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)