools where the competition for positional goods tends to last longer. Cf. Zaring & Henderson, “Young Associates in Trouble,” 105 Mich. L. Rev. 1087, 1088-89 (2007) (reviewing two novels on associate life and observing, “By eliding hard choices, these young associates find themselves in unhappy, unfulfilling environments without really knowing how they got there, dis-empowered and alienated from their work. And, ironically, their wealth and prestige still make them the object of envy.”)

Granted, when I enrolled at University of Chicago in the fall of 1998, I didn’t understand any of this.  However, I had been partially inoculated by 14 years of blue-collar work experience. (Note I said partially.) In December, at the end of my first quarter of law school, I started getting invitations to Holiday parties hosted by large Cleveland law firms trying to recruit 1Ls from national law schools. I accepted them all, hoping to land a job and contribute to the family budget.

Despite having only ten weeks of legal education, I received offers from several major firms in Cleveland at pay rates 40% to 80% higher than my very decent firefighter salary.  Yet, what would have been my options if I had attended Cleveland-Marshall?  It seemed like an absurd fixation on law school brand, especially when combined with such a superficial evaluation of people.

That impression deepened during the 1999 fall OCI recruiting season when twice as many employers showed up as U of C students available for hire. Having already lined up my summer 2000 employment in Cleveland, I was a mere spectator. Yet, what I observed among my classmates — the most intelligent people I had ever been around — was an obsession with obtaining offers from firms that, one year earlier, very few had ever heard of.  Further, the firms were much more alike than they were different.  What about career opportunities outside the OCI bubble?  The need to win, or perhaps prove that one belonged, seemed to be crowding out balanced reflection.

Through observing this process, I got the idea of creating a law school course focused on law firms as businesses. It was obvious that we needed a counterweight to the enormous pull of positional competition — higher quality information on how the legal marketplace worked and critical distance to make important decisions related to values and purpose.  That course was first offered at Indiana Law in the fall of 2004. Shortly thereafter, data and ideas from the course became the basis for several law review articles. By continuing to pull on this string, I created my tenure file and a career researching the legal market, including a recent landscape report for the State Bar of California. See Post 058 (providing link to report). So far, it’s been a good run.

All of this is a long way of saying that I owe an enormous debt to my working class life experience. But for that experience, I wouldn’t have seen what was right in front of me.  I thought it was time to share this perspective as it might be helpful to others.


Family Planning

A couple of years ago, my original life insurance policy expired. I was very happy that the insurance company won that bet.  Before it expired, I got a new policy that will get Mary (and hopefully me) safely into retirement.

It has been more than 20 years since Mary and I signed our original wills. In the intervening years, Lauren turned 21 and we moved to two different states. Thus, we agreed it was necessary to update our wills and execute other documents to deal with the possibility of physical and mental incapacity.  When we made plans for a significant overseas leisure trip to celebrate our 25th wedding anniversary, Mary used our departure date as a hard deadline to get everything done.

We fit the simple default model.  If one of us should predecease the other, 100% of our assets transfers to the surviving spouse.  If Mary and I should perish together (e.g., on a transatlantic flight to Europe), Lauren would be our sole heir.

After a month or so of serious reflection, I gave the task to LegalZoom.  Mary and I spent two hours on a Saturday working our way through the questionnaires. The total package included two wills, two powers of attorney, and two living wills. The total cost was $296.00. In terms of customer experience, I would give it a 9.5 out of 10. I am very satisfied.

The most interesting and important part of this story, however, is the fact that it took me over a month to make this decision.  It took that long because the part of me socialized as a lawyer had to process feelings of shame and embarrassment.

These feelings were not rational because, rationally, I made a prudent decision based on considerations of cost, quality and convenience. LegalZoom is a expert system, which is ideal for the most common legal fact patterns. Forty years ago, an early version of this technology drove the storefront revolution, which sociologist Jerry Van Hoy concluded was great for consumers but bad for lawyers because selling the simple cases was profoundly tedious and unremunerative. See Post 059 (discussing rise and fall of storefront revolution). Today, Thomson Reuters sells very similar technology on a subscription basis to law firms that are trying to earn a living in a flat-fee world.

Although my legal market research influenced my decision to use LegalZoom, see, e.g., photo below, I only got to the other side when I started to channel the practical wisdom of the firehouse.  My fellow firefighters would want an answer to the simple question, “why should I pay more?”

Lawyers and legal educators seldom discuss LegalZoom. But when they do, it is typically to denigrate what the company offers. My emotional makeup is not unique or special among lawyers. Thus, it is likely that other members of the legal profession, when faced with the prospect of using LegalZoom or a similar innovation not widely sanctioned by our peers, would also experience similar feelings of shame and embarrassment.  These are powerful emotions that compromise our ability to process information in a balanced and objective way. I worry about the possibility of the legal profession getting stuck in this rut for another half generation. What a waste.

Some lawyers/readers might disagree with my conclusions. Indeed, some might relish the prospect of my estate being thrown into probate by a defect in a LegalZoom document. If so, you might want to bring that up with your therapist or your priest.  You’re giving the topic more headspace than it deserves.


Eddie Hartman and the LegalZoom technology team working at a co-working facility in San Mateo, California, May 2016. Photo taken by wdh during field research.

What’s next? See Two types of legal innovation: Type 0 substantive law, Type 1 service delivery (071)


Microsoft’s legal department has the talent, resources and vision.  With enough time, a “Microsoft system” could evolve that will be as influential as the original Cravath system.


I was very fortunate to be invited to the most recent Microsoft Trusted Advisor Forum, which took place on September 20 at Microsoft’s Redmond campus. The Forum featured 13 key Microsoft legal service providers (12 law firms + one of the Big Four) giving presentations on an innovation that “demonstrably improves legal service delivery to Microsoft.” Although ambitious and unprecedented, the Trusted Advisor Forum on Innovation is but one small moving part in a much larger and well-resourced strategy.

This strategy was announced last summer in a widely read essay by David Howard, CVP & Deputy GC at Microsoft. See “Microsoft’s New Strategic Partner Program,” LinkedIn, July 27, 2017. What caught people’s attention was Microsoft’s commitment “to move 90% of our work to AFAs within two years.”  The mechanism for achieving this goal is the Strategic Partner Program, which asked 13 law firms to co-create solutions within the context of long-term business relationships. This collaboration theme was recently re-enforced at Microsoft’s Global Summit when General Counsel Dev Stahlkopf asked all of Microsoft’s outside counsel to “[p]artner with us to continuously improve and innovate.” Zach Abramowitz, “Why Microsoft is Hosting Their Law Firms in Redmond This Week and Why it Matters for Everyone Else?,” BigLaw Business, Sept. 18, 2018.

These are big ideas. Someone, however, has to execute.

This task has been given to Jason Barnwell, Microsoft’s Assistant GC for Legal Business, Operations and Strategy.  To give the Strategic Partner Program continuity and weight, Barnwell and his team started running the Trusted Advisor Forums. Last fall the topic was Artificial Intelligence. This spring it was Competition and Data. Later this year will be Diversity & Inclusion. Sept. 20 focused on Innovation.

