Bob Dylan. Uncredited.
Bob Dylan. Uncredited.

Bob Dylan, Nobel Laureate, said it well.

This is my last post on SeytLines as the times for me are changing. Almost four years ago to the day, I decided to move my career in a new direction. In the past, we described that change as retiring. But, Baby Boomers don’t retire we move on to the next gig. It is time for another change and a step in a new direction, so I am also leaving my post as Lean Law Evangelist for Seyfarth.

For the curious few as to what comes next …

I have been an adjunct professor at Michigan State University’s College of Law for two years and I will prepare for my third year this summer. The three courses I teach—Delivering Legal Services, Entrepreneurial Lawyering, and Artificial Intelligence and Law—are part of the Law College’s LegalRnD program. I find teaching a challenging and rewarding task and I hope to continue doing it for years to come.

I am involved in various research projects focused on the practical aspects of changing the legal profession. They range from new models for law firm-client relationships to bringing natural language processing and machine learning to court decisions. It isn’t just the delivery of legal services that is changing, it is the substance of law.

I talk every week with startups in the United States and around the world. I will continue those conversations. These entrepreneurs are the disruptors and they bring amazing stories to our industry.

I also have been writing “the book.” As I present, talk, blog, and teach how to re-invent legal practices in the modern world, I am asked “what can I read?” My answer so far has been a cobbled together list of online articles, posts, and books dealing with occupations other than law. I decided to change the answer by writing the book. I’m deep into it now and will continue the push to get it into print.

Finally, I will continue my quest to move the profession forward. That journey has taken me through small, medium, and large law firms; large corporations; consulting; and academia. I look forward to learning the next step in that journey.

A Different Source for the Same Voice

As you might suspect, although I will speak through a different publication, I will continue to talk about the profession and its future.

You can continue reading my posts at  at The Algorithmic Society (you can find my contact information there).

If you want to stay in touch, please follow me on Twitter (@LeanLawStrategy).

If you would like to connect, reach out to me on LinkedIn.

And, of course, you can always use Facebook.

I thought it would be fitting to close out my last post on SeytLines with a verse by Bob Dylan that helped define another time of change. Thanks to all, and I look forward to continuing our discussions on the other side.

The line it is drawn

The curse it is cast

The slowest now

Will later be fast

As the present now

Will later be past

The order is rapidly fading

And the first one now will later be last

Cause the times they are a-changing

Bob Dylan. “The Times They Are a-Changin’ “ 1964.

PapillonIn 1974, Allied Artists Pictures, Corona-General, and Solar Productions released Papillion, a movie based on Henri Charrière’s book by the same name (his nickname, which is the French word for butterfly). The book covers the time he spent in the brutal French Guyana penal system. Charrière became famous for his many attempts to escape from prison. The movie has a great cast, including Steve McQueen and Dustin Hoffman. The screenplay was by Dalton Trumbo. Trumbo was an excellent screenwriter. But his greater fame came in the 1940s as one of the “Hollywood Ten” who refused to testify before the House Un-American Activities Committee (HUAC). Hollywood blacklisted him. He continued to write, however, using front men. Two of the front men movies—Roman Holiday (1953) and The Brave One (1956)—received Academy Awards for screenwriting. It is hard to keep a good author down.

One scene from Papillon has stuck with me. For bad behavior, such as attempts to escape, the guards put prisoners in solitary confinement cells. The prison’s conditions were poor and, of course, cells lacked mirrors. A prisoner could guess if his physical condition was deteriorating. But he had another way to tell. To get his hair cut or to get deloused, a prisoner stuck his head through a small hole in the door of his cell. He would turn his head and look at the prisoner in the adjacent cell, who had his head stuck through the door of his cell. the first prisoner would ask, “how do I look?”

For some reason, this scene reminds me of lawyers working in their offices. Even in large firms, they work alone, oblivious to the world. For comfort, they meet at the coffee station and ask each other, metaphorically of course, “how do I look?” They don’t ask clients or others outside the industry, typically afraid of the answer or wanting to avoid it. They trust the word of the lawyer in another cell.

The light for these lawyers would come by inviting other disciplines into their thinking. I wrote an essay explaining the need for multidisciplinary thinking. If lawyers considered what others have studied, they would find answers—or at least potential answers—to many of the questions they struggle with each day.

