Innovation and Change: A New Normal in the Legal Profession?
It’s no secret that the past few years have seen drastic economic changes. But how have these changes impacted the way we do business? And how have changes in industry impacted the norms and practices for those of us in the legal profession? At the Churchill Breakfast Club, I recently had the pleasure of hearing a panel including Paul Lippe (CEO, Legal OnRamp), Aric Press (Editor-in-Chief, American Lawyer Magazine), Bill Deckelman (General Counsel, CSC), and Mark Chandler (General Counsel, Cisco Systems) address this topic.
According to Lippe and Chandler, the economy has had a dramatic effect on law firms—typically the larger firms—serving corporate clients. Over the past few years, there has developed a sometimes accurate perception that lawyers at large firms bill clients excessively. With more employees and greater resources, the benefits of using large firms outweighed the costs, even with what is sometimes referred to as “fluffy” billing, i.e., billing for work that does not genuinely add value for the client. But when companies don’t have the funds to cover estimates, invoicing, and client development, the cost of using a firm who practices “the old-fashioned way” becomes insupportable. In Silicon Valley, where start ups and venture capital reign, this holds especially true. Emerging companies seek a competitive advantage, and bank on value-added efficiency. If large, traditional law firms want to survive in the new economy, they’ve got to change the way they do business—tackling inefficiencies, and where possible, cutting down hours. As Lippe pointed out, “This is how we’ve always done it” is an express ticket to a severance package in the real world.
Cost reduction is key at the moment, as competition from many small and mid-size firms will force lawyers to be more efficient as costs are now an issue. It’s not the hours spent, but the product to the client that’s most important. While GC’s were once left to their own devices in a veritable “black box,” the curtain has been removed. They are now measured by company-wide standards: client intimacy, process innovation, predictable pricing, alternate staffing, technology enhancement, and defined quality.
In-house legal departments also must comply with new practices. Mark Chandler heads the legal department at Cisco Systems, which gets measured the way every other team in the company does. They must demonstrate that deals are going through and their work is creating value for the company as a whole. Chandler must show that threats to the company are managed and compliance is in order, without waste. When the metric is based on how much time is put into a product rather than the result of that time, the value is denigrated.
In addition, the use of electronic tools to monitor value-added efficiency is increasing. Automated document management, tracking systems, and electronic contracts are popping up everywhere with the assumption that digital records provide greater transparency. Because clients currently demand more knowledge about where their money is going, boutique firms, many of which already use these kinds of programs—and many of which are better suited to adapt to these new circumstances—may well be the better choice for industry.
The transformation trickles down to law schools, as law firms will demand graduates who can provide specialized, efficient services—graduates with more practical knowledge. And with the new technological applications, technological understanding is key. But will these changes stick? Is the adoption of more efficient practices just a blip on the legal radar screen, or has a “new normal” emerged in the profession? Only time will tell. In the meantime, those firms that do put productivity before profit will have a clear and credible advantage.
