Is legal operations a discipline or a job within a legal department?  The market just provided an answer.


Last Friday, David Cambria, the Godfather of legal operations, left his secure post at ADM (#46 on the Fortune 500) to become Global Director of Legal Operations at Baker McKenzie.  To be clear, Cambria’s title is not another name for “Chief Operating Officer,” an established role in law firms that focuses on internal cost and efficiency.  This is an outward-facing role designed to attract and cement client relationships.

Per the press release:

Cambria will be responsible for ensuring that the strategies for pricing, legal project management, and other commercial activities are closely matched to increasingly sophisticated client needs and expectations. He brings a unique “voice of the client” to the leadership of Baker McKenzie and will work directly with major clients to both help shape delivery of the Firm’s services and to assist clients in addressing the development of their own operations.

It is hard to predict whether this is the beginning of a trend, or a one-and-done experiment.  It all depends on whether the desired benefits show up within a reasonable period of time. In this instance, there are only two certainties: (1) Cambria is being compensated for the risk, and (2) the Fortune 500 will take him back if the boulder gets too heavy or the mountain gets to steep.

This is also a valuable learning opportunity for everyone else. This is because David Cambria is both an innovator and opinion leader within the legal operations field.  As discussed in the foundational posts on diffusion theory, these attributes, particularly when combined, accelerate adoption.

Cambria’s move threw a wrench into our editorial calendar.  Nonetheless, it was too significant to ignore. This post attempts to answer three questions relevant to this important industry milestone.

1. If legal ops is a discipline, where will it get maximum traction?

“Legal operations is a multidisciplinary field where professionals collaborate to design and build systems to manage legal problems.”  That was my conclusion back in 2015 as I observed three legal innovators — Connie Brenton at NetApp, John Alber at Bryan Cave, and Andrew Sieja at Relativity — all solving similar types of problems, albeit at different points in the supply chain.  See Henderson, “What the Jobs Are,” ABA Journal, Oct. 2015.

A couple of weeks ago, we analyzed the ULX Partners, UnitedLex-DXC, and ElevateNext deals. See Post 053. But in retrospect, one question drove the whole 4,200 word essay: “where will legal operations get maximum traction?”  Is it BigLaw, NewLaw, legal departments, or legaltech?  Several hundred legal innovators with the technical skills to deliver better-faster-cheaper are very interested in the answer. What they long for is a stable, resource-rich environment where they can build the systems that are already in their heads.

Thus, BigLaw tends to drive innovators nuts, as it struggles to play an essentially perfect hand: (1) longstanding relationships with industry-leading clients; (2) a business that requires very little operating capital yet generates significant cash and profits; (3) an established brand that makes it the safe choice against upstart new entrants.  See Post 039 (discussing Innovator’s Dilemma within law firms); Post 053 (discussing psychology that precedes law firm failure); see also MacEwen, TomorrowLand 26 (2017) (discussing the very real possibility that some firms “would rather fail than change”).


NB: This post frames a structural problem from the perspective of organizational clients. For this group of clients, the problem of lagging productivity is leading to market-based responses, including the hiring of David Cambria by a BigLaw firm.  For individual clients in the PeopleLaw sector (roughly one-quarter of the legal market and shrinking), lagging legal productivity manifests itself through self-representation or people failing to seek any type of legal-based solution. See The Decline of the PeopleLaw Sector 037Legal Services and the Consumer Price Index (CPI) (042). In short, these are two distinct problem sets. Improving PeopleLaw is an important topic that we will continue to focus on. Just not today.


There are three contenders to create the new paradigm for organizational clients:

  • Legal departments through more legal operations and in-sourcing;
  • Law firms by skillfully playing their superior hand; or
  • NewLaw, which has data, process, and technology as its core competency but has the challenge of being new and unfamiliar.

Right now, I see no clear winner. Yet, from a human capital perspective, the solution set is the same for all three.

2. Is there is human capital model for legal ops?

Yes.  David Cambria and his legal operations colleagues are “legal integrators.”

Below is a graphic first generated by Bill Mooz and I in the fall of 2015. The occasion was a presentation to a group of legal operations professionals in Chicago led by David Cambria. See Creating Legal Integrators (Sept. 2015).  David was curious about the curriculum of the Tech Lawyer Accelerator (which Mooz founded) and wanted to understand its connection to legal operations. 

The legal integrator model we created contains the DNA of the original partner-associate pyramid.  But it has also moved on, reflecting the types of human capital needed to deliver both bespoke one-to-one legal services and one-to-many systematized/productized legal solutions.

Bespoke lawyers remain at the top of the model.  But is the top more important than the center? The green center portion is where systems are built to optimize cost, quality, and effort. It is also where expert sourcing decisions get made. This requires a skill set that includes not only substantive legal knowledge but systems thinking, statistics, accounting, finance, and technological literacy.  (BTW, there are many allied professionals without law degrees who also thrive in the green zone.)

In this version of the model, I break legal integrators and legal operators into two, with the former excelling at design and strategy and the latter excelling at execution, change management, and continuous improvement.  Integrators and operators are yin and yang to each other. Some professionals have these skill sets in exact equal proportion.  But that is rare. This is why legal operations is much more a team sport than traditional lawyering.

The rarest legal professional, however, is the bespoke lawyer who understands what is happening in the green and why it is crucial to his or her long-term prosperity.  In all likelihood, closing this communication gap will be a substantial part of David Cambria’s new job.

3. What is the law firm strategy that requires the talents of legal integrators?

Several years ago I was hired to give a presentation on the future of the legal profession to an elite AmLaw 25 law firm.  The responsibility of shepherding my presentation fell to a small committee of junior partners.  Although they claimed that my future-oriented observations were interesting, they really wanted to understand the future of their own firm. They had spent a decade focused on making partner and were now playing catch-up. Well, that was a pretty big change order. Yet, I was happy for the stretch assignment and did my best to deliver.

The graphic below is one of the models that came out of that effort.

The key point is that an elite law firm has a choice to make — a choice based on endowments where, for most firms, the dye has already been cast.  When a firm has a top of the pyramid strategy, it is focused on transformative events where (a) the outcome really matters and (b) the C-suite executives don’t want to be second guessed. Top of the pyramid can also apply to clients engaged in ongoing complex financial transactions, particularly when legal fees are rolled into the deal and paid for by third parties. A handful of firms fit the top of the pyramid model, and many more would like to be part of this ultra-elite group. To become a top of the pyramid firm, however, you’ll need a time machine.

An alternate strategy is the traverse the pyramid model.  Firms that traverse the pyramid can handle large complex projects that include sophisticated bespoke lawyering along with a large volume of operational and commoditized work that is connected to it. It is particularly valuable when the legal work is global in nature. General contracting this work is complex and cumbersome.  Thus, clients are willing to play a premium for a law firm to bundle it together. But a premium is not the same as a blank check. Thus, traverse the pyramid firms need to build and maintain sophisticated systems and staffing models.

Baker McKenzie is a credible traverse the pyramid firm, but there are many others. For all of them, the biggest challenge to execution is the large portion of the line partners, and occasionally lawyers in leadership, who struggle to grasp the strategy.  Specifically, the core strategic tenet of this model is that work in the operational and commoditized zones can be re-engineered in ways that improve quality and the client experience while also driving down overall production costs. This is a formula for larger and more stable profit margins. It is also why the traverse the pyramid model requires an investment in legal integrators and operators: they can deliver a “whole product solution,” see Post 024 (discussing power of whole product solutions), that is highly defensible and sticky. Once in place, the barriers to entry are (1) brand, (2) geographic footprint, and (3) the large number of client touch points.

However, when line partners are presented with this strategy, they are often drawn to the tip of the small blue triangle because it signifies bespoke legal services at $900 to $1400 an hour.  Many seem to be unaware that the operational and commodity work can be done at 30-40% profit margin with very little partner oversight and that, from a business perspective, that is a profoundly good thing. Stated another way, the partners seem to want a model that preserves their ability to sell their own time at a premium price. The traverse the pyramid strategy, however, is designed to build a highly profitable legal services business with a moat around it.

Perhaps partners are stuck in this mindset because, for the last generation or two, compensation structures have rewarded revenue, which is easiest to rack up when partners and pricey associates do all the work. Or it may be the craft satisfaction of personally creating something they believe to be perfect.  Regardless, for the Cambria bet to payoff, Cambria needs to overcome this mindset so, when the time comes, he can push more work down the pyramid in ways that delight clients, cement relationships, and improve the firm’s long-term financial prospects.

Endgame

One of the core insights of the organizational innovation posts, see Posts 015017, is that, even in law firms, size is correlated with innovation. This is because size brings with it resources, diversity of talent, and more opportunities to run trials, etc.  On balance, these benefits tend to outweigh the challenges of implementation within a larger firm, albeit diffusion theory can also help with the latter. See Post 017 (management roles need to switch between initiation and implementation).

It is hard to believe, but large firms are truly capital constrained. See Post 053. However, if all a firm can muster is 1-2% of revenues for innovation efforts, $2.7 billion (Baker McKenzie’s current revenues) yields a lot more than $350 million (the revenue of the firm currently ranked #100 in the AmLaw league tables).  This is why David Cambria went to Baker McKenzie — the strategy just might work.

What’s next? See Studying leadership before the big test, Part I (056)

Photo by The Climate Reality Project on Unsplash

Elite, one-percenter lawyers are an easy group to vilify, especially from afar. Change agents and disruptors alike need to resist the temptation.  


Conference season is in full swing, and legal professionals of varying titles are convening in cities all over the world. Some conferences coalesce around themes, but most events target functional roles both new and old. As more and different roles proliferate around the practice and business of law, some spheres collide or merge (law librarians + competitive intelligence, pricing + LPM, etc.)

These days, everyone – managing partners, the law firm C-suite, the general counsel, legal ops, pricing professionals, legal technologists, marketing, marketing technologists – has a conference dedicated to showing them how to navigate the future.  Everyone is meeting, learning, networking, and engaging in dialogue in gatherings of every size, shape and flavor.

Everyone, except the working partner.