Holmström’s Career-Concerns Model

The recent Nobel Prize in Economics brings this point home. Oliver Hart and Bengt Holmström won the award for their work on the economics of contract theory. Contracts are dear to most lawyers’ hearts and one might think that lawyers would stay current on research into contract theory. One would be wrong. To most lawyers, Hart and Holmström are strangers. Lawyers remain ignorant of their work.

This gap in lawyers’ knowledge is disappointing. Economic theory and contract studies could help lawyers understand their own practices. But that disappointment deepens, because the knowledge could help lawyers help clients.

(I’ll come back and address the complaint you raise. First, you say, he wants me to learn project management, process improvement, metrics, and AFAs. To that he adds economics. Doesn’t this guy get that I practice law. A day gives me 24 hours and I squeeze in eating, sleeping, and relaxing.)

Corporate clients complain that legal services come with unpredictable costs, inefficiency, mediocre quality, and arrive late. They direct their ire at large law firms, though the problems seem agnostic—every legal services supplier is at fault.

For years we have enjoyed guessing “why.” Why are law firms unresponsive? Some lawyers are responsive and deliver, as best they can, what their clients want. It seems, though, that the challenge for clients to get what they want grows each day. Clients have responded by taking steps, such as bringing legal services in-house. Increase lawyer hiring, say the general counsels. The problems stay, but reducing use of legal services providers reduces the volume of problems.

Of course, the “why” question remains. If we look to Holmström’s research, we can find a potential answer.

Holmström and Milton Harris studied what happens between employer and employee as the employee ages. For employee, substitute lawyer. Remember, Baby Boomer retirement is underway. By 2030, all Baby Boomers will have reached age 65. We should ask, “what happens to the lawyer-client relationship as the lawyer ages?” As a related question, we should ask whether the general counsel push to move work from first and second-year associates to senior associates and income partners makes sense.

The Harris-Holmström study, titled A Theory of Wage Dynamics, questions some of our basic ideas. Let’s start with this one. The longer an employee works the greater the employer’s knowledge of the employee’s skills (or client’s knowledge of a lawyer’s skills). “This learning allows more senior workers to be matched better to tasks than less senior workers. The result is that more senior workers exhibit higher productivity on average, and this accounts for their higher average earnings.” The higher you rank in the law firm, the higher your income.

But what if that relationship isn’t correct. “Some … empirical evidence suggests, however, that there may be factors other than acquisition of productivity enhancing human capital which produce upward sloping experience-earning profiles. …Medoff and Abraham … find that more experienced managerial employees earn more on average even though their performance is not as highly rated as less experienced workers in the same job category.” Harris and Holmström go on to show that senior workers may get paid more for reasons other than productivity. For general counsel, this could mean you pay higher rates for senior attorneys even though you don’t get higher productivity from them.

Perhaps the Harris-Holmström view holds true for lawyers in firms. We do not know. But, this is a nice example of lawyers acting based on guesses even though economic studies would give them data-based knowledge. Harris and Holmström published their paper in 1982. I’m sure an economist would point to all of the studies following the paper. Perhaps their idea did not survive. The point is that lawyers tread ground others have covered, for no good reason. By working alone, lawyers deprive clients of what we (the broader “we”—society) already know. Doing so wastes time and money. As I have said, law and the delivery of legal services is too complex to leave to lawyers.

Join a Team

I promised I would come back to your complaint. You say lawyers lack the time to become project managers, process improvement experts, pricing experts, and economists. I’ll go back to my usual response. I argue that lawyers must become part of expert teams. I get it — I was a partner in a law firm and spent 20 years in-house, most of them as a general counsel. As a general counsel, I worked on teams composed of experts. In-house lawyers get used to this approach. Law firm lawyers avoid it.

I argue that practicing law takes a wide range of skills and those skills should come from blended teams. Lawyers should avoid the lone wolf syndrome. Law firms and law departments will be better off with teams that include project managers, process improvement gurus, data analysts, economists, and other professionals.

The mix of those professionals for each project and matter will vary. But, the modern legal team needs skills and knowledge lawyers lack. The leader of the team, which may be a lawyer or could be someone else from the team, should be familiar with these other disciplines. She should know how to leverage these individuals and how to compose teams suited to answering client problems. I do not argue the lone lawyer should become an expert in all areas.

Lawyers are stubborn. They refuse or ignore this advice. What happens? Precisely what we see happening today. Lawyers get displaced. Consultants, accounting firms, entrepreneurs, and others embrace teams. They leverage teams, which may include lawyers, to the benefit of the client. Lawyers become tacticians, others become strategists.