Both Jae Um and I were at the Sept 20th event. We felt it was sufficiently important for the broader legal industry that it warranted two detailed write-ups. Mine (068) applies the lens of diffusion theory to the SPP/Trusted Advisor Forum innovation, examining the obstacles to adoption and the likelihood that MIcrosoft, through its leadership and systems-level approach, will eventually be successful. (For a primer on diffusion theory, see Posts 004, 007, 008.) Jae’s post (069) goes deeper into the substance of the Innovation Forum.  Both 068 and 069, however, discuss how and why MIcrosoft’s efforts matter for the broader legal industry.

Will it work?

To handicap the odds of Microsoft’s Strategic Partner Program (SPP) becoming a major success that influences other Fortune 100 legal departments and eventually the broader legal industry, it is worth focusing on three factors:

  1. The quality of leadership driving and supporting the SPP
  2. The “adoption” of the SPP by law firms
  3. The duration of the adoption period (measured in years)

Factor #1 strongly favors Microsoft’s: Jason Barnwell is a 1 in 10,000 talent. No less remarkable, however, is that Barnwell has the full backing of senior leadership (Brad Smith, President & CLO; Dev Stahlkopf, CVP & GC; David Howard, CVP & Deputy GC) along with numerous Microsoft practice group leaders at the Deputy GC-level who told Barnwell, “I’m in.” Barnwell also has the bench strength of 13 legal professionals, including Rebecca Benavides (Dir. of Legal Business) and Tom Orrison (Dir. of Legal Ops). See Post 017 (innovation in organizations crucially depends upon the attitudes of leadership and the presence of “champions”).

Factor #2 cuts strongly in the opposite direction: The SPP is an innovation that Microsoft wants its key outside service providers to adopt (i.e., embrace, improve, own).  Yet, using Rogers rate of adoption model (Post 008), the still-evolving SPP faces enormous challenges to adoption, particularly with regard to relative advantage and cultural compatibility (see full analysis below).  It is all-too-easy to misunderstand or underestimate these challenges, particularly within the elite segment of the bar where Microsoft needs to operate.

Which brings me to the #3 factor: If Barnwell and his team can forge ahead for six to eight years, I would put the odds of success at 90%+.  This is because the SPP/Trusted Advisor Forums reflect a multiple iteration/repeat player design that can reshape cultural norms and re-orient relative advantage toward the long-term. With some luck, the “Microsoft system” can do for legal departments what the Cravath system did for law firms 100 years earlier. This would be a much needed refresh for everyone.

In this post, I’ll delve deeper into the three factors listed above.  But first, let’s review the set-up of the Microsoft’s Trusted Advisor program, as it provides specific context for understanding Microsoft’s core innovation, which is the SPP.

September 20th Trusted Advisor Forum

Trusted Advisor organizations were invited to make presentations on two topics:

  1. tell us about one thing you have done in the last year to get better; and
  2. tell us about one thing you will try to do next year to get better.

Presenters were instructed to focus on an innovation that demonstrably improves legal service delivery to Microsoft.”  Because Barnwell knows his audience, these instructions were parsed in a detailed explainer sent out in advance. Organizations with past and future presentations (7 of 13) had 20 minutes to present, including a short Q&A. Organizations with only a future presentation (6 of 13) were allotted 15 minutes.

Sure, everyone is bound to be nervous presenting on innovation in front of Microsoft and their industry peers. But other aspects of the Forum further raise the stakes. Specifically, Trusted Advisor organizations were strongly encouraged to invite other in-house professionals. Thus, in the room were (to name but a few) Adobe, Amazon, American Airlines, Fedex, Glaxo-Smith-Kline, Intel, Liberty Mutual, Starbucks, T-Mobile, etc). According to Barnwell, Microsoft opened this particular Forum to other law firm clients because “we don’t want to be the only client asking you for this type of commitment.”

The Trusted Advisor Forum on Innovation was designed in collaboration with Casey Flaherty.  During his opening remarks, Barnwell cited Flaherty’s 2016 ACC monograph  “Unless You Ask,” as his primary blueprint.  Flaherty was retained by Microsoft to help organize and run the Forum.

Regarding follow-up, which clearly bears Casey’s fingerprints, the last section of the explainer lays out the tentative plan:

The [Innovation] Forum is an experiment. The current thinking is we will reconvene in a year to report back and publicly commit to a new round of innovations. But we will see how this goes.

Our commitment to continuous improvement is not an experiment [emphasis added]. These types of projects will become part of our annual feedback cycle and will be on the agenda for my site visits. In addition, I recommend you start, if you haven’t already, situating these projects in a larger strategic plan with a target operating model and a digital transformation roadmap. You do not have to share your entire vision at the Forum. I will ask about it when I come onsite.

Suffice it to say, Microsoft is trying something new.


1. Quality of leadership driving and supporting the Microsoft initiative

The September 20th Trusted Advisors Forum took place in Building 92 on Microsoft’s Redmond Campus.  Although not labelled as such, Building 92 appeared to be a conference center. Our room was on the second floor, roughly 100′ by 200′, with 30′ ceilings and two all-glass walls (front and side) overlooking a wooded landscape.  The set-up was 15 round tables with plenty of room to spread out.  I have been in a lot of law firms, but very few have a room that could hold 200 people so comfortably. Remarkably, Building 92 had a lot of other activity that day and could have easily handled three of four similar events. We were but one corner of one floor.  This is how things roll at an $85 billion global software giant that employs 115,000 people.

I share this information to make a simple point:  The person running an outside counsel initiative at Microsoft is bound to enjoy a lot of power and influence. But that does not make the person an exceptional leader.  Jason Barnwell, however, combines the two attributes.

In his opening remarks, Barnwell explains that today participants are Microsoft’s “long-term partners” and that Microsoft intends to “invest in the relationship.”  Barnwell reminds the audience, “We serve the same client, but all of us have to be committed to doing better.  In this program, success is learning; failure is not trying.”  Barnwell continues, “Those of us in CELA [Corporate External and Legal Affairs] are updating our culture to embrace a growth mindset that stresses a learn-it-all instead of a know-it-all approach. We expect to see this reflected by our Trusted Advisors.”  Finally, Barnwell emphasizes his goal of creating a “psychologically safe place” for Forum members to share and collaborate.

How many lawyers do you know in positions of senior leadership who use the term “psychological safety” to describe the environment they aspire to create?

The term psychological safety has made one other appearance on Legal Evolution, in the context of effective change strategies. See Post 057 (citing research from Google showing that psychological safety is the key attribute of high-performing teams). Professor Amy Edmundson at Harvard Business School defines the term as a “shared belief held by members of a team that the team is safe for interpersonal risk-taking. … [and] a sense of confidence that the team will not embarrass, reject or punish someone for speaking up.”  Edmundson, “Psychological Safety and Learning Behavior in Work Teams”, 44 Admin. Sci. Quarterly 350-383 (Dec. 1999).