Failure to appear ⇒ default judgment

The recurring conference call is a feature of modern professional life. Often, one or more people are late, giving rise to this well-worn piece of office humor: A late arrival offers an apology that falls somewhere between perfunctory and profuse. In response, someone jests, “No worries… we assigned you all the work.”

(How funny or good-natured this actually turns out be depends on a number of factors: the relative importance and current status of the project, personal relationships and professional reputations of those involved, and the varying levels of good feelings or ill will that pervade the team.)

A similar social dynamic plays out at conferences about the legal industry. Whether as a function of exclusion or absenteeism, working partners are not in the room where it happens.

Keynote speakers often sprinkle in one or two jokes about lawyerly tendencies for the easy laugh; these jokes tend to be mild and good-natured. Lawyers are incorrigible! 😂

Panel speakers tell stories that feature some fresh tale of folly, along with the heroics required to overcome their challenge. Knowing heads shake and nod as sympathy flutters across the room. Near-strangers find solidarity in genteel mockery. Lawyers are clueless!! 🙄🤦🏻‍♀️

Attendees gather in small groups to vent their latest frustrations in hushed, conspiratorial tones, seeking advice from old colleagues and new friends alike. These exchanges tend to be more frank and more angsty; pearl-clutching and NSFW language are both featured in equal measure. Lawyers are 😤 insufferable, 😠 arrogant, 😡 out of touch, 🤬 overpaid!!! 💢

There is also solidarity in shared vitriol, but it becomes weaponized, and the metaphorical crosshairs are often fixed on people who aren’t in the room.

No worries… we assigned you all the blame. 

So where are the partners?

The Altman Weil surveys of law firm leaders and Chief Legal Officers always makes for interesting reading, but the best insights come from tracking trends over time.

A key development in recent years has been the waning confidence of law firm leaders. It’s been many years since managing partners received the “lawpocalypse now” memo, and most firm leaders are trying their best to adapt to a changing market. Over the past few years, however, they’ve admitted openly that they are having a much harder time than anticipated, particularly in creating the same awareness among their partners.

In the most recent Law Firms in Transition survey, 69% of managing partners reported not doing more to change service delivery because “partners resist most change efforts”:

Click to enlarge

This is not necessarily because they are stubborn, arrogant, or incurious. Big Law partners are not exactly oblivious: in fact, most of them are stressed and worried about an increasingly uncertain future.

But most law firm partners are phenomenally busy, and they spend most of their days under an unbelievable amount of pressure. Many of them put in grueling hours on client work and travel. In many firms, even senior partners receive less administrative support than ever. If they attend an event, it is usually an industry affair for networking and business development. They prioritize these tasks because their standing within the firm depends on it, and because that position seems less secure with each passing year.

Most law firm partners are not reading books about the future of law or legal service innovation, because there are people at the firm who are paid to do that. They are not following breaking news about ALSPs, which are growing fast but still comprise less than 1% of the legal services market. They are not following what the Big 4 are doing in high-volume, low-margin areas that have no relation to their own area of practice. Mostly, they are focused on doing what they know.

And they are likely to continue down that path until they hear from the only stakeholder that matters to them: their own clients.

There are many echo chambers, but this one is mine

The last decade has spurred greater interest in dialogue about the future of law. This is, on balance, a good thing: the number and quality of communication channels positively influences the rate of innovations. See Post 008 (explaining the key variables that determine rate of adoption).

In 2018, the legal industry has more communication channels than we did even five years ago. Some are high in quality. I worry, however, that our communication channels are splintering the industry into sharper and more brittle factions.

Let me give some context for my concern. The legal industry has been under enormous pressure since the Great Recession – this we all know. Most professionals working in legal businesses are suffering from change fatigue. The dialogue, in short, is getting a bit more heated and a lot more cynical.

Take the ongoing debate over the word “non-lawyer“: it is complicated because it’s symptomatic of the long-simmering resentment of allied professionals. Professionalization of a new role is a difficult undertaking. Pioneers must build content to standardize language and practices in tandem with a community of practice that will accept and uphold those standards. But the most taxing work, in my view, is the murkier challenge of building legitimacy and market acceptance – and in this instance, that market has been comprised of lawyers.

Legal marketers, project managers, pricing officers, legal technologists, and legal ops professionals all have stories to tell about the bad behavior of lawyers. In these war stories, lawyers almost always fail to recognize the value or respect the legitimacy of other professions. The “non-lawyer” grievance neatly and implicitly captures the indignation and resentment of the marginalized.

Against this backdrop, it makes sense why change agents seek out forums filled with like-minded people who “just get it.” Conferences fit the bill: “something of a ‘high school reunion’ for professionals who have been in the change management game for some time.” Strom, “The Law Firm Disrupted: In Heavyweight Bout, It’s Clients v. Law Firms,” Law.com, May 18, 2018.

At their best, conferences function as important forums for continuing education and professional development – two things that are desperately needed for the legal industry to keep pace with the markets it serves. Apart from content and programming, the social aspect is also important. Professionals, especially those in emerging roles, often need the support of a community of peers and mentors that share similar challenges in similar contexts.

A place to share stories and perspectives is important and valuable, but much less so when the gathered group is homogenous in viewpoint and attitude – and not at all when the talk turns to complaining and commiseration. We are all subject to the temptation of groupthink because it is much more pleasant to hear our own worldview affirmed and to be told that we are fighting the good fight.

It all becomes a bit problematic, however, when we fixate on a common enemy who also happens to be a constituent and stakeholder in the very industry we want to transform. Gentle mockery can devolve very quickly into meanness and schadenfreude when talking about people who are not in the room. Any misperceptions or knowledge gaps we might have about their challenges and constraints will persist, while repetition makes us more confident in what we believe.

Anonymous shade and public diatribes

A couple of years ago, Casey Flaherty wrote a book for corporate counsel called Unless You Ask. It is an excellent and comprehensive guidebook designed to help in-house counsel drive structured dialogue with their firms on how they might create or provide greater value. I have read the entirety and I highly recommend it, but that’s not why I bring it up. I bring it up because the origin story of the book is fairly indicative of the current state of “dialogue” in our industry.

For many years, Altman Weil posed a series of questions to both law firm leaders and Chief Legal Officers:

  • How much pressure are corporations really putting on law firms to change the value proposition in legal service delivery?
  • How serious are law firms about changing their service delivery model to provide greater value (as opposed to simply cutting costs)?

These questions provided reliable fodder to deride firms. Here is a side-by-side comparison of how each group rated the seriousness of firm efforts to change:

Click to enlarge / 2018 CLO survey not yet released

There are two basic points of interest in the chart above. The first is glaring and has been noted widely: there is a material perception gap separating the client and firm viewpoints. In 2018, this gap (based on the average) amounted to two full points on an 11-point scale, meaning law firm leaders consistently graded themselves more generously than clients did over the same period.

The second point of interest is that more clients appear to be growing disenchanted with law firm commitment to change. In 2012, one in ten CLOs rated law firms as “not serious at all”; by 2017, that proportion had grown to one in six. The clients at the very edges of dissatisfaction with the status quo are most likely to articulate pain points and unmet needs and to actively seek new solutions from a wider range of providers. These clients are also likely to self-identify and coalesce into like-minded groups in forums like ACC and CLOC to facilitate knowledge sharing across companies.

Often, it is this vocal minority that make up the early markets: they are the innovators and early adopters who are very often featured in conference keynotes and panels and interviewed and featured by legal publications. Keep this group in mind — they will feature in this discussion again.

In 2015, Altman Weil upped the stakes by asking firm leaders why they weren’t “doing more to change,” and firm leaders responded with stunning candor:

(Cue the 💢 uproar 💢 of indignant disbelief.) 

For most pundits, the top two responses provided proof positive that Big Law was doomed to 🧐🧐🧐 their way to certain extinction. Law firms were roundly excoriated.

Over the following year, Casey wrote his book because he understood something worth restating here today: most clients really do not ask. There are a handful of clients who give very good talks at conferences about the change imperative facing us all. Others give extensive interviews explaining the broad challenges of the industry. Most of this group is in the vocal minority.

From time to time, a scathing denunciation of firm behavior by a client might be quoted with attribution, but the veneer of civility ensures that no names are mentioned. In other instances, clients will register their displeasure through some strongly worded but anonymous comments to reporters about things like associate compensation. For the most part, clients continue to give tepid grades to firms in anonymous surveys and scorecards.

But by and large, the majority of clients aren’t holding direct conversations with their relationship partners at their primary firms about what they specifically want. This much has been apparent for years to close readers of the Altman Weil survey: below is another side-by-side view of how CLOs and law firm leaders have answered the question about corporate pressure on law firms to change.

Click to enlarge / Question not featured in 2018

Constructive dialogue must happen at conferences and at your place of work

Let me be clear. The problem isn’t that clients and/or change agents sometimes say unkind things about lawyers behind their backs at conferences. The real issue is that we need to have more tough conversations in our own place of work with our own colleagues, clients, suppliers, and stakeholders.

In two positive examples, constructive dialogue happened in spades at recent conferences:

  • “Whose Fault Is It?” at LMA P3 Practice Innovation Conference
  • “Transforming the Client-Firm Relationship” at the ACC Legal Ops Conference:

The first was framed as a gladiatorial battle but progressed as a debate, pitting firms against clients to decide who is to blame for the glacial pace of progress in pricing innovation. The second was less controversial in format, with a panel of speakers leading table discussions on real-world scenarios and problems that arise in client-firm relationships. Both of them were designed to feature multiple viewpoints, from law firms as well as law departments. Panelists spoke frankly about their constraints and their frustrations, pushing attendees to consider not only the familiar perspectives of their peers but also the unfamiliar challenges facing their counterparts and stakeholders.

Constructive does not mean pleasant. However polite or well-intended, disingenuous consensus is ultimately not constructive. Difficult dialogue may be stressful but festering resentment is usually toxic. Meaningful change cannot happen with some collision of differing opinions, but candor need not be feared if we work to preserve civility.

With those points in mind, we need to include working partners in the dialogue about legal services innovation. Too many change agents within law firms go around in circles without understanding why partners resist change. Too many pundits dogpile on lawyers for arrogance or avarice without considering context.