The retirement of Baby Boomers means the legal industry will watch some knowledge walk out the door. We will lose some experience. But if we don’t change our behavior, we will lose an important opportunity. We lose the opportunity to become team builders and team players. We lose the chance to integrate what we do with what others do to enhance our problem solving abilities. We lose our chance to solve problems. We become the technocrats that computers can replace.

References

Harris, Milton, and Bengt Holmström. “A theory of wage dynamics.” The Review of Economic Studies 49.3 (1982): 315-333.

Multidisciplinary
I recently had an interesting conversation with one of my Twitter followers. He had challenged my use of a certain social media tool. He pointed out that many studies show the tool is ineffective. These studies use data gathered from a broad swath of Twitter users. He was relying on studies that used data which might, or might not, have any value in predicting the behavior of my Twitter followers. I pointed out that I use data from my Twitter feed to gauge whether the tool helps me, and that data supports using the tool — so far.

We had a basic disagreement. His point was that large data sets showed no benefit from the tool, my point was that a specific data set (and more relevant data set) showed I was getting a benefit. He seemed frustrated, believing no doubt that I was wedded to a worthless tool. He suggested that many of my followers probably dismiss what I say about billable hours, believing that my general arguments about billable hours do not apply to their specific cases. Let’s call this the Twitter Tool Story.

I had a second conversation recently with a different Twitter follower (let it never be said that you can’t get engagement on Twitter). This follower leads a global law firm network (more precisely, he helped create and guide the network). He wants to establish global quality standards for legal services. Legal industry trade associations would coordinate the work. While I lauded his efforts to bring quality standards to legal services, I was not in favor of the global approach. I thought it might work to establish metric categories, but I disagreed with defining specific metrics firms and clients would use globally. Legal practices vary significantly around the world due to law, local customs, and other variables. Establishing one metric would not mean much and could be misleading and even counter-productive. My follower did not agree. Let’s call this the Global Metric Story.

On Not Being Multidisciplinary

I share these stories because both point to a common problem in the legal industry: weak knowledge of statistics. I am sensitive to this issue, because I was a graduate teaching assistant for statistics courses. A little knowledge can be a dangerous thing, and when it comes to law and math, we often see that maxim played out in real life.

For most of my career, legal services providers* could get by without understanding statistics. Now that the data era has arrived, providers lacking a basic statistics understanding will find themselves increasingly at a disadvantage when compared to those who have basic statistics fluency. Queue the howls.

Lawyers point out that we tell them they must have proficiency in law, project management, process improvement, pricing theory, marketing, business development, and now math? There was a time not long ago when an undergraduate degree in philosophy and a law degree was all it took to earn a decent living. How can it be that lawyers must now know all these “secondary” areas?

Any decent response must start with the obvious. First, lawyers had it easy, and second, welcome to the complex world. I will add some brief color to the first point and then move to the second (but if you want a sneak preview, consider this essay: “Using Multidisciplinary Thinking to Approach Problems in a Complex World”).

I am sure very few lawyers would admit this, but lawyers have gotten off easy for over 100 years. While a lawyer could get by on a philosophy degree and three years of law school, doctors, business leaders, engineers, accountants, and other professionals had to go well beyond their basic field to stay proficient. Law professors took on additional fields, as the “law and” movement blossomed. Even some lawyers (myself included) added professional training in other fields. But practicing lawyers stuck to the basics—a law school education focused on reading court cases and a law student received (and was offered) not much else.

Most lawyers won’t admit that the world has changed since the late 1800s, when the current legal education system was developed. Law has shifted from a field for the generalist to one for the specialist. It also has shifted from legal theory only to legal theory plus knowledge of several other subjects. In business, those subjects include accounting (the mad rush to train in-house lawyers in basic accounting after Sarbanes-Oxley was passed, comes to mind); in employment law, organization theories; and in securities law, finance. Even then, we have just scratched the surface. Is isn’t that lawyers now must do more, it is that for 100 years they got by doing less.

On Being Multidisciplinary

I mentioned a blog post a bit earlier (“Using Multidisciplinary Thinking”). The post was written by Shane Parrish, who says that at one time he spent his days “in management with an intelligence agency.” I like spy thrillers, so I was a sucker for this bait (apparently I am not the only one, because Parrish has a long list of well-respected individuals who like his site). But, the real thing I liked about this post, apart from its