Stop Pummelling BigLaw

Round 1 – Heavyweights in the Ring

The College of Law Practice Management (COLPM) held a conference last week and, while I wasn’t there, I did follow the tweets of attendees. One tweet in particular caught my eye:

Jordan provided a nice string of tweets repeating prognostications from the speakers, most of them filled with interesting if unsupported statistics (80% of legal services are basic or low touch, 20% of legal work is high-value bespoke, etc.). It seems, from reading the tweets of many attending the conference that the air was filled with specific numbers talking about the decline (the next 10 years seemed to be the favorite timetable) for lawyers. Estimates range, but about 50% of the profession will disappear during that period, from what I read.

The COLPM conference focuses on Big Law and Big Corporate Law (the in-house equivalent of the large law firms), so the speakers presumably meant that around 50% of what lawyers in large firms do will move off lawyers’ desks reducing the need for about 50% of lawyers. Some of the COLPM speakers who were throwing around those numbers also are leaders of the Corporate Legal Operations Consortium (CLOC). CLOC members focus on improving the operations of Big Corporate Law. None of the speakers were talking about the hundreds of millions of individuals who get little or no legal services.

Using the tweets as a proxy for the full text of the presentations is not a reliable way to gauge sentiment at the conference. But they suggest there is a lot of anger being directed towards Big Law. Clients have spoken and Big Law has not responded. So, borrowing the words of Jordan’s tweet, the large law firms are “being detoured around.”

Round 2 – A Draw

At one time, I was general counsel of a company owned by a large, well-known private equity firm. The chief financial officer was a hard-working very conscientious person whose goal was to run the company in the best interests of all constituents. For those who have worked at private equity portfolio companies, you know it can be a problem to focus on anyone except the managing directors of the private equity firm. It varies by firm, but many have the goal of making the most money in the shortest period of time, and taking no prisoners.

The CFO would come to my office (frequently) to complain that the CEO, with the permission of his fellow board members (all private equity firm managing directors) had decided to spend money on something the CFO opposed. The CFO was frustrated because he felt spending the money was not in the best interests of the other constituents (a jet to take the CEO to all the remote locations of the retail chain was a particular source of concern).

We would talk and I would explain that our company was something like the local doctor’s office. The doctor owned his practice and if he wanted to spend money on a fancy office, that was his business. His employees might want him to increase salaries or do other things, but since he owned the practice he could do what we wanted (within some obvious restrictions). So could the private equity firm.

Big Law is the same way. If the owners of the law firm—the equity partners—choose to follow a path that they think is in their interests but seems contrary to the interests of their constituents (and does not violate applicable restrictions), so be it. They own the firm and can do what they want. There is no law of nature that says law firms must exist or survive. In fact, there is no law of nature that says lawyers must exist or survive. We trip on this last one quite a bit.

There seems to be a strong feeling among many not in the firms that Big Law is violating some sacred trust by not changing to meet what others want. Of course, the firms have no obligation to make any such changes, even changes demanded by their clients. A large law firm is entitled to look a client in the eye and say that it will continue billing by the hour, increase its hourly rates whenever it pleases, and put as much time into a matter is it wants. In fact, for a long time one of the cherished benefits of being an equity partner was the freedom to do just that. You could run your practice as you saw fit and if your quality, cost, ethics, or anything else exceeded what your client wanted, then your client was free to find representation elsewhere.

Let’s play this out. Imagine the 200 largest law firms do not pivot to what some (certainly not all and maybe not even a majority) of clients say they want them to do. We have ourselves an old-fashioned standoff. Now what? Most assume some combination of the following: 1) new firms will rise up to provide what clients want, 2) alternative service providers will fill in, 3) in-house lawyers will take over the work, 4) some number of the large firms will cave and change, or 5) computers will take over. Imagine 1, 2, 3, and 5 come true, but that the 200 largest law firms hang tough. They don’t change. In fact, they are so obstinate that all 200 fail. Where does that put clients?

Clients presumably would not have any problems with that mass collapse. If they let the largest law firms fail, they had alternatives to those firms. They did not need the firms. The only ones “hurt” were the law firms. Life goes on. The lawyers who were foolish enough to stick with the large law firms to the bitter end may suffer and staffers may suffer as well. Or, they both could exit before the firm collapses. Businesses fold every day so the death of such firms should not come as a surprise or a source of concern.

Round 3 – Another Draw

According to surveys by one consulting firm, large corporations have pulled over $12 billion of work from large law firms over the past four years, with about $4 billion of that being pulled in the last year. The pace of decline for Big Law has quickened, point out the critics. They need to get with it.

Large law firms still are run by baby boomer lawyers who control large percentages of the client relationships. Strangely, it seems these lawyers are running the firms the way they want to not the way others want them to. The firm’s managing partner may get that things are changing, but the other partners show high resistance to change (and the resistance to change among partners seems to be increasing).