It is a competitive disadvantage for any business to believe its customers or competitors are stupid or crazy. Firstly, all people sense antagonism, learn to anticipate it and become more defensive over time. Secondly, the assumption that some stakeholders behave in a way that eludes our understanding makes our own thinking lazy: when we see people as incomprehensible we stop trying to understand them. Lastly and most importantly, it is nearly impossible to change anyone’s mind while dismissing their worldview, thinking lowly of them, and sort-of-semi-secretly wanting to see them punished.


As frustrated as we might be with the pace of change, the industry is making progress — and that progress happens in actual conversations that take place behind closed doors. It might not be visible on Twitter or in headlines, but more clients are asking, new entrants continue to experiment, and law firm leaders are still trying.

Enjoy the conference season. When you get back to the office, though, I hope you will try a bit harder to empathize with the people who weren’t in the room.

What’s next? See The Godfather just lateraled to a law firm (055)


Are you a mid-market firm worried about the cost and risk of innovation? UnitedLex is offering a turn-key solution.


By any objective standards, equity partners working in AmLaw 200 firms are rich. Even firms at the lower end of the profitability scale are filled with 1-percenters ($481,000+ per year). So why, then, do law firm leaders complain about lack of access to capital to finance much needed law firm innovations?

Based on recent news, we can ask the question another way: Why do we need a entity like UnitedLex’s ULX Partners to bear risk for a firm like LeClairRyan (325 lawyers, 25 offices)? See Rozen, “UnitedLex and LeClairRyan Announce Innovative New Law Venture,” Law.com, June 13, 2018.

Many of us struggle to answer this question, at least succinctly, because we start with the assumption that large law firms are unified businesses. But that’s not quite right.  Law firms have revenues because partners are out there hustling work, typically by selling a combination of personal expertise and responsiveness. Partners who have built and managed a decent-sized practice know they need IT, office space, associates, support staff, and even marketing, if only to respond to RFPs.  Yet, partner books are often an idiosyncratic mash of clients that vary widely by industry, price sensitivity, legal spend, and appetite for change. See Post 048 (clients vary by size and adopter type, making generalizations hard); Post 013 (same).

At a practical level, this means that firm leaders struggle to explain to partners why a meaningful slice of profit needs to finance “innovations” that are (a) relevant to only a subset of clients, and (b) require partners to learn and change. If law firm leaders push the innovation envelope too far, big-producing partners might leave. So here is the answer to our question: Law firms need capital because their own partners are reluctant to pony up, at least in the quantity needed to compete with VC- and PE-backed NewLaw companies.

Despite these challenges, a surprising number of law firms are going down the innovation road–~10-15% of the AmLaw 200.  If I were a law firm leader who had successfully sold such a plan to my partners, I would be worried that the P3 professionals (pricing, project management, process improvement) we worked so hard to find and train will get poached by competitors. Cf. Henderson & Zorn, “The Most Prized Lateral Hire of 2015 Wasn’t a Partner,” AmLaw Daily, Feb. 1, 2016 (discussing poaching of four-person P3 team from BLP to Herbert Smith Freehills). Of course, if I failed to sell such a plan, I would be worried that I was presiding over a hotel for lawyers (a two-star hotel at that).

These are very serious challenges to manage. It’s also the problem that ULX Partners is designed to solve.

Deep bench

This post is being written on the last day of the ACC Legal Ops conference in Chicago.  During one of the sessions earlier this week, I heard a legal department ops professional advise his peers that “it’s a good idea to engage with the law firms’ price and project management professionals” because “these folks are also doing legal ops, but from the law firm side.”  Others in the room agreed. This is evidence that a true sea change is taking hold.

Yet, I have been a regular attendee at these ops conferences, and often the most expert panelists work at NewLaw providers, with UnitedLex and Elevate typically jockeying for the pole position. These companies have the largest and deepest bench of seasoned legal ops professionals. And because these companies are not law firms, lawyers and allied professionals work together as co-equals in terms of status, bonus, and equity. Consistent with Clayton Christiansen’s disruptive innovation, these companies started with rebar (e-discovery) but are now climbing the value ladder toward high-grade steel (strategic work on par with bespoke practitioners).

For many years, CEO Dan Reed has been hinting that UnitedLex is on the path to become something like Accenture, but pointed at the corporate legal services market. To made that a reality, however, UnitedLex has to reconfigure (disrupt or dis-intermediate are too strong a word) the traditional client-law firm relationship.  BigLaw has tremendously valuable client relationships. However, much to the disappointment and frustration of the legaltech world, those relationships are almost never used to introduce clients to innovation by third-party companies.  See Post 025 (discussing law firms as failed distribution channels for legaltech innovators). Thus, most NewLaw providers focus primarily if not exclusively on legal departments.

Why do we need a legal structure like ULX Partners?

The short answer is that partners need a way to co-venture with highly talented allied professionals without running afoul of Rule 5.4, which prohibits lawyers and nonlawyers from sharing ownership interests in a business that is engaged in the practice of law.

The figures that follow are designed to show how 5.4 shapes, but hardly prevents, how capital finds opportunity in the legal market. We start with Figure 1, which reflects the familiar schema that is in our heads.  If we innovate, we are innovating to change this baseline model.  By the way, the baseline model is much more powerful than some might realize, as it reflects the status quo. More on that latter.  Figure 2 reflects a configuration that is starting to take shape. If you were at the ACC Legal Ops conference or at CLOC, this is likely how you view the legal market.

Figure 3 adds in NewLaw’s current point of entry.  Note that NewLaw has lots of lawyers along with allied professionals.  Because its core business is legal ops / P3, NewLaw invests a lot in vetting technology, building sophisticated workflows, and measuring with data. Most legal departments and law firms can’t keep up with this level of sophistication. NewLaw, however, can’t engage in the practice of law. So, as a workaround, lawyers — usually in purple but sometimes in green — have to “supervise” them.

Figure 4 shows what Accenture’s legal vertical would look like but for Rule 5.4.

Thus, Dan Reed and others need a workaround.  Figure 5 is a depiction of the ULX Partners configuration.

The UnitedLex-LeClairRyan initiative will conduct its business through an entity called ULX Partners, LLC, a Delaware Limited Liability Company with several subunits organized other the laws of Florida, California, Massachusetts, Virginia, and the District of Company.  This structure has surely been set up so that no ULX Partner revenue accrues from the practice of law–i.e., no ULX employee will be signing pleadings, making appearance on behalf of clients in court, writing opinion letters, or negotiating with regulators at the FTC, DOJ, or EPA, etc. But absolutely every other activity that occurs within a law firm, including all the pre-work done by associates, staff attorneys, and other professionals before the partner signs off, can potentially be done better, faster, and cheaper inside ULX Partners.

UnitedLex will be the majority owners. LeClairRyan will be a minority shareholder, with ULX Partners set up to take on additional member firms.  The law partners will continue to manage client relationships and perform their usual work. In the meantime, ULX Partners can drive lower-cost, higher-margin engagements. To make this as concrete as possible, about 300 employees of LeClairRyan will be “re-badged” as employees of ULX Partners. Instead of issuing paychecks to these folks, LeClairRyan will pay a service fee to ULX. If this workforce gets supercharged through UnitedLex’s superior legal ops capabilities, LeClairRyan will share in the upside as a ULX owner.

Capitalists and regulators

The configurations above (and in the appendix below) were predicted back in 2010 by Nick Baughan, a managing member of Marks Baughan & Co, an investment bank with a specialization in legaltech.

‘If the law firms themselves can’t have outside investors, the market will continue to chip away at every part of a law firm that is not the pure provision of legal advice,’ says Nick Baughan, a managing member of investment banking firm Marks Baughan & Co., with offices in Conshohocken, Pa., and London. ‘Anything that can be provided legally by a third party will be.’

Rose, “Law, the Investment,” ABA Journal, Sept. 2010 (also quoting the late Prof. Larry Ribstein, “The question used to be: ‘Will the ABA change Rule 5.4?’ … The question now is, ‘Who cares?’”). For the last decade or so, Baughan’s firm has been running a large proportion of the major legaltech deals. So if this feels new to you or me, it’s old news to the professional investors tracking the legal sector.

Now that the market has shifted in a way that could really disrupt traditional law practice, it’s possible state bar regulators will interject themselves into these more aggressive NewLaw structures. This has long been a risk factor in NewLaw PPMs.

That said, regulators will have to work very hard to find a public interest rationale in Rule 5.4 or Rule 5.5 (pertaining to the unauthorized practice of law) that will contain NewLaw’s growth. These rules are grounded in a presumption of asymmetric information between lawyers and unsophisticated clients. If knowledge is asymmetric, clients have little choice but to trust lawyers. Thus, under this policy rationale, lawyers as a group must be completely independent. Obviously, this asymmetry does not exist in large corporations with legal departments comprised of former BigLaw lawyers.  As a result, protectionist motives dressed up as consumer protection won’t cut it.  Ironically, NewLaw will have no trouble finding BigLaw lawyers willing to take their case.

All of this, however, may be premature, as ULX Partners (or related models) may not be a sufficiently large or imminent threat. As noted by Jae Um, “legal innovation is an extreme sport.” Post 051.

Why would a law firm join ULX Partners?

Well, I can think of five reasons, with higher profits being the least important.