Barnwell’s background sheds some light on his unconventional style.  Barnwell is originally from South Carolina before heading to MIT to obtain a degree in Mechanical Engineering.  During his last semester and the summer after graduation, Barnwell worked as a Developer/Technology Specialist for the Harvard School of Design.  In 2000, Barnwell headed to California, where he worked as a software engineer for four years. In the fall of 2007, he enrolled at USC Law.

The key point point here is that long before he entered the legal field, Barnwell was thoroughly socialized into a systems method of thinking.  In a sidebar conversation, Barnwell told me that he knew within the first 30 days of his associate position at Heller Ehrman that the firm was awash in work that could easily be automated.  At his next firm, Barnwell observed a strong focus on profits with little attention paid to how the work was performed.

Thereafter, Barnwell concluded that law firms would not be a good long-term fit.  Thus, he resolved to spend another year in private practice to learn how to be an MVL — “minimum viable lawyer.” In the fall of 2010, Barnwell joined Microsoft. Since then, he has been promoted from attorney, to senior attorney in a variety of roles, to assistant general counsel. See Barnwell’s LinkedIn page.

Among in-house peers, Barnwell fits the classic innovator profile–i.e., intellectually venturesome with an interest in new ideas that lead the innovator out of conventional peer networks into more far-flung social and professional circles. See Post 007 (defining adopter types from Everett Rogers, Diffusion of Innovations). Within lawyer circles, Barnwell describes himself as “a nerd” and an “odd duck.”  I was recently added to an external email list where Jason passes along new sources of learning relevant to the workplace.  Here is a sampling from that list:

  • Link to an HBR podcast from the Chief Strategy Officer of Alibaba with Jason noting the growing role of creativity in knowledge work.
  • Link to an article titled “How to Solicit Negative Feedback When Your Manager Doesn’t Want to Give It” with commentary on how these ideas are being used at Microsoft.
  • summary of research documenting the lag time between changes in business school orthodoxy and changes in corporate strategy (roughly three decades) and analogizing this process to the legal profession.

If Jason Barnwell was still working in a law firm, these intellectual pursuits would be a distraction from ambitious billable and origination targets. Perhaps that’s a clue to the root cause of law firms’ innovation woes. Regardless, Barnwell is continuously adding to his toolbox so he can drive better results in his own area of influence.

In Diffusion of Innovations, Everett Rogers describes how the creative insights of the innovator often flow from their status as a “stranger,” a concept originally developed by the German sociologist Georg Simmel. See “The Stranger” (1908). Rogers notes that a stranger “has a unique view of the system in which he or she is a member” and “can more easily deviate from the norms of the system by being the first to adopt new ideas.” Diffusion of Innovations at 42-43.

Among elite lawyers, Barnwell is a stranger: he is a scientist and software engineer who can’t be co-opted into believing that law is special or different. Yet, he has remarkable EQ and political instincts on when to push forward and when to back off. This is what makes Barnwell a 1 in 10,000 talent.  Now he’s in a position of significant influence and authority at Microsoft.

Jason Barnwell at the whiteboard (all day) during Sept. 20 Trusted Advisor Forum. This is what innovators do.

2. “Adoption” of the SPP by law firms

Even with Barnwell’s unique talent, perspective and credibility backed by the clout of Microsoft, the ambitious goals of the Strategic Partner Program — 90% AFAs by 2020; continuous improvement from all partner firms — are far from guaranteed. This is because of the difficulty of the underlying problem, which is a legal culture that resists learning.  To be clear, this is my assessment, not Barnwell’s or Microsoft’s. More on the legal culture problem in Section 3 below.  First, let’s look at the innovation that Barnwell is trying to get law firms to adopt and how it fares in Rogers rate of adoption model.

a) An innovation designed to spawn other innovations

Drawing upon the ideas of Casey Flaherty, Barnwell is building the SPP to include a “structured dialogue” process that emphasizes continuous improvement for the benefit of Microsoft.  The theory is very simple.  Smart people from the buy and sell side come together on an annual or bi-annual basis to discuss what is working well and what could be improved. Based on that conversation, goals are set with very simple metrics for ascertaining progress.  If the structured dialogue is faithfully followed, the participants are put onto the path of high-value innovations. This is the Flaherty-Barnwell thesis, which I strongly endorse.

Since Barnwell is at the beginning of this process, the Sept. 20th past and future innovation presentations are grist for structured dialogue. Further, all the Trusted Advisor organizations got to see each others’ presentations. Lawyers are highly competitive.  Thus, independent of any dialogue between the Trusted Advisors and Barnwell and his team, participating organizations are going to up their game. Of course, that is the key to all of this — multiple iterations that build on one another.

Regarding the quality of ideas and evidence of demonstrable improvement, critiques of specific firms would be completely counter to Barnwell’s laudable and wholly correct mandate of psychological safety.  Suffice it to say, presentations in this first Iteration fit onto a bell curve with only two to three in the A range.  Here are my takeaways.

  • Innovation is not a synonym for tech: Quantums leaps are possible with a well-designed process and high-quality training of paraprofessionals.
  • Outstanding P3 (pricing, process improvement, project management) and KM professionals can add immense clarity and value to workstreams.  These folks are “sell-side” legal ops professionals. No JD required.  Just get out of their way.
  • Mine your data — we are all impressed by an international firm that studied its own cross-border M&A transactions to identify patterns that are sure to be valued to clients.
  • The innovation presented by the Big Four participant was very sophisticated and advanced, giving the impression that it was just popping the hood on its ongoing strategy. The Big Four does not have a legal culture problem.

Expect next year’s presentations to have a lot more A’s.

b) Likelihood of adoption

Let’s assume that to be successful in Microsoft’s goal of continuous improvement, Barnwell needs Trusted Advisor organizations and some key Microsoft in-house lawyers to “adopt” his iterative structured dialogue process. Rogers rate of adoption model from Post 008 provides the key criteria, with “Perceived Attributes of Innovation” accounting for most the variance.

Applying these criteria to the innovation, the first two are strong negatives; the second three are all strong positives.

Relative Advantage (-). The larger the relative advantage, the faster the rate of adoption.  In this case, if Microsoft is your client and asks you participate in a Trusted Advisor Forum, you are very likely to accept.  However, what’s the value? In the short- to medium-term, it’s preserving the relationship with Microsoft; I doubt any relationship partner sold participation to firm management by promising a significant volume of additional work.  Part of the legal culture problem is an inability to see the long-term, which includes Microsoft as an institutional client of the firm that reduces dependence on partners with portable clients. The relative advantage is negative to neutral in the early stages but positive for those focused on the long run.

Compatibility (-).  The more compatible an innovation is with the social system’s existing cultural norms, the faster the rate of adoption. Granted, this sounds ludicrous, but a large number of lawyers are extraordinarily resistant to candid conversations about performance. They are (1) afraid of the emotional blowback of giving it; and (2) terrified at the prospect of receiving feedback that is not in the “A” range. The pervasiveness of this problem within elite professional services was the impetus for Professor Chris Agryis’s article, “Teaching Smart People How to Learn,” Harv. Bus. Rev. (May-June 1991), which is now an HBR classic. Agryis discusses the “brittle” personalities of elite professionals who have never experienced failure. The result is an intellectual defensiveness and a propensity to blame others. Of course, none of this unpleasantness is necessary if the hard conversations can be avoided in the first place. Compatibility is a strong negative that Barnwell is countering with a precommitment strategy. It also explains Barnwell’s emphasis on psychological safety.