Clients point out that they are no longer standing idly by. If the firms don’t change, they will pull their work and bring it in house and the numbers show that some are following through on the threat. That means that when a law firm doesn’t respond, it risks losing work from clients. The point may seem obvious, but I want to make sure you read it given what I’m about to say.

I think clients, in-house lawyers in particular, need to stop beating on the lawyers in the large law firms. Give it up and let them be. As I noted at the beginning, I’m not protecting them. Rather, I think the verbal pugilists would be better off spending their time showing they really do want change and not just talking about it.

I regularly talk to general counsel who overspend on a daily basis. They aren’t pushing for change, don’t really seem to want change, and emphasize that they are not being pushed to change. Some of them run very, very large departments in very, very large corporations. Right now, they could cut legal service spending by 50% in a year, but they won’t. They will tinker around the edges enough to stay in the good graces of the management team. But they won’t do the obvious things to get spending down. I suspect there are quite a few of these general counsel. While a spending drop of $12 billion over four years is worth noting, it is small compared to what we would see if Big Corporate Law was serious about change.

More interesting are some of the loudest voices in the call for change. They, too, are not really into cutting their legal spending. They are into making a lot of noise and getting lots of visibility, but not into really cutting legal services costs. This is the dark secret that isn’t so dark or secret in the profession. There is a line between saying you want to cut costs and actually doing so, and virtually everyone stays on the side of talk and does not wander into serious action. Let’s face it folks, if you want to cut your legal services spend it is not hard to get it down to a small percentage of what you spend today (as in well under 50%) within a year or two. And that just gets you the low hanging fruit.

Now Let’s Stop the Fight

I get frustrated listening to all the Sturm und Drang. Real change does not happen by getting in the ring and pounding on someone. At the end of the fight, both fighters are worn out and everyone else walks away. One fighter bested the other, but neither changed the world around them. Real change happens outside the ring.

The range of issues that lawyers could attack is enormous. Many of them have direct impact on their existing corporate clients. There are services lawyers (in-house and outside) could provide clients that would add value. Lawyers could help clients steer through murky and turbulent waters. World governance structures are changing quickly, technologies are emerging and evolving every day, societal concerns are shifting presenting new opportunities and risks for clients, and lawyers are ignoring all of this in favor of fighting in the ring over inanities.

Killing off a profession isn’t easy, but it also isn’t hard. Big Corporate Law can throw stones and complain, all the time not really addressing what their clients need and skirting around real reform. They can duck and jab, making sure they don’t pull enough work way to truly weaken Big Law but at the same time showing their bosses they are serious.

By continuing on this route, they ensure that 10 years from now, fewer people will care about the aging legal profession because it will have less to offer people. Big Corporate Law lawyers forget that they too are expendable. Whatever services they pull from outside lawyers can also be pulled from in-house lawyers. As inefficient as outside lawyers may be, in-house lawyers are just as inefficient. The over-hiring of today’s corporate law departments will eventually result in downsizing because cheaper labor does not replace working smarter. Big Corporate Law is following an old playbook used by their colleagues in other departments and a little investigation will show that it is, at best, a short-term trick.

Apparently, the folks at COLPM did not talk about the few corporations who have skipped the urge to add in-house lawyers and are exploring the next evolution in legal service thinking. There are some who are looking at ways to replace outside and in-house labor using process improvement and technology. Their goal is to dramatically reduce the number of lawyers outside and in-house handling routine legal work. Instead, they will use lawyers to tackle the challenges I talked about and new challenges on their way—substantive and meaningful challenges. These lawyers will divert what one speaker called the 80% of low touch, basic legal work away from in-house lawyers as well as outside lawyers, not in-house legal work to reduce labor rates. None of these lawyers were the ones who took shots at Big Law during COLPM.

I agree with the sentiment in Jordan Furlong’s tweet. I think, and have been saying for years now, that clients are simply going around lawyers. The big issues of our time are being faced down by groups that don’t include lawyers. Clients are not seeking lawyers for strategic thinking (the exceptions are very few), and clients are tired of the in-fighting over things like billable minutes and who doesn’t trust whom.

BigLaw is tough enough to take the punches and it doesn’t need me to defend it. But if you are one of those doing the punching, ask yourself this: is your time better spent punching or working with academics, entrepreneurs, venture capitalists, and practicing lawyers (even those in BigLaw) to find ways to meaningfully change the profession? That includes reducing the number of lawyers in law departments focusing on that routine work. But it also means finding new ways that lawyers contribute to solving the pressing problems clients face and in the end, that is where lawyers want to be anyway. If you think punching away is best, then knock yourself out. If you think change is better, then contact me—we should talk.