  1. More Profit.  UnitedLex CEO Dan Reed claims that ULX Partners will increase partner profits by 5-15%. See Strom, “Will LeClairRyan’s UnitedLex Deal Be the Accelerant Big Law Innovation Needs?“, June 13, 2018. This is certainly possible, albeit it depends upon the level of internal adoption by the lawyers inside ULX member firms. For this to have been the primary driver of the deal, LeClairRyan partners would have made business judgments based on models of future cash flows and profit margins. This is too much math and too much uncertainty for the typical line partner. I don’t buy it. Profit is, at best, icing on something else.
  2. Cost of innovation efforts. A credible legal ops team inside a major law firm is going to cost between 1-2% of firm revenues. There is a lot of talk that such teams will productize firm offerings and become freestanding profit centers. A few have, see Post 039 (Chapman and Cutler), and more will.  But not in the first year or two.  Further, there are indirect, but extremely significant, costs associated with training and change management. Through ULX Partners, UnitedLex bears the start-up costs and associated headaches.
  3. Risk of slow or uneven adoption.  If a firm built its own legal ops team and did everything right, clients may not adopt at the rate and volume needed for a fair return. Last week, I heard a innovation officer at an AmLaw 200 firm say that his firm took the ACC’s Value Challenge seriously, making major investment in people, process, technology, and data.  When shown the output, however, many clients continue to just ask for a fee discount. Cf Post 048 (corporate clients still in early adopter stage). Innovation requires clients to (a) think, and (b) think in a different way. Not all clients are ready. ULX Partners off-loads this risk to UnitedLex.
  4. Risk of innovation failure. A firm could expend money on its own legal ops team only to get its talent poached. Alternatively, the firm leadership could underinvest in change management, resulting in faulty execution and plummeting firm morale. “For god sakes, can’t we just sell time?”
  5. Focus on the practice of law.  Partners excel at counseling clients, dispensing legal advice, advocating, negotiating, and developing clever solutions to knotty problems.  In the past, they have been paid well for this work.  If keeping it requires them to bundle in NewLaw features, they would be most grateful for low-cost, non-compulsory solutions that leave them in control of their own practice. Cf. Post 040 (describing Flaherty’s “Lawyer Theory of Value”). Most partners want to reserve their white space for things related to the practice of law. Let UnitedLex worry about everything else.

These are five very compelling reasons to ink a deal with UnitedLex.  But will other firms follow suit?  And if so, when?  The answer to these questions is complicated.

Why did LeClairRyan go first?

LeClairRyan is not your typical AmLaw200 firm.  It was founded in the mid-1980s by Gary LeClair, who specializes in venture capital businesses, and Dennis Ryan, a now-retired tax lawyer. So it is a “young” AmLaw 200 firm. Gary stepped down as chairman in 2015. But during his tenure, he was one of the most visionary and innovative law firm leaders I have ever met.  He is also a person of exceptional discipline and character who attracts a large client following.  Thus, Gary always had the respect of his partners even if only a few had the time and patience to digest the full sweep of his futuristic thinking.

One of the consequences of a decade or two of give-and-take with Gary is that LeClairRyan partners understand the shifting economics of modern practice, at least compared to other AmLaw 200 lawyers. Under LeClair, the firm did a large deal with UnitedLex around the firm’s e-discovery practice. See Cassens Weiss, “LeClairRyan opens ‘legal solutions center’ in collaboration with tech company,” ABA Journal, Nov. 1, 2013.  The current CEO of LeClairRyan is Erik Gustafson, a litigator who formerly served as head of the firm’s litigation practice. For the five reasons listed above, plus a longstanding relationship of trust with UnitedLex, Erik and the firm’s executive committee were able to make business decision on par with a corporate client in a highly competitive sink-or-swim business environment.

What firms will go next?

I suspect and hope that UnitedLex gets a few other takers in the relative near term. (They will get a lot of meeting with law firms, primarily to shake them down for competitive intelligence. David Perla has an obscene term to describe this ritual. Fill in the blank: grin ____ .)

The most receptive firms would be in the NLJ 100 to 300 range with a diverse range of practices (i.e., not specialized). These firms would also need an innovative-visionary-realistic leadership team and partners who want to stay middle-market for reasons related to clients and culture.  Suffice it to say, this is not a long list.  If, three or four years from now, ULX member firms get their promised 5-15% return and praise from clients regarding service delivery, UnitedLex may get the early majority to tip, see Post 004, setting off rapid adoption in the rest of the social system. Dan Reed and his senior leadership team will be declared geniuses who changed everything.  And they will deserve it.

However, this could play out in a different way. The most lucid account of BigLaw’s possible futures can be found in TomorrowLand by Bruce MacEwen.  First among the eight competing scenarios for how the market might evolve is Chapter I, “Nothing to see here, folks; move along.” Its core point is that all noise from the blogosphere and legal press may be nothing more than Chicken Little. Through the passage of time, BigLaw proves itself endurable. If Chapter I is right, doing nothing is the wisest strategy.

Chapter II is titled, “Lawyer Psychology and the Partnership Structure Win.”  In this scenario, law firms also do nothing. The difference is that “outside forces impose urgent requirements that [firms] change, but they simply cannot bring themselves to do so. This scenario, in short, is populated by firms that would rather fail than change” (p. 26).

This is a funny line.  But I have spent enough time around large firm lawyers to understand how this would play out. In fact, it’s a short walk to failure:

  • Should we build out our own innovation team? “No, there is too much upfront expense and risk.”
  • Should we do a deal with UnitedLex? “No, there is too much brand risk.”
  • Can we at least merge with another firm so we can get some economies of scale to grapple with innovation? Cf. Post 016 (size associated with greater organizational innovation). “No, we need to protect our unique firm culture.”
  • Well, more of our clients are clamoring for the type of solutions offered by NewLaw and our innovative peer firms. What should we do?  Partner 1: “I don’t care because I’m retiring.” Partner 2: “I don’t care because I’m lateraling to a more innovative firm.” Partner 3: “I knew this would happen.”

Perhaps this is what game theory would predict.  I think the ranks of the NLJ 350 are going to get thinned out, either through planned mergers, rescue mergers, or run-on-the-bank implosions. But lawyers with their own books of business will never miss a meal.

The UnitedLex-DXC Deal

It is important to remember that UnitedLex is maneuvering on several fronts. In addition to its current point of entry (Figure 3) and ULX Partners (Figure 5), it recently launched a deal with DXC, a large information technology and professionals service firm. See SenGupta, “In-house legal teams take the lead on speed and spending,” FT, Dec. 11, 2017; Orum Hernández, “UnitedLex to Support Bulk of DXC Technology’s In-House Department,” Corp. Counsel, Dec. 5, 2017.

DXC is the product of a merger between Computer Sciences Corporation (CSC) and the Enterprise Services business of Hewlett Packard Enterprise (HPE). The new company has roughly $26 billion in annual revenues, which will eventually place it in the top quarter of the Fortune 500.

In the post-merger company, a portion of the lawyers and staff from CSC and HPE legal departments were re-badged as UnitedLex employees (and others were laid off). According to the press release, UnitedLex now “deploys more than 250 senior attorneys, contract and commercial professionals, engineers, and other experts in support of DXC around the globe.”  Interestingly, AdvanceLaw is another part of this deal, handling the selection and management of DXC’s panel of outside law firms. See Sprouls, “Welcome to Legal 2.0,” Modern Counsel, Dec. 13, 2017. UnitedLex projects a 30% cost savings along with greater price certainty. Other anticipated benefits include a bump in quality and transparency.

Figure 6 shows the UnitedLex-DXC configuration, which is yet another Rule 5.4 workaround.

DXC’s general counsel, Bill Deckelman, believes that the sourcing and management system they have put together is “Legal 2.0.”

Last week, I attended a plenary at the ACC Legal Ops meeting that included Deckelman along with the GCs of Walmart, Medtronics, and Chicago Public Media (who had previously worked at Motorola Mobility). After Deckelman explained the new platform with UnitedLex, one of the GCs expressed tremendous skepticism that any cost saving would be worth the risk. Her point was that lawyerly judgment requires business context, and that context is made more attenuated through such aggressive outsourcing. (The other two GCs are building out a mix Figure 2 and Figure 3 models, so they listened with interest.)

What the skeptical GC did not grasp, however, is that DXC is a professional services firm whose core business is the sale and execution of outsourced solutions. DXC has decided to eat its own cooking.  Further, although most GC’s are anxious to protect and preserve their headcount — because headcount equates with status and power in most corporate environments — operational legal work is not core to any business with the exception of insurance. The last 20 years have been characterized by an in-sourcing binge of legal work. See Post 003 (graphing growth). The next 20 will be focused on outsourcing to NewLaw or innovative AmLaw200 firms.  Either way, UnitedLex wins. See Figure 5 (ULX Partners); Figure 6 (UnitedLex-DXC). The timing, however, may still be an irritant to Dan Reed and many others.

Still a very slow bake

Folks, I am going to make a point grounded in diffusion theory.  But this puts everything into full perspective and is arguably the most important point in a very long post. Sorry, it had to come last.

For a moment, consider the Figure 1 baseline model.

Each one of the lawyers in purple and green has a view on how things are going and what needs to be changed. In a corporation, the legal budget (in-house and outside counsel) runs around .3% of revenues with variations by industry. See Henderson & Parker, “Your Firm’s Place in the Legal Market,” American Lawyer, Dec. 2015. Is that too much money?  Well, are we talking a relatively simple thin-margin business (e.g., transportation or retail), or a complex business involving IP and extensive regulation (telecom)? A lawyer content with the status quo can spin a story of risk best managed by a big in-house team and/or elite outside counsel. How many CEOs or CFOs can see through the law-is-a-black-art handwaving? Probably not many, though their ranks are growing as they compare notes while socializing.

Granted, agency costs are not the full story. Quite a bit of change is driven by the desires and preferences of innovator/early adopter lawyers (on both the client and law firm sides). It’s just that actual client urgency, and thus law firm urgency, is far from a given. It is also distributed unevenly and somewhat randomly.

Now, consider the UnitedLex configurations (Figures 3, 5, 6) in light of the perceived innovation attributes of the Rogers rate of adoption model in Post 008 (five factors explain 49-87% of rate of adoption). See also Post 011 (slow versus fast innovations).