Complexity (+). The simpler and less technical an innovation, the faster the rate of adoption.  A structured dialogue process is drop-dead simple even if there is emotional resistance to participation. {Lack of] Complexity is a strong positive here.

Trialability (+). Innovations that can be tested through trials are more likely to be adopted. As noted in the explainer, the Innovation Forum is “an experiment” and that Barnwell wants to “see how it goes.”  Iterative approach =  trialability. It’s also a “little bets” approach. See Peter Sims, Little Bets: How Breakthrough Ideas Emerge from Small Discoveries (2011).  Another strong positive.

Observability (+).  The more observable an innovation by other members of social system, the more likely adoption. For example, taller and better corn in Rogers’ original research made the benefits of hybrid seeds highly observable to other farmers. See Post 008. Likewise, the Forum format dramatically increases observability (and also reshapes culture, albeit slowly) — all positive.


3. The duration of the adoption period (measured in years)

The combination of low relative advantage and low compatibility is what I refer to as the legal culture problem. And it affects all firms in the AmLaw 200 on a continuum that ranges from “challenging” to “extremely severe.” But for the SPP’s multiple iteration/repeat player design that will, hopefully, extend for a period for years, I would be writing off this whole initiative. The legal culture problem runs that deep.

For the purposes of this last section, I’m going to refer to the multiple iteration/repeat player design as the “Microsoft system.” This is useful for two reasons. First, if Barnwell and his team are permitted to stay the course, the SPP/Trusted Advisor Forums will evolve into a system.  Second, the emphasis on “systems” is appropriate because virtually all elite U.S. lawyers now operate in the late stages of the Cravath system, though few appreciate what that means.

The Cravath system was developed in response to an acute shortage of sophisticated business lawyers during the rapid growth of financial and industrial enterprises in the early 20th century. See Henderson, “Three Generations of U.S. Lawyers: Generalists, Specialists, Project Managers,” 70 Maryland L. Rev. 373 (2011). The core of the system was a partner-associate training model that aligned incentives so that young lawyers got excellent training, clients got excellent service, and partners enjoyed security, profits, and prestige. Further, it was scalable, meaning that it could keep pace with the relentless increase in client demand without compromising quality. Indeed, the purpose of the system was to build “a better lawyer faster.” All of the system’s key moving parts are laid out in remarkable detail in the first 12 pages of the second volume of the Cravath Swaine & Moore firm history. See Robert T. Swaine, The Cravath Firm and Its Predecessors, 1819-1948 Vol. II (1948).

The results of the Cravath system were so powerful that its principles were adopted by every major U.S. law firm.  Yet, how may BigLaw partners today know what those principles are? The legal culture problem is, in essence, the problem of ahistorical partners. Each successive group of lawyers has paid less and less heed to the system’s operating principles until little more then an emphasis on elite credentials remains.  Yet, because of the system’s tremendous forward momentum, decades later partners are still collecting its late-stage financial rewards.  This is very powerful operant conditioning, re-enforcing some very misguided ideas about how value is created.

Because so many in-house lawyers also came of age at late-stage Cravath system firms, they too fail to appreciate the value of systems-level thinking.  Casey Flaherty’s “Lawyer Theory of Value” describes the absurd result — just clear the room and let a few well-credentialed lawyers do what they think is best.  See Post 040 (laughing and crying with Casey). Thus, as an industry, we are at a place where lawyers–both in-house and in law firms–have to rediscover the power of systems thinking so we can, once again, as we first did over 100 years ago, coordinate our behavior in service of what the client truly needs. If we do it right, as a second-order effect, lawyers who follow the resulting system will enjoy another several decades of financial prosperity.

The Microsoft system has the potential to make this happen because the multiple iteration/repeat player design can slowly change the culture and reorient incentives and payoffs (i.e., relative advantage) toward the long-term. If it’s not long-term, then it’s not a system. Further, Microsoft’s odds of success are made higher because (a) David Howard, the original architect of the SPP and a person who controls a huge external legal budget, saw the wisdom of promising a stream of high-value work to partner firms who operated in good faith; and (b) Barnwell and his team are fostering a “psychological safe” environment — to break down resistance, the many lawyers involved need assurances they won’t lose what they have, which is primarily a sense professional accomplishment and status.

Microsoft’s biggest execution risk is an underestimation by senior leadership regarding the nature of the resistance they will eventually encounter.  The SPP/Trusted Advisor Forums, and the Microsoft system it will create, is at best a “slow” innovation.  See Post 011 (slow versus fast innovations).  In the short- to medium-term, the only reward for participating (and investing time and firm resources) is to keep the Microsoft work you already have. This puts relationship partners in a vulnerable position vis-a-vis the short-term financial goals of their own firms.

Think I am being too cynical?  It is noteworthy that Microsoft asked 13 Strategic Partners to participate in the Forum on Innovation.  Nine accepted, four declined. Thus, Barnwell and his team filled the four open spots with service providers who “saw value” in the exercise.  That is how CMS, Eversheds, Reed Smith, and EY got into the mix. And this is just the beginning. Eventually, as real change begins, there will be whisper campaigns of naysayers (both line lawyers at Microsoft and partners at law firms) who are going to complain that the SPP’s implementation is “impractical” and should not apply to their workstream. This is what “non-adoption” of the SPP looks like.

Here is my message (of encouragement) to Microsoft’s leadership: When things get hard, don’t mistake the hardships for a flaw in the underlying strategy. This is what the naysayers want you to believe. They lack your long-term perspective; they would be most comfortable being left alone. Success requires that you face them down rather than grant their exceptions. Cf. Post 047 (discussing failure of major in-house change effort at Fortune 100 company because leadership lacked resolve).  As Jae Um has correctly pointed out many, many times, see, e.g., Posts 051, 052, 062, 063, 066, and with due credit to her former boss, Josh Kubicki, innovation in the legal vertical is just lots of hard work over a very long period of time. Your multiple iteration/repeat player design is the right way to conquer this problem; but it won’t make it easy or comfortable. Thus, stay the course until the end. Pay the price. The resulting Microsoft system will be worth it.

What’s next? See Huge, If True: How Microsoft’s Big Ideas Could Transform Legal Buy (069)


Big corporations are growing faster than the rest of the economy. It is not hard to figure out where this is going. Lawyer acceptance is different story.


Many lawyers and law firms claim to serve the middle market, often describing how they deal directly with owners and executives rather than in-house counsel. Although these clients aren’t the Fortune 500, the lawyers and law firm leaders take enormous pride in this type of practice and discuss it in ways that suggest it’s a stable and permanent market niche. I’m not sure that’s right.