  • Relative Advantage. It really depends on the intensity of pressure placed on legal departments. Exogenous forces can help, as Pangea3 and Axiom were dramatically aided by the 2008 financial crisis. See Post 032 (Pangea3); Post 036 (Axiom). Pressure is steadily increasing — Richard Susskind’s “more-for-less” challenge — but not necessarily on the timetable of VC and PE investors.
  • Cultural Compatibility. NewLaw scores low on compatibility, albeit crossover at CLOC and ACC are slowly changing that. UnitedLex and others need to continue the basic blocking and tackling. Theses are the “efforts of change agents,” which is an important rate-of-adoption factor. See Post 008 (reviewing full model, including change agents); Post 020 (going deep on change agents).
  • Complexity. Very complex. UnitedLex is not offering a smartphone app. This slows adoption.
  • Trialability. Not really. A trial on low stakes work is dismissed as not a real test. The really transformative stuff requires a commitment + effort + time. The client must believe in reason, data, and the experience of other industries. This slows adoption.
  • Observability. Really hard to do.  I have done site visits and web/conference demos and have been impressed. But that still takes a lot of effort for potential clients. Client testimonials can help here, but are they from opinion leaders? See Post 020 (opinion leaders needed to tip early majority). DXC and LeClairRyan don’t fit that bill, as they are innovator/early adopters. Cf. Post 052 (discussing need of right types of reference clients for pragmatist mainstream market). Higher PPP by itself won’t do it, as the causal relation will be contested.

In summary, ULX Partners (and the UnitedLex-DXC model) appears to be, at best, a slow innovation. See Post 011 (fast versus slow innovations).  UnitedLex is competing against in-house legal ops and more innovative law firms, see Figure 2, which are (a) more culturally compatible and (b) require less complex changes in how the work gets done. For some clients, in the short to medium-term at least, these factors may weigh heavier than lower cost and higher quality. Remember these adoption decisions are made by groups of lawyers. All day long, collective adoption decisions impede the diffusion of valuable innovations. See Post 008 (basic model); Post 048 (comparing individual and corporate markets based on type of adoption decision). This is why leadership is so crucial — to serve as a counterweight to paralysis-by-analysis so common among lawyers.

Lawyers might confuse slow change with no change.  But they are different. Further, to benefit from slow change, you might need to act very soon in relatively significant ways lest the door of opportunity permanently close. One can’t put off change for a decade and then, when the heat gets unbearable, change overnight.

Appendix on ElevateNext

ElevateNext appears to be a cross between the two UnitedLex models. Basically, most of the legal department functions, including outside counsel management, are being moved to ElevateNext, a law firm that will be very tightly integrated with Elevate Services. The client in this case is Univar, a global chemical company currently ranked #349 in the Fortune 500.

Under this configuration, those practicing law in ElevateNext have best-in-class process, technology, and staffing options.  This effort is being engineered by Univar GC Jeff Carr, who is famous in in-house circles for his ACES model and his excellent track record at FMC Technologies, see, e.g., Davis, “Playing with ACES,” ABA Journal, Oct. 7, 2009. In fact, this opportunity got Jeff to un-retire. Thus, ElevateNext will be highly incentivized to optimize their use of Elevate legal ops functions. Also, when Univar needs the specialized expertise of a law firm, the firm will enter into an ACR with Univar, but ElevateNext lawyers (i.e., another law firm) will, in most cases, manage them. (By the way, the DNA here descends from Mark Cohen and Clearspire.)

Below is the ElevateNext configuration.

The analysis on the UnitedLex models applies wholesale to ElevateNext.  Jeff Carr is a thought leader, but he is not an opinion leader that triggers the early majority to follow. Instead, they watch with interest, as happened with the ACC Value Challenge. All of this will take longer than reason or self-interest would suggest.

What’s next?  See BigLaw partners aren’t dumb: they are just not in the room (054)


The legal industry wants more innovation. The missing ingredient is strong leadership.


Several years ago, a good friend threw me to the lions, though that was not his intent.

My friend, who works in legaltech, asked me to show up at the headquarters of a Fortune 100 company to present some prototypes I had developed on giving feedback to law firms.  Cost pressures were rolling downhill to the legal department.  Thus, in an effort to better manage costs, the senior leadership winnowed their outside law firms to a panel of preferred providers.  In theory, the firms were supposed to work cooperatively with each other to deliver world-class quality within a large predefined budget.

From a distance, this all sounded innovative. But up close, implementation was a challenge. The only management tool was an annual rating system that measured law firms on a 1 to 5 scale (1 = poor, 5 = excellent). Because performance was aggregated across dozens of lawyers and dozens of matters, the narrative comments were too general and lacking in context to be helpful. Further, all the quantitative scores were clustered in the 4.8 to 4.9 range, making them useless for making merit-based adjustments.  Indeed, if in-house lawyers gave scores any lower, they’d be tacitly admitting a problem with their own oversight.

I had approximately 90 minutes to present my prototype to a room full of BigLaw relationship partners.  Basically, my proposal was to have in-house counsel complete a monthly survey tool for each significant matter they were managing (a 10 to 30-minute commitment per lawyer who managed outside counsel). In turn, the results would roll up to a centralized knowledge management system that would generate practice group, firm, and legal department-level reports.

Although the proposed prototype required the in-house lawyers to do all the work to generate the feedback, the law firm partners disliked everything they heard, arguing that the work to review the feedback would be burdensome and counterproductive. One especially vociferous partner remarked, “If there’s a problem, I’d rather have a phone call.” He would not concede that there was any value to timely bucketing specific examples of good and bad behaviors, nor that the resulting data could provide a roadmap to help the client and create a factual basis for higher fees.

As I was getting pummeled by the BigLaw partners, the in-house lawyers looked on in silence.  And in hindsight, I really don’t blame them.  They, like me, were learning the depth of the opposition to systematic measurement of performance.  It would have been a different dynamic if the general counsel, who operated at a level above these lawyers and was not supervising this initiative, had communicated that the company was going to use a feedback system to better manage millions in legal spend and that the purpose of this meeting was not to question the premise, but collaborate on implementation.

At this juncture in my career, I had not witnessed many examples of strong and decisive leadership among lawyers and thus did not appreciate how essential it was to organizational progress.  Over the next several years, however, I began to see the pattern.

Who should run the feedback process?

A few years later, in December of 2014, I spent the afternoon with two law firm insiders who were in charge of strategic initiatives at their respective firms.  Both believed in the importance of client feedback to not only enhance the quality of service but also deepen relationships with clients and build a path to more meaningful and sustainable growth.  Yet, they expressed frustration at its limited value to drive firm-wide or industry-level change.

Here’s why.  Imagine a large corporate client that uses 20 outside law firms.  In most cases, that means that there are nearly 20 different ways that the client provides feedback. One firm sends the managing partner for an annual dinner with the general counsel. Another sends the relationship partner. A third sends the Chief Value Officer. A fourth has an annual client survey system, albeit only 30% of the in-house lawyers reply. Several other firms use a third-party service, such as Acritas, Wicker Park Group, BTI, or PP&C Consulting.  And a surprising number of firms are content with feedback in the form of paid bills and continued work.

Virtually all of these feedback mechanisms are fragmented and lacking in context, making it easy for lawyers to rationalize away negative information. Under the best case scenario, only 20-30% of the total feedback time will result in significantly better performance.  That means that 70-80% of feedback has zero ROI. That’s an enormous amount of waste.

Yet, what if clients took control of the feedback process? As my colleagues pointed out, if clients rigorously evaluated their outside counsel, the information would be too direct and specific to be ignored. Then we laughed at our Panglossian idea, “This is never going to happen.”

Sometimes it’s good to be wrong

One of my law firm friends in the December 2014 meeting was John Fernandez, who was at the time was the US Chief Innovation Officer at Dentons (now Global Chief Innovation Officer).  One of John’s projects was the launching of NextLaw Ventures and NextLaw Labs, which identified promising new legal technologies for investment and piloting within the firm.

In June of 2015, John fielded an inquiry from a corporate GC who had, over the course of eight years and two different companies, developed a feedback system for managing his outside law firms.  The general counsel, Mark Smolik of DHL Supply Chain Americas, was looking for guidance on whether this idea had commercial application. John asked if I wanted to join a meeting with Mark to help vet the opportunity for NextLaw.  I said “sure.”

That meeting was very fateful because (a) John and I had already identified that this was a problem worth solving, and (b) Mark Smolik had years worth of data showing that his system worked.   Miscommunication and derailments were going down, value per dollar spent was going up, and Mark had more bandwidth to focus on other company priorities.

Borrowing from HR

I think readers will benefit from understanding the origins of Smolik’s system, as it reveals the power of simple ideas and insights.

The first insight occurred to Mark over a decade ago when he was general counsel of Safelite Auto Glass, a national company doing on-site windshield repair.  In addition to running the legal function, Mark was also in charge of HR. One day, Mark became a Safelite customer when the windshield on his wife’s car got damaged.  While at work, Mark took a call from his wife, who told him that a somewhat frightening looking guy claiming to be with Safelite showed up at the house to repair the damage  “I have no idea who this person is. Why should I open the door?” Wanting to reassure his wife, Mark contacted the Columbus service center and asked them to send their best technician to perform the work. “Please tell me his name and at least what he looks like.”

That incident gave Mark an opportunity to experience Safelite through the eyes of the customer.  Shortly thereafter, Safelite developed a standard practice of sending a technician profile email to all its mobile customers that included name, photo and credentials of the auto glass technician.  Safelite also implemented a client feedback tool to track the quality of each service call.  By the time Smolik left Safelite in 2009 (two years after its successful sale to Belron), Safelite was planning a national ad campaign that would make the quality and friendliness of their glass technicians the centerpiece of the company’s branding.

The systematic tracking of the customer-facing personnel at Safelite created a desire in Mark to apply the same logic to the many law firms that he was managing.  “If the company is going to spend a few hours each year reviewing the performance of each of its employees, then why aren’t we devoting at least that much attention to the large sums we spend on law firms?”

Thus, Mark applied basic HR principles to his outside counsel, developing performance criteria, applying it to firms, sharing results, and collaborating on a plan for improvement.  Mark used this methodology to winnow and consolidate the number of firms he worked with. This reduced his overall communication overhead while increasing the value of each dollar Safelite spent on legal.

Building a company around scorecards

By the spring of 2016, Mark Smolik’s outside counsel scorecarding system became the basis for Qualmet, one of the first companies in NextLaw Ventures investment portfolio.

Along with John Fernandez, the other law firm insider at my December 2014 meeting was Jim Beckett, who at the time was Chief Business Development Officer at Frost Brown Todd.

Beckett started his legal career as a Frost Brown Todd associate before going in-house at RJ Reynolds. A few years later, he moved to the business side, running an RJ Reynolds operating unit in Puerto Rico.  Jim came back to the firm partially because it enabled him to raise his family in his hometown of Louisville.  But having spent eight years inside a large company, he felt he had a roadmap in his head for how a law firm could grow market share. Jim and the firm’s chairman, John Crockett, had worked together when Jim was an associate and John was a young partner.  John wanted to give Jim’s ideas a try.

Jim’s business development strategy was very simple.  Spend time with your clients and listen to what’s on their mind.  Then make their problems your problems, using all your creative energies to identify, anticipate, and solve what’s happening in their world. This may sound obvious, but many lawyers struggle to get out of their comfort zone and then blame the lack of immediate returns on client resistance.

At his core, Jim is an impatient person who wants to change the industry.  Thus, in December of 2014, when we discussed the possibility of the client owning the feedback process, Jim couldn’t get it out of his head.  By the time Fernandez and I met with Smolik, Jim was sketching out a business plan.  Thus, during the June 2015 meeting, I told Mark, “There is a guy, Jim Beckett, who you’ll want to talk to. He has been on both the buy and sell side and is already fixated on this idea.”  John nodded in agreement, “I can’t think of a better guy to run with this.”  After several months of additional vetting, Qualmet was formed and Jim was named CEO.

CEO in legaltech may sound glamorous, but in reality it’s just more stress, a pay cut,  a chaotic mix of product, marketing, and sales, 6 am flights, bad airport food, and guilt over how your career decision is affecting your family. But if you think this is your big opportunity to make a difference, you’re willing to pay that price.


Disclosure: Through NextLaw Lab, I gave input to Qualmet during its formation, including sitting on its Board. Qualmet also became a client of Lawyer Metrics, where I served as Chief Strategy Officer.   When I left Lawyer Metrics in late 2016, and before I started Legal Evolution, I resigned from Qualmet’s Board, as I viewed fiduciary obligations to any legal industry business as incompatible with my role as editor. In addition, I have no financial or investment interest in Qualmet or any legal industry company.


We’re entering the management age for lawyers

Leadership and management are not part of the legal education canon.  Yet, that is bound to change as more lawyers stumble forward into these disciplines to cope with the relentless growth in complexity we face on a daily basis. In the meantime, however, we are at risk for misinterpreting the tides of change.

For example, many lawyers and law firms (and initially this professor) are quick to conclude that the goal of scorecards is to save money.  Yet, in most cases, the motivation is scarcity of internal bandwidth. An important task done well and efficiently frees up time and mental energy to tackle other strategic priorities. Saving money, or getting more value per dollar spent, is a by-product of a more disciplined approach to one’s job as lawyer-manager.

The first step in this more disciplined approach is formulating the evaluation criteria.  Initially at Safelite and DHL, Mark Smolik focused on seven criteria:  (1) understands our objectives / expectations, (2) expertise, (3) responsiveness / communications, (4) efficiency / process management, (5) cost / budgeting skill, (6) results delivered / execution, and (7) compatibility with company values.  Each criteria, in turn, is defined by a set of specific behaviors.

What managing law firms looks like

For ideas like scorecards, lawyers need examples rather than abstract descriptions. In 2016, I ran some focus groups for what would later become Qualmet. Below are some of the graphics from those sessions (credit: Evan Parker from LawyerMetrix).

These data reflect the performance of actual law firms, including the AmLaw 200 firm of Conroy & Alexander (a pseudonym). The scores for each criterion are averages of in-house lawyers who used the firm. Obviously, between 2011 and 2015, things moved in the right direction. Conroy & Alexander now exceeds expectations on six of seven criteria and has a clear priority on where it needs to improve.

Below is the trendline of Conroy & Alexander’s average annual performance. This is the ROI that flows back to the in-house lawyers who are providing the feedback — they’re expending less time and attention to get better results.

Below is a picture of how the top seven firms are doing. Conroy & Alexander is firm E.

One takeaway is that expertise — which lawyers routinely fall back on to sell themselves, are table stakes.  Another takeaway is that no firm really stands out on efficiency / process management. Thus, perhaps this is an area where a firm could seek to differentiate itself over the next one to two years. A third takeaway is that firm F is in trouble.  During our focus groups, several leaders of AmLaw 200 firms said they would like this data as a management tool for partners who are all-too-ready to blame the client.

These scorecard graphics above are basic management tools applied to the work of lawyers.

Progress will require leadership

As a profession, have we accepted the premise that working within a well-designed management system would make our work more valuable to clients?

Few of us would debate the general premise, particularly in front of our clients. Yet, we struggle to accept it because, in our own little zones, we fear losing control.  As a profession, we need a handful of lawyers in positions of authority who will make the decision for us.  They will be subject to a lot of blowback and pleas for special treatments.  However, in the long-run they will win our trust and respect.  We will view them as leaders.

I came to this conclusion in December of 2017 during a design workshop in Chicago.  After more than a year in business, the Qualmet team is coming to grips with a common innovator mistake: they had confused why they loved their product with why a client might buy it.  Cf. Post 008 (“[The innovator is] often deeply immersed in the technical workings of the project … [and thus] at grave risk of falling in love with features that are of little practical value to the target end user.”). Fortunately, the Qualmet team includes professionals with expertise in marketing and design thinking. I secured them meeting space at Northwestern Law.  In exchange, I got to observe the workshop.

The key goal of the daylong session was to work backwards from the daily lives of legal department professionals.  A wide variety of legal professionals–not just general counsel–were invited in for 60- to 90-minute conversations.  The Qualmet team wanted to know how they spent their time, their biggest frustrations, what they wanted most out of their jobs, etc.  Yet, very rarely were these questions asked directly. Instead, they were asked for their reactions to a series of crude prototypes (the vast majority that had nothing to do with outside counsel scorecards).

For me, the most surprising revelation was that in legal departments with several lawyers, the general counsel spends less than half of his or her time managing the department.  Instead, they are focused on being a fully contributing member of a C-suite management team.  One GC of a publicly traded company put the percentage at 70%, with less than 15% that touched on anything related to outside counsel.  Among the department professionals, the common theme was lack of time and budget to operate at a strategic level.

Indeed, I did not realize it until later, but Qualmet was running the design work shop to test their thesis that scorecards were a tool to put the general counsel into alignment with the CEO, as the performance data could be used to show how decisions regarding outside counsel were being made. The use of quantified performance puts the GC in more of a business place than a “legal place.”

One question to a general counsel that I especially enjoyed was, “Do you want to be a CEO some day?” Reply, “yes.”

Follow-up, “What about your general counsel friends — do they want to be get promoted?” Reply, “Probably. Otherwise, why do this job? Once you become a general counsel, you are more a manager and leader than a practicing lawyer. Thus, you have to develop those skills to excel at your job. Why not embrace the career path?”

We need to talk more about leadership

Leadership in legal departments is different than leadership in law firms.  Unlike a law firm leader, a general counsel can make an unpopular but necessary decision and not worry about losing revenue and triggering a proverbial run on the bank.  This reality is what is driving the consolidation of law firms into global giants. The hope is that global reach and the support services that a large firm can afford — technology, project management, process improvement, data analytics, etc — will wed the client to the firm.

I would like to see more general counsel collaborate with law firm leaders. Scorecards are just the start.  The goal should be to bring out the best in the lawyers and legal professionals they lead and manage.

What’s next?  See Confusing conversations about clients (048)

In a recent post at 3 Geeks and a Law Blog, Casey Flaherty puts his finger on a big problem.  The opening paragraphs are too funny not to quote in their entirety:

My friend John Grant [of Start Here HQ] made a mistake.

Many moons ago he was consulting on process improvement for a large law department. He surveyed in-house counsel on their biggest complaints about outside counsel. The response was that outside counsel:

  • Don’t understand my business
  • Can’t tell me how long anything will take
  • Overwork a problem/introduce complexity
  • Don’t give me output in a format I can use

Familiar enough. And so far so good. John’s misstep is that he put the same question to internal clients of the law department. The response was that in-house counsel:

  • Don’t understand my business
  • Can’t tell me how long anything will take
  • Overwork a problem/introduce complexity
  • Don’t give me output in a format I can use

This result was not well received by the law department.

I laugh because I have seen this problem firsthand.  However, it’s probably not as funny if you earn your living selling advice to in-house lawyers.

Casey’s post contains a level of humility and candor that is rare among people, let alone lawyers.  Here is my own paraphrase of Casey’s thesis: “After 10+ years of relevant work experience and countless hours of reflection, I’ve concluded that successful innovation among lawyers is less complicated but more difficult than I thought.”

The Lawyer Theory of Value

Casey’s “lawyer theory of value” is the insight that makes things less complicated.

Casey writes, “The lawyer theory of value states that the key to value is having smart lawyers.  Lawyer time is the primary resource and the primary unit of measure even in law departments that have no compensable time sheets.” Because in-house and law firm lawyers are the same people, they have the same go-to move — stand back and let me lawyer.  For in-house lawyers, however, the reflex varies by problem-solving hat:

  • Hat 1.  When wearing their service-provider hat, they measure value based upon time and effort.  After all, they know how smart they are and how hard they work for their internal clients.
  • Hat 2. When wearing their client hat, in-house lawyers measure value based on predictability and how the service provider helps them get their work done — just like those folks in sales, HR, and purchasing.

Although in-house and law firm lawyers are the same people, law departments “get them at discount and on a fixed fee.”  Thus, for at least two decades, as Casey points out, clients have dealt with budget pressure by expanding their law departments. See Post 003 (documenting trend).  However, as this approach hits the point of severe diminishing returns, Casey acknowledges that legal departments have fully replicated the management challenges of law firms.  The refrain from lawyers is the same: “not here, not yet.”

“What most in-house stakeholders want,” observes Casey, “is more budget, more headcount, and to be left alone.”  We see the same mindset in law firms: “I’ll work hard and track my time. Otherwise, leave me alone.”  Indeed, the perfect symmetry is what makes the lawyer theory of value so compelling. If we apply Occam’s razor, there’s nothing left to cut.