Above is a treemap chart of U.S. businesses grouped by annual revenue. The key takeaway is that $100M+ companies comprise the vast majority of U.S. business activity (71.6%). Remarkably, all this purple is generated by 22,400 businesses, a mere 0.4% of the 5.7 million businesses in operation in the U.S. in 2012 (the most recent year that contains total receipts).

Companies in purple tend to have legal departments as do a meaningful number of companies in orange (>$25M-$100M). We can deduce this from a number of sources.  For example, according to the Legal Executive Institute, companies with less than $1 billion in revenue were classified as “small.” See 2018 State of Corporate Law Departments at 10.  Yet, these companies had, on average, nine in-house lawyers, or one attorney per $65M in revenue. Likewise, a 2016 report by Barker Gilmore, a national recruiting firm, classified companies into four groups: >$10B, $1B-10B, $100M-$1B, <$100M. Yet, even in the smallest category (<$100M), there were sufficient data to calculate separate salary, bonus and equity averages for three different in-house roles: general counsel, managing counsel, and senior counsel. See 2016 In-House Counsel Compensation Report at 14-22.

Defining “middle market” turns out to be surprisingly difficult — is it somewhere in the purple? The orange? The gold?  The managing partner of a successful firm near the bottom of the AmLaw 200 recently told me that all his partners agreed that the firm served the middle market. Yet, that consensus broke down during a strategic planning process when partners were asked to define middle market using specific criteria. Finally they gave up. The firm was still middle market, but each partner was free to follow his or her own definition.

Although consensus on the middle market is bound to elude us, not everything is so ambiguous. This Post addresses two interrelated topics regarding the future of law:

  1. The Journey to Big.  Large corporations are the fastest growing segment of the U.S. economy. This trend started several decades ago and will continue into the future.
  2. How Big affects the practice of law. Once one sees and accepts the journey to Big, several consequences for the practice of law come quickly into focus.

Journey to Big

Every day the global economy becomes a little more interconnected and complex. In contrast, our mental models for the practice of law are very sticky. This is because we need common, coherent and tractable mental models to coordinate organizational goals and effort. Thus, we only change our mental models when they become a source of competitive disadvantage, essentially pitting the pain of building new models against the pain of imminent failure.

The middle-market law firm discussed above is in that uncomfortable in-between state where the need for new mental models is building but the organizational benefits of such a change remain out of focus.  This likely describes most lawyers and law firms.

Below are charts regarding the more rapid grow of large businesses. Yet, these data are supported by our own intuition if we take a moment to reflect on the enormous advantages that accrue to very large companies. These include:

  • Significant economies of scale and scope, which translate into cost and pricing advantages
  • Portfolios of familiar brands that send signals of quality and value
  • A plethora of low-cost sales channels they either control or can readily influence
  • Ample cash on hand to develop new products and services
  • If internal R&D fails, the financial resources to acquire smaller, more innovative competitors

If you’re wondering how important large companies are to the overall economy, review your credit card statement or the bills you pay online each month, such as your mortgage, car payment or student loans.

The graphic below shows how the mix of U.S. employment is steadily shifting to companies with large employee headcounts.

Companies with 500+ employees (purple bars) comprise the largest category in the SUSB data. This is the only group growing in proportionate size, increasing from 45.4% of total US employment in 1988 to 52.5% in 2015.  If the change looks quite subtle, that’s also it’s experienced — so gradual it’s barely noticed. This makes it more difficult to keep our mental models up to date.

The magnitude of the change is easier to observe through a trendline analysis that starts with 1988 as baseline:

The absolute numbers underneath the purple trendline are striking.  Between 1988 and 2015, the total number of companies with 500+ employees increased from 12,800 to 19,500. The total number of employees in the 500+ company category increased from 39.9 million to 65.1 million. Further, total payroll for these companies increased from $958 billion (51.4% of total US payroll) to $3.7 trillion (59.2%). Purple companies, by dint of their sheer size and scale, generate substantial and ongoing legal work for lawyers.  Thus, they are very desirable clients for law firms.

Finally, the trend toward bigness is compounded by the growing portion of purple, orange and gold companies that are partially or wholly owned by private equity. Below is graphic showing an annual count of U.S. companies in private equity-backed portfolios.

Source: Pitchbook, 2017 Annual US PE Breakdown

In our journey to Big, more and more successful businesses with regional roots are becoming assets in multi-billion dollar private equity funds.  According to a recent McKinsey report, even the largest funds ($5B+) are growing faster than the rest of the PE market, increasing from 5% market share in 2010 to 25% in 2017. See “The rise and rise of private markets,” McKinsey Global Private Markets Review 2018 at 14 & Exhibit 9.

What makes all of these trends so powerful is (a) they are all moving to Big and (b) the pattern is near certain to continue. Alas, this is the path of globalization.


How Big affects the practice of law

Once we accept that the legal industry is on a journey to Big, several predictable consequences come into focus. In this post, I’ll discuss three.

1. Legal departments are law firms with structural features that favor efficiency and innovation. Thus, they are taking market share.

Our journey to Big produces legal departments that are comparable to AmLaw 200 law firms or specialized boutiques. Yet, legal department “firms” have several features that favor efficiency and innovation.

To illustrate this point, consider the statistics below from a recent CLOC survey of 156 member legal departments.

Large Companies ($10B+)

Mid-Size Companies ($1B-$9.9B)    Small Companies  (< $1B)
Avg. attorney headcount 188 41 9
Avg. legal ops headcount 21 6 1
Avg. attorney to revenue ratio 1 / $585M 1 / $195M 1 / $65M
Avg. internal spend per legal dept FTE* $225K /  FTE $236K / FTE $175K / FTE
* Legal Dept. FTEs include attorneys, paralegals, legal ops professionals, administrators, and all other members of the department.

Although the per-FTE cost of staffing a legal department appears to be higher in large and mid-size departments ($225-$236K vs. $175K), it hardly matters because the overall cost structure of legal departments gets significantly lower with size, moving from one attorney per $65M (small company) to one attorney per $585M (large company).

Part of the declining cost structure is economies of scale that apply equally to in-house and outside counsel. For example, the legal work for a loan or other type of financing is not ten times more labor-intensive because the monies raised are ten times larger.  Yet, another part is surely greater operational efficiency.  The larger and more mature a company, the more it must rely upon lower per-unit costs to meet its financial targets.  We see this in the CLOC survey above.  When asked to identify their department’s top priorities, the top response was “Controlling outside counsel costs” (76%) followed by “Using technology to simplify workflow and manual processes” (41%). See 2018 State of Corporate Law Departments at 8-9.

Although law firms and legal departments may be doing very similar work, their internal incentives run in opposite directions. Most law firm partners are strongly incentivized to maximize the revenue, either through originations or working receipts.  Likewise, high-billing partners can stifle innovation and efficiency measures by threatening to leave the firm.  In contrast, when a general counsel commits to similar initiatives, in-house lawyers have limited leverage to push back.

[click on graph to enlarge]
These favorable conditions are why the number of in-house lawyers has grown so rapidly. In 1997, there were 35,000 lawyers working in-house. By 2017, the number was more than 105,000.  The chart to the right (updated from Post 003) shows the trendline compared to lawyers in government and private practice.