Seeing the world as it really is

if the lawyer theory of value is true, then it has implications for Casey’s broader views on legal innovation.  To Casey’s credit, he catalogues four faulty assumptions he has personally harbored:

  • “First, I’ve taken in-house counsel at their word. I’ve relied on stated rather than revealed preference. … The desire to change may be genuine. But that in and of itself does not make change a priority. … I expected more law departments to be fast followers. Instead, we’ve repeatedly witnessed innovations by prominent law departments remain outliers.”
  • “Second, I’ve imagined change efforts that are deeper and more transformative than they turn out to be. I’ve taken the highlight reel and mentally filled in the gaps to be equally spectacular.”
  • “Third, I’ve observed success in one area [contract management, diversity, outside counsel spending] and mentally grafted it onto others [e.g., litigation management or use of alternative service providers]… [T]his assumption has it backwards. In-house departments are resource constrained. With finite resources, the essence of strategy is choosing what not to do.”
  • “Fourth, and relatedly, I’ve treated in-house departments as monoliths. Because the legal ops head and one AGC have stood up something cutting-edge, I’ve implicitly assumed that the remainder of the department shares their innovative fervor. But politics is the art of the possible. … While innovation may be embraced and effected by a few, the many view it with suspicion and annoyance.”

What makes these admissions / reinterpretations so striking — and useful — is that Casey is as intelligent and experienced as they come. Yet, he is coming clean with insights that he learned from the trenches, admitting that true progress is a lot more difficult than he thought. God help the rest of us trying to sort things out from the comfort of our base camps.

Why does this matter?

Roughly 55% of all legal services in U.S. are purchased by organizations with at least one in-house lawyer.  And this staggeringly high number excludes the economic value of more than 105,000 in-house lawyers. See Post 003. Thus, Casey is writing about the substantial bulk of the legal services market, not a fractional subset.  The portion of the profession fully outside his analysis, see Post 037 (decline of the PeopleLaw sector), has a different set of problems. Albeit, the answer to both requires a substantial redesign of how lawyers — or, more accurately, legal professionals — serve their clients.

I hope Casey agrees with this additional gloss on his analysis: The lawyer theory of value — solving legal problems one at a time with smart lawyers — is an unstated and unexamined preference of lawyers, not a viable long-term solution for the clients they serve. Further, it is not a preference that law students and younger lawyers can afford to indulge. As I collect my law professor salary, I think about this issue on a daily basis.

There is a lot of hard work ahead on staggeringly complex problems. These problems are made more difficult by organizational politics, the personal agendas of those fending for themselves, and necessity of telling people things they don’t want to hear.  Good ideas are, at best, the first 5% of a solution.  We ought to be grateful we have Casey’s brain power and intellectually honesty to help us cope with the rest.

What’s next? See Successful technology adoption: David Cambria (ADM) and Eric Elfman (Onit) discuss their collaboration (041)

If a successful large law firm faced an Innovator’s Dilemma, what would it look like?

On the one hand, the firm has a wonderful set of endowments: (1) longstanding and lucrative relationships with industry-leading clients; (2) a business that requires very little operating capital yet generates significant cash and profits; and (3) an established brand that makes it the safe choice against upstart new entrants.  On the other hand, when the traditional service offerings hit a plateau that is likely permanent, the firm struggles to use its superior endowments to reinvent itself in a way that locks in another generation of prosperity. The graphic above depicts the problem.

Many law firm leaders understand the innovator’s dilemma and worry about the timing and execution of reinvention. Thus, at numerous firms, there are internal innovators, or “intrapreneurs,” who are running carefully vetted projects designed to deliver tangible benefits to their firms. In its idealized form, this strategy raises awareness through small wins, which, in turn, create buy-in and momentum for more ambitious change.

We were fortunate to have three law firm intrapreneurs as guest lecturers during Week 5 of “How Innovation Diffuses in the Legal Industry“:


For a summary of Week 2 guest lectures (Pangea3, Practical Law Company, Hotshot), see Post 032. For week 3 (consultative sales at Thomson Reuters), see Post 034. For Week 4 (a deep dive into Axiom), see Post 036.


To set reader expectations, there was a lot to cover in this class. With three great guests, we ran out of time to probe each story with equal depth.  Also, for the purposes of publication, I need to disentangle the principles and lessons of intrapreneurship from the organizations where our guests have worked. The risk is that a discussion of context will be construed as criticism, and criticism was far from the spirit of our discussion.

To resolve this tension, I use the two problem statements below to meld together common themes. After that are specific highlights of each speaker’s remarks.

Problem statement from within the law firm

When we apply innovator’s dilemma and intrapreneurship concepts to law firms, the underlying subtext is that highly educated and successful partners are, as a group, ill-equipped to adapt to a changing legal market.  Assuming this problem statement is true — and I believe it is — why would it be true?

The problem is certainly not lack of creativity.  Within their substantive specialties, lawyers routinely come up with ingenious solutions.  Rather, the challenge is a confluence of experience, perspective, and incentives that create a powerful mental frame that is very difficult for long-time insiders to overcome.

Specifically, for several generations, lawyers in corporate law firms have carried on their craft within a simple business model that required very little time or attention to maintain. In most cases, if lawyers just focused intensively on their clients’ problems, the economic results got progressively better. This was (and is) powerful operant conditioning. As a result, for many law firm partners, the macro-trends of the legal industry are abstractions that carry very little weight.  The only market that matters is the tiny slice each particular partner serves.

Unfortunately, in very few instances are clients speaking with one voice.  In fact, voices vary by adopter type. See Post 013 (providing examples of two major corporate clients expressing completely opposite views on the need for change). Innovator and early adopter clients are drawn to new ways of legal problem-solving, though they’re in the minority.  Similarly, some early majority clients are pushed toward innovation because they can no longer afford solutions provided by traditional law firms, see Posts 032 and 036 (2008 recession led to surge in adoption for Pangea3 and Axiom).  But a sizable portion of the legal market is content with brand firms billing by the hour. If “my clients” feel differently next year or the year after, we can deal with it then.  This narrow client-centric approach is strongly reinforced by most law firm compensation systems.

The above description explains the paradox of the highly successful law firm unable to play its superior hand.  Thus, the innovator’s dilemma is a real strategy dilemma for virtually all large law firms.

Problem statement from the client side

Although clients don’t speak with one voice, the environment they are operating within is becoming more complex, global, and regulated.  This, in turn, is changing the structure of the corporate legal services market — i.e., the macro-level trends that many partners wave away as irrelevant to their practice.

Arguably, the biggest change is growth of corporate legal departments.  For at least the last 20 years, corporate clients have adapted by growing their in-house legal departments and insourcing more repetitive or lower-stakes work that formerly went to law firms. See Post 003 (showing 1997 to 2016 employment trends for lawyers working in government, in-house, and private law firms).

With more and more legal departments becoming the equivalent of large law firms embedded inside corporations, we’ve witnessed the rise of the legal operations movement (CLOC and ACC Legal Ops) and the rise of the “Type 6” client. See Post 005 (presenting a typology of law firm clients).

Legal operations as a profession and field is coming into being because many large corporate clients need more sophisticated methods and systems for managing legal cost and legal risk.  The ascendency of this role is strong evidence that the business-as-usual law firm billable hour model is on a slow but permanent decline, at least for operational “run-the-company” work that accounts for the majority of the corporate legal services market. See Post 034 (discussing trend through the lens of Axiom); Post 010 (discussing trend through the lens of the managed services industry).

The graphic below depicts the market transformation.

In general, legal complexity increases with economic growth.  For about 100 years, we’ve coped with this problem through division of labor and specialization.  This approach created the large law firm. In more recent decades, as the growth-complexity line has steepened, law firms reaped higher profits.

Yet, we have reached a point where division of labor and specialization are no longer a match for the geometric growth of legal complexity. Although clients and law firms experience this pressure as a cost problem, the root cause is lack of productivity gains.  See Post 001 (discussing systemic problems created by lagging legal productivity). To meet this productivity imperative, the legal industry is starting to migrate to new methods of legal problem-solving that are based on data, process, and technology. Indeed, these pressures are why NewLaw exists, financed in large part by venture capitalists and private equity.


NB: All the analysis and charts above frame a structural problem from the perspective of organizational clients. For this group of clients, the problem of lagging productivity is leading to market-based responses, albeit slowly. For individual clients in the PeopleLaw sector (roughly one-quarter of the legal market and shrinking), lagging legal productivity manifests itself through self-representation or people failing to seek any type of legal-based solution. See The Decline of the PeopleLaw Sector 037. In short, these are two distinct problem sets.


So the question is very simple: for large corporate clients, who is going to create the new paradigm? There are three contenders:

  • Legal departments through more legal operations and in-sourcing;
  • Law firms by skillfully playing their superior hand; or
  • NewLaw, which has data, process, and technology as its core competency but has the challenge of being new and unfamiliar.

The answer is likely to be some combination of all three. Yet, it is also likely that many law firms will fall victim to the innovator’s dilemma and be among the losers.

The challenge for law firms is that the business opportunities of a structural market shift require partners to make business judgments about macro-trends at the same time they are under pressure to acquire, bill, and collect hundreds of thousands of dollars or more in legal fees for the current fiscal year.  Unfortunately, this problem can’t be fixed by changing a comp system to reward a long-term focus, as those with a short-term focus are free to leave and take their clients with them.

Kubicki: Intrapreneurship inside a law firm

Among my three guest lecturers, Josh Kubicki has given the most thought to intrapreneurship as an applied discipline. See, e.g., Kubicki, The Intrapreneur’s Dilemma, Medium, Aug. 20, 2014.  During his guest lecture, Josh asked us to envision a simple corporate pyramid that consists of the CEO (at the top), the C-Suite (layer 2), vice-presidents (layer 3), directors (layer 4), managers (layer 5), and line workers (base of the pyramid). “Obviously, we know who’s in charge.”

“Law Firms,” noted Josh, “are much flatter.” He then picked up a grease marker to draw a stylized law firm org chart.

At the top of the pyramid, which may not be a pyramid at all, are partners who are also owners. Although partners are not the CEO, they do tend to act as CEOs of their own practice, particularly if they keep a lot of other lawyers busy.  However, increasing performance and enterprise value of the firm require collaboration across the partner / owner / CEO class.

To do this well, the law firm intrapreneur has to find ways to break down the partitions between partners — the blue lines above — without engendering fear or resistance.  Further, the intrapreneur has to do it with little or no formal authority.  “No matter what your title is, the intrapreneur is part of the professional staff paid for by revenue-generating lawyers.  So the only tool you have is your ability to make someone’s life better in a relatively simple and low-cost way.”

This reality is why Josh relies heavily on design thinking in all his change initiatives.  Josh drew the diagram below, which he called “the trifecta.”

Innovations start as an idea in an innovator’s head.  Once we move to implementation within an organization, however, we move into people’s daily experience — busy people whose job it is to serve others. Even if an innovation will, in theory, make the organization better off, implementation will fail if individual stakeholders have a negative experience that makes their job harder. Thus, successful innovation (Phase I Initiation + Phase II Implementation, see Post 015) is actually a series of properly designed sub-innovations.

A successful sub-innovation requires making the complex very simple, culturally compatible, and highly advantageous to the end-user, ideally with a very fast return-on-investment. Cf. Post 008 (presenting the key factors in Rogers rate of adoption model). If the coordinated sub-innovations all result in a good individual experience, the larger innovation has a chance of being successful. Seen through Josh’s eyes, the effectiveness of the law firm intraprenuer is less about individual brilliance than empathy, listening skills, patience, and budget, as doing this type of work “is very labor intensive.”

The intrapreneur’s intellectual gift is that, for a variety of reasons, they are not stuck inside the frame of the traditional model, often because of some prior life experience that gives them an outsider’s view. (For one of Kubicki’s transformative life experiences, which he discussed in class, read his Intrapreneur’s Dilemma.)  Yet, Josh was emphatic that humility is the single most important attribute for intrapreneur effectiveness. “If something works, congratulate the adopter for their insight and move on.”

Josh described some of the wins of his team but it would be counterproductive to publish them on the web, as Josh believes the credit goes to the entire Seyfarth Shaw organization.

Eric Wood: making partner as a technology innovator

One of the reasons I am carefully chronicling my class is that I want to create a contemporaneous record of how the legal profession navigated the shift from a world of lawyer specialization to one based on multidisciplinary collaboration.  I am confident that Eric Wood’s story is going to be replicated by hundreds of young lawyers who begin their careers at law firms. Yet, Eric was the first to blaze this trail.

Eric is the Practice Innovations and Technology Partner at Chapman and Cutler.  The key word here is partner.  Eric is a 2008 graduate of the University of Chicago Law School.  After a stint at Cleary Gottlieb in NYC doing capital markets work, Eric moved back to Chicago and joined Chapman as a banking and financial services associate.  However, several years ago, Eric quit doing client billable work and instead focused all of his attention on technology-based initiatives.  During this time, his formal title remained associate. And earlier this year, he was promoted to partner.

Practice Innovations and Technology Partner is a new role within a law firm. During his portion of the class, Eric described his work as primarily “R&D” that fell into three major buckets:

  1. Writing code to build legal expert systems and automate the drafting of documentation for a wide range of legal matters.  Often this includes the design of web interfaces so the systems are relatively intuitive for the lawyers, clients, and other personnel who use them.
  2. Designing new technology products and managing their development, release, and maintenance. Often this involves finding ways to scale innovations across multiple practice groups, including via the development of new staffing models.
  3. Other knowledge management and technology projects, such as building transactional metadata databases and data visualizations, evaluating vendor products, and researching technological developments that might affect transactional practice (e.g., blockchains and crypto currencies).

Eric has no formal training in a technical field.  His undergraduate training is in political science and environmental studies.  Instead, he attributes the initial development of his technical abilities in computer coding and database structures to a desire to impress his friends with fantasy basketball data visualizations. That hobby required a lot of scraping of data from websites followed by computational analysis.

Yet, Eric’s work in the legal field enabled him to see cross-over applications. Prior to law school, as an AmeriCorps volunteer with Wyoming Legal Services, he helped build web content to reach the agency’s far-flung clientele. “We had to scale seven lawyers for the entire state, and it was obvious that only technology could do that.”  Likewise, many late nights as a NYC transactional associate gave Eric many ideas for how to automate unpleasant, time-consuming grunt work.

In 2013, as Eric continued to improve his technical skills, he decided it was time to find a outlet in the legaltech world.  However, during this time period, the firm’s Chief Executive Partner, Tim Mohan, began bringing in outside speakers to explain how the traditional practice of law was on the brink of a major shift.  So Eric requested a meeting with Mohan to explain some of this ideas.

Mohan immediately embraced what he heard and Eric stopped doing billable. Now do the math — taking Eric off the billable track is roughly a million-dollar decision ($500/hour x 2,000 per year).  Yet, what is the price of failing to reinvent?

Relatively quickly, the decision proved to be a wise one.  For example, one of Eric’s projects was the automation of closing document sets for finance transactions.  The market no longer pays full price for the organization, indexing, and tabbing of the full deal documentation, yet this work still needs to be done and delivered to the client in a polished, professional, and timely manner.  “What used to take weeks now takes a minute.”  At roughly $500 in staff time (with wide variations based on the size and complexity of the deal) x 3,000 closings per year, this single project is saving the firm roughly $1.5 million in labor that can be allocated to other value-add projects. And that is just one example.

With the encouragement of the firm’s leadership, Eric regularly gives internal demos that have generated significant curiosity and broad buy-in among partners.  Eric notes that these internal sales were often predicated on the quality advantages of technology — of increasing transparency of changes to complex forms and reducing opportunities for error. Yet, the economics are also very attractive.  Chapman and Cutler is a highly specialized financial services firms that does approximately 40% of its work on a fixed-fee basis.  In this context, technology and process enable the firm to continue to charge less than many rival firms while protecting or improving its margins. This is exactly how innovation is supposed to function.

In addition to Eric, other transactional lawyers at Chapman have begun to invest in technical skills, with several automating significant portions of their practice. Part of this transition is made possible by an accounting system that treats “productive” hours related to firm innovation the same as client billable work. Eric gave the example of one  associate who has logged hundreds of productive hours over the past few years working on projects with Eric and his team. In short, Chapman is building more internal capacity.

This is a remarkable story. But can it be replicated by other other law firms?

I think the answer is “not easily.”  First, a firm needs someone like Eric Wood who possesses both deep legal domain knowledge and strong technical skills. Second, the stars have to align so that a leader like Tim Mohan can enable such a person to focus full-time on innovation and execution. In competitive markets, half-time efforts seldom win.  Third, it undoubtedly helped that Chapman and Cutler is a “small” large firm (~230 lawyers) that is focused on a single industry. This makes it culturally and logistically easier to implement change.

Beckett’s business mindset

As noted in Legal Evolution’s foundational posts, innovation is strongly influenced by connections between different social systems. Being on the edge of two or three systems is more valuable than being in the center of one. This is because multiple perspectives enable a person to transcend the dominant local frame and see problems with fresh eyes.

In addition to knowledge of law, all of our guest lecturers possessed a second or third frame for viewing the world. However, the most pronounced example was Jim Beckett, who acquired his legal frame after working five years in sales and distribution in the food industry, helping to grow market share for companies like Frito-Lay and Haagen Dazs.  During this time, Jim was following the advice of his father, who was impressed with Jim’s people skills and aptitude for business. Ironically, Jim’s father was a lawyer, working in-house at KFC.

Then, several years into Jim’s business career, his father had second thoughts.  “Jim,” his father said, “Law doesn’t have enough people who truly understand how businesses work.  If you get a law degree, you’ll go a long way.”  So, as an older student, Jim returned to Indiana University to go to law school.

Jim shared that law school was very difficult for him because the level of abstraction was so far removed from the practical problem-solving he was used to. It wasn’t until he was a law firm associate that we was able to meld the two perspectives.

The business frame, however, remained the dominant perspective.  For example, Jim discussed how he got his first in-house job at Brown & Williamson (a large tobacco company that later become part of RJ Reynolds). “I was the only lawyer they interviewed who could discuss the business issues that were at the core of the company’s legal work.” Further, rather than pursue upward mobility in the legal department, Jim asked to move to the business side, eventually running an RJ Reynolds operating unit in Puerto Rico.

Jim’s multiple perspectives in law and business was one of the reasons that John Crockett, chairman of Frost Brown Todd, recruited Jim to return to Louisville to run business development for the firm. Roughly 10 years earlier, Jim and John had worked together at the firm as billing lawyers. Jim was hired despite his warning that long-term success was going to require significant change, which would make some of Jim’s efforts controversial.

While the firm implemented many client-centric initiatives, Jim eventually became convinced that he could do more good by helping clients focus their purchasing power. Thus, in the summer of 2016, Jim left Frost Brown Todd to become the CEO of Qualmet, a technology company that provides legal departments with a scorecarding methodology that collects, organizes, analyzes, and shares feedback with their outside service providers.

During his lecture, Jim spoke with passion about what happens when lawyers get in full alignment with clients. “All lawyers want to do a great job. Unfortunately, very few are getting the information they need to take their practice to the next level.”  Jim believes that structured metrics and dialogue will enable clients and law firms to smoothly transition into the world of data, process, and technology.  Jim see this as not as a question of “how”, but “when.” Today’s CEOs expect their GCs, CLOs and in-house teams to drive business value that aligns with their respective company goals and objectives. Jim wants to bridge the “value” gap and sees 360 performance management as a critical piece to accelerate alignment. “Value creation is no commodity,” Jim observed, “So all stakeholders will benefit when performance is properly measured.”

Qualmet’s scorecarding methodology is closely related to Dan Currell’s post on the necessity of active outside counsel management. Convergence alone can’t deliver the desired results. See Post 031.  Thus, scorecarding will be the topic of a future post.

What’s next?  See “The Lawyer Theory of Value” by Casey Flaherty (040)