A recent American Lawyer article by Hugh Simons and Gina Passarella modeled the financial cut point for bringing work in-house.  See “The Rise (and Fall?) of In-House Counsel,Corp. Counsel, Feb. 25, 2018.  According to their analysis, roughly 45% of the AmLaw 100 were performing the type of work that could generate a 2x financial return if brought in-house.  In asking how far insourcing might go, the authors offered a startling benchmark: “70 percent of accountants and auditors work in-house.”

Cost, however, is not the sole reason to insource.  In-house lawyers have an enormous advantage in acquiring essential knowledge regarding client goals and needs. This physical and organizational proximity reduces communication overhead and creates conditions where legal work can be better defined, scoped and managed.  As a result, some of the insourced legal work will eventually be outsourced again, but this time to lower-cost NewLaw service providers.

2. Specialized tranches of work go to law firms and other service providers

Although the journey to Big leads to in-house “law firms” that become very good at process and efficiency, there remains a significant class of work that, for reasons of cost or quality, will continue to go to law firms.  What are the criteria for these decisions?

Below is a graphic that Mark Chandler, the GC of Cisco, showed during the final plenary session of the 2018 CLOC Institute:

[click on graph to enlarge]
Chandler refers to this model as the “Core vs. Context Resource Allocation Model.” It is adapted from Geoffrey Moore’s book, Dealing with Darwin (2005). According to Chandler, this is how Cisco’s legal team makes resource allocation decisions.

The top-right quadrant consumes 65% of the department’s internal resources. The high percentage is warranted because (a) these are mission-critical activities that (b) bear on the competitive advantage of Cisco, a $48 billion technology company that manufactures and sells networking hardware, telecommunications equipment and other high-technology services and products.

The second biggest area of internal resource allocation (20%) is the bottom-right quadrant, which enables business units to more efficiently conduct their activities in a legally appropriate way. Note, however, that “Tools/Processes” are in every quadrant, not just in the self-service green. That is the result of Cisco’s very advanced legal ops function led by Steve Harmon.

Law firms are mostly likely to get work from the left side of the matrix. The work in the top-left pays the most because it is mission critical and Cisco’s in-house staff lacks contextual knowledge to perform the work at the necessary level of quality. Nonetheless, 15% of the department’s resources are dedicated to managing out-tasked work. This is to ensure that the department achieves its cost and quality objectives. The goal in the bottom-left is to lock-in a combination of quality-cost-reliability for low-stakes matters. The best outcome is one that require little to no department oversight.

Under this type of decision matrix, traditional law firms have two clear paths for winning work:

  1. Be best-in-class in an area of law that is mission critical. Cf. Henderson & Parker, “The Five Strategies of Highly Effective Firms,” Am. Law, Jan. 2017 (statistical model showing that practice area specialization is the single most important factor in law firm profitability).
  2. Be outstanding at doing volume legal work.  Cf. Henderson & Parker, “Your Place in the Legal Market,” Am Law, Dec. 2015 (discussing how three firms climbed into the AmLaw 100 by focusing on price-sensitive labor and employment work).

Some law firm partners might dismiss Cisco’s resource allocation matrix as this year’s gimmick. That’s wrong for at least two reasons. First, Cisco has been using this system for 12+ dozen years. I first saw Chandler present a 1.0 version of this model at a 2010 Georgetown Law conference. That slide was dated 2006. Second, this type of resource allocation matrix was featured in a 2018 CLOC Institute session taught by Nancy Jessen (SVP of Legal Business Solutions at UnitedLex) and Elizabeth Lugones (Dir. of Legal Operations, DXC.technology). See DCX-UnitedLex allocation matrix. This session was attended by roughly 300 people. The presenters, however, are innovators or early adopters. See Post 007 (discussing adopter types).  The success they were sharing is what other professionals in the social system will to try to replicate.  This is how innovation diffusion works. See Post 004 (innovation diffuses through social systems).

3. In the long-term, there is no middle market

Because the journey to Big is a very gradual process, it’s easy to confuse slow change with no change. Further, there is a generational effect, with both buyers and sellers of legal services sticking with what they know until external events force them to change. It’s certainly true that a no-change approach will work many lawyers in the last decade or so of their careers.

I have never met a law firm partner who told me that he or she planned to ride out the clock rather than adapt to changing times.  Instead, I hear a lot of lawyers 50+ years of age tell me their “middle market” clients just want excellent service at a cost-effective price.  These lawyers continue to stay busy, or busy enough, because there is demand for what they offer: (1) a personal relationship with a knowledgeable, responsive lawyer who makes difficult legal business issues go away (2) at rates that do not carry the expense and overhead of AmLaw 50 or Global 100 law firms.

Many lawyers like this type of practice because it puts them in control, giving them autonomy and security within their firms. They don’t have to collaborate with anyone if they don’t want to. Arguably, when the business world was itself more middle market and less influenced by private equity, this described the bulk of private law practice. Less so now.  And less so in the future as economic activity is increasingly driven by larger, more complex organizations that have the resources to build out their own sophisticated legal departments.

[graphic from Post 048]
Not only are clients on average getting bigger and thus destine to change their buying habits, but law firms are upping their game, trying to lock-in tranches of work based on some combination of efficiency, expertise, and national or global reach.  Likewise, there is a good chance that emerging businesses that start life in the 3.9% portion of the treemap chart above (<$1M in revenue) used LegalZoom or a similar service to incorporate their business and educate them on things like intellectual property.  How does the middle market lawyer disintermediate LegalZoom? And what is he or she selling beyond a promise of responsiveness?

Strategy and the Fat Smoker (2008) was the last book David Maister, the preeminent law firm consultant, wrote before he retired. Maister starts Chapter 17, titled “The Trouble with Lawyers,” by conceding the point that lawyers are, in fact, different. “The combination of a desire for autonomy and high levels of skepticism,” wrote Maister, “makes most law firms low-trust environments” (p. 231). Thus, according to Maister, firms struggle to execute on strategies that require collaboration and sharing of risk.

If this is true, why do most firms do so well financially?  Maister opines that it’s because lawyers “compete only with other lawyers.  If everyone else does things equally poorly, and clients and recruits find little variation between firms, even the most egregious behavior will not lead to a competitive disadvantage” (p. 239).

This passage invariably garners a good laugh among lawyers, but less so in the future. Law firms inside large legal departments increasingly rely on systems and process. Likewise, to capture a tranche of the legal work that is sourced using a resource allocation model, some law firms are executing on a strategy that requires collaboration and risk sharing. Although most firms struggle with this approach, a firm only has to do marginally better to win.  This is because the most able mid-career lawyers will eventually lateral out of firms unable to offer anything beyond a pledge of great service.

As discussed in Innovation in Organizations, Part I-III (015, 016, 017), firm size is correlated with innovation, not because of size per se, but because size brings with it specialized expertise, financial resources, and better access to a diverse stream of clients. Cf. Post 062 (Jae Um discussing how innovation require high-quality access to buyers and users). Further, the service offerings of marginally more innovative firms are destined to create value that is controlled by the firm, reducing the tyranny of partners with portable books of business. As portions of this legal work get productized, middle market lawyers will have very little left to sell. Thus, as it turns out, the middle market is but a waystation on the journey to Big.


Coda.  The journey to Big has significant consequences for entry-level law graduates and thus legal education. But that is a topic for another day.

What’s next? See Can Microsoft hit “refresh” on client-law firm relations? (068)

Over the summer, Legal Evolution moved to a weekly Sunday publication schedule with an emphasis on long-form content. Readers seemed to like this change, as our page views increased substantially.

Although we are very grateful for this success, Legal Evolution is moving to an unconventional publication schedule.  From Labor Day 2018 until Memorial Day 2019, Legal Evolution will publish bi-weekly (on Sunday or Monday Holidays).  Then, over the summer of 2019–from Memorial Day to Labor Day–we’ll resume weekly publication.

The reason for the change is a desire by the editor (Bill) and our talented regular contributor (Jae) to plan out and execute projects, both writing and other professional commitments, without sacrificing quality.  If our plans work, less frequent content, at least over the fall, winter and spring, will ultimately result in better content.

Thank you for your readership.

What’s next? See Legal Innovation Woes, Part III: Skill Shortage, Emotional Labor & Arrested Development (066)

Credit: Institute for the Future of Law Practice

A handful of farsighted legal employers are seeking to build a better talent pipeline. You’re invited to join them.


Practicing lawyers have long complained about the content of legal education – too much theory, not enough practical skills. If you’re one of those lawyers, do you also believe in the power of markets to improve the value of goods and services? If so, what market signal are legal employers sending to legal education?

As someone who has studied this market for more than 15 years, here is my paraphrase: “We want to hire smart, hardworking, and diverse law graduates, ideally from highly ranked national law schools or those at the top of their class at regional law schools.”

This describes how the majority of law firms, federal judges, and prestigious public interest employers sort through resumes. This is an observation, not a judgment. Information costs are high. Even for pedigree skeptics — and there are quite a few in the legal profession — the road of least resistance is to favor candidates with strong academic markers.

This leaves legal education in a bind – if we build it, you won’t come. Instead, legal education expends enormous energy, and a lot of scholarship dollars, to move up in a rankings competition where quality is determined primarily by pre-law credentials. Indeed, over the last 20 years, there has been a consistent .90+ correlation between schools’ median LSAT scores and their U.S. News rank. This is an input-driven market that does not materially reward improvements in legal education. How do we fix that?

Call to Action

If you are legal employer, here is a simple, low-risk way to send a powerful signal to law schools: Hire an IFLP intern.

IFLP (pronounced “I-flip”) is the Institute for the Future of Law Practice, a nonprofit created by innovative legal departments, law firms, legal service companies and law schools seeking to build a better talent pipeline. IFLP’s core initiative is a 3-week skills boot camp for law students followed by internships (10-week) and field placements (7-months) with IFLP employers. In 2018, 40+ students from five law schools participated in the program. In 2019, we hope to expand to 90+ students from 15 law schools. See 2019 IFLP Curriculum and Internship Program. The long-term goal is to make future IFLP curriculum and internships available to all interested law schools and law students.

This will happen if legal employers send a clear market signal.

If your organization hires an IFLP intern, you are supporting the creation of a curriculum that maps onto the demands of modern law practice:

  • Basic accounting, finance, and industry analysis. According the After the JD Project, law graduates two and seven years into practice report lack of business training as the most significant shortcoming of their legal education.
  • Introduction to legal operations (data, process, technology, design). Legal budgets are not keeping up with the growth in legal complexity. The emerging field of legal operations is dealing with this challenge head-on. The profession needs more operationally aware lawyers.
  • Real-world case studies and simulations. Knowledge can be taught in a classroom, but skill acquisition requires practice within a relevant context. IFLP designs experiential modules so that students can efficiently acquire both knowledge and skills.
  • Teamwork, communication, collaboration, feedback, leadership. Sophisticated law practice has become a team sport. This is reflected throughout IFLP’s curriculum.

If you hire an IFLP intern, you’ll get the benefit of a well-trained law student who takes work off your plate. Your lawyers and professional staff will also react with curiosity rather than defensiveness to the skills and know-how of IFLP interns. This can soften the soil for future change initiatives; it also reflects how a truly effective talent pipeline can deliver second-order benefits to all stakeholders.

If your organization becomes an IFLP employer, you are helping to align the interests of legal education with the long-term needs of clients. Indeed, this is part of being self-regulated profession. IFLP is just trying to make this easier.

IFLP Wave One Launch

If you’d like to learn more about IFLP, please consider attending (or sending someone from your organization to attend) IFLP’s Wave One Launch, which takes place on Wednesday, Sept.12 in Chicago (in Loop) from 5:30 to 7:30 pm. Registration details here.

During the 60-minute program, IFLP instructors from legal departments will discuss their talent needs. Speakers include:

You’ll also learn about the history of IFLP (our initial pilot was in 2014), hear from past and current students, learn how clients and law firms have used internships to create win-win benefits, and obtain information on the supervised internship program (no supervision, just results) in conjunction with Elevate Services. Again, see 2019 IFLP Internship Program.

Industry pioneers behind this effort include IFLP founding sponsors Chapman and CutlerElevate, and Cisco, as well as IFLP employers Archer Daniels Midland (ADM), Auto-Owners InsuranceBryan Cave Leighton PaisnerFenwick & WestHermes LawHonigmanNeota LogicOrrickRelativitySeyfarth ShawThompson HineUnivarColorado LawIndiana University Maurer School of LawNorthwestern University Pritzker School of Law, and Osgoode Hall Law School. In Canada, IFLP industry pioneers include BlakesBennett JonesKiraMcCarthy Tetrault, and Olser.

Thank you for reading. Now let’s increase the market signal to legal education. For additional information, please reach our to IFLP Program Director, Lisa Colpoys at lcolpoys@futurelawpractice.org.


Originally published on LinkedIn on August 23, 2018.  Republished here to help spread the word. wdh.


What’s next? See Legal Evolution’s 2018-19 publication schedule (065)

Legal Evolution is going long on long-form content. This decision is reflected in our move to a Sunday publication schedule, which began in early June.

This editor’s note is made timely by Jae Um’s three-part series, Legal Innovation Woes (062-064).  It is not accurate to describe this work as a blog post.  It is strategic analysis on the legal industry of a depth and quality that is not available anywhere else on the Internet.  Jae is writing not to express her opinion but to solve a very difficult set of industry-level problems.  And that takes word count.

That pretty much covers it.  #SundayReading #LongFormContent. Thank you for your readership.

Continue Reading Long-form content (061)


We lack the experience and vocabulary to describe what is happening in the entry-level legal job market.


Below are four charts that provide context to NALP’s recently released Class of 2017 data. But first, here are some key highlights from NALP’s press release and Selected Findings:

  • Overall employment: 88.6%, up from 87.5% in 2016.
  • Bar passage req’d jobs: 71.8%, up from 67.7%
  • Private practice jobs: 54.4%, up 1.5%
  • Median salary:  $70,000, up $5,000
  • Law firm median: $117,000, up $13,000
  • Hiring in 500+ lawyer firms: 4,606, up 368 jobs

These favorable statistics account for the press release headline “Class of 2017 Notched Best Employment Outcomes Since Recession.”  Similar headlines followed in the legal press.  See, e.g., “Median salaries for new law grads jump to $70K as BigLaw boosts hiring of newbie lawyers,” ABA Journal, Aug. 2, 2018; “Job Market for Law Grads ‘Surprisingly Strong,’ NALP Finds,” Law.com, Aug. 1, 2018; “Law grad salaries rise as big firms up their hiring,” Nat’l Jurist, Aug 3, 2018.

A simple, positive story, right?  The NALP materials contain other other facts, figures, and observations that reveal a much more complex market.  However, they can’t be reduced to pithy takeaways that are both accurate and helpful. To truly understand these data, we have to invest quite a bit of additional time and effort.

The four charts below are designed to partially bridge this gap. (Charts can be downloaded on Slideshare.)


Chart 1. Jobs in private practice continue to decline

Drawing upon the NALP press release and select findings, the news reports cited above all emphasize the increase in BigLaw hiring. In Chart 1, the supporting data are inside the orange circle.

Yet, when the Class of 2017 is viewed in a longitudinal context, the most striking feature is the continued decline in the total number of private practice jobs. Granted, jobs are down, at least in part, because the supply of entry-level talent is down.  Some employers hire more when talent is plentiful and cheap. However, it is not accurate to say that law firm hiring has rebounded from the recession. The recession was 10 years ago, yet the number of private practice jobs is lower now than at any time since the beginning of the recession.

Those of us in legal education need to understand why this is happening. See Post 057 (solving difficult problems require accurate understanding of root causes).


Chart 2. “Good news” is produced by fewer grads

As shown in Chart 2, over the last seven years, law school has become a lot less attractive to prospective law students. The class of 2017 had 34,922 graduates, which is the lowest level since 1982.

The higher employment rates for the Class of 2017 are due to smaller classes rather than an increase in the total number of jobs.  The complexity of this job market can be seen in the first paragraph of the Commentary and Analysis written by NALP’s executive director, Jim Leipold:

[Good news:] The employment outcomes findings for members of the Class of 2017 are surprisingly strong. Most notable is a bar passage required employment rate that jumped more than four percentage points from the previous year, and a private practice employment rate that has now increased for six years in a row. [Complexity:] Undergirding the strength of the employment outcomes, however, is a smaller class and not more jobs. For the fourth year in a row the employment rate has been shaped by a smaller number of jobs and a smaller graduating class size. The employment rate has risen because the falloff in the size of the graduating class has been larger than the falloff in the number of jobs secured. Notably, like the two classes that preceded it, this class secured fewer private practice jobs than any class since 1996.

This is important information, but what exactly are we supposed to do with it? It’s great that a higher proportion of students are getting better employment outcomes. But does the continued slide in law firm jobs require some type of collective action or response?  If so, who would make this call and what would they advise?  Unfortunately, we have no ready answers.  This is our conundrum.  Cf. Post 056 (discussing likelihood that law is entering a period when we will need lawyer-leaders to handle very difficult organizational and industry-wide problems).

Based on fall enrollments in 2015-17, we can forecast with reasonable accuracy the graduating classes in 2018-2020. All of them are likely to be smaller than 2017.  Thus, in terms of employment rates, we can expect three more years of “good news.”  We should use that time wisely.


Chart 3.  Relationship between law school debt and lawyer salaries

Chart 3 shows the relationship between law school debt and starting salaries, which are useful proxies for cost and perceptions of future earning potential. Since 2010, average student debt has rapidly outpaced entry-level salaries. This divergence is the simplest explanation for the massive drop-off in law school enrollment.

Fortunately, we are finally at a point where debt loads are headed downward while median salaries are tilting upward. The remaining gap, however, remains very large compared to the early to mid-2000s. Until these lines are brought closer together, those of us in legal education are going to struggle to grow our enrollment. This is very hard work, as it requires increasing the value of legal education — in the eyes of students and employers — without increasing our base costs.  In short, this is a design problem. A good number of law faculty understand this; hence the growing emphasis on innovation. See, e.g., Law School Innovation Index.


Chart 4. BigLaw will not save us

One of the NALP findings latched onto by the legal press was the increase in hiring among 500+ lawyer firms — up 368 jobs, or 8.6% from the prior year.  However, the data in Chart 4 suggest that BigLaw is unlikely to power a recovery for law schools.  Although the number of lawyers working in 500+ lawyer firms has increased significantly over the last 11 years (+36%), associates appear to be waning in importance. We see this through the shrinking proportion new-hires within large law firms.  Why is this happening?

A partial answer is that firms are finding it harder to sustain organic growth. See, e.g., Georgetown Law, “2018 Report on the State of the Legal Market” at 14 (“Since 2008, the overall growth trend for demand for law firm services has (with certain spikes and dips) been essentially flat to negative in every year.”); MacEwen, “It’s [not] The Economy. Stupid,” Adam Smith Esq., Aug. 5, 2018 (showing large drop-off in annual revenue growth after 2008). Because many lawyers and firm managers associate size with safety, growth through mergers and lateral partner hiring has become a dominant strategy.  The idea is to focus on groups of lawyers who can pay their own way in the current fiscal year.

One of the primary consequences of this strategy is that firms are relying less on associates and more on staff attorneys, counsel, and non-equity partners. See Henderson & Parker, “The Diamond Law Firm: A New Model or the Pyramid Unraveling?,” Lawyer Metrics Industry Report No. 1 (2013). First-year associates require higher salaries; more training and supervision; engender greater client pushback; and often leave before the firm recovers recruitment costs. Thus, large firms are finding ways to get by with fewer of them.

The orange trendline in Chart 4 also reveals another factor that is likely impacting entry-level hiring in the 500+ lawyer category: the number of 500+ lawyer firms is increasing.  In 2010, there were 76 firms with 500+ lawyers. By 2016, the number increased to 87.  A year later, it jumped to 91. Indeed, in 2007,  65.5% of the lawyers in the AmLaw 200 worked in 500+ lawyer firms; by 2017, this percentage increased to 75.5%.

Are the largest firms hiring more entry-level lawyers? Or are the mega-firms just taking up a larger share of the total corporate market? The latter trend would explain why entry-level hiring in 500+ lawyer firms is up while the total number of private practice jobs is at a 22-year low.


Conclusion

For many of us working in the legal field, we treat the NALP data as something we passively consume. Every year we do so without much thought or effort.  This is a conditioned response based on several decades of uninterrupted prosperity. In our experience, things have always worked out, so we can count on that pattern to continue.

Yet, the practice of law is changing in very significant ways, primarily because clients are changing how they buy legal services. There will be no shortage of opportunities for lawyers, legal educators, and recent law grads who get out into the field and obtain insight into what these clients really need. Those insights will tell us what to do.

(Charts can be downloaded on Slideshare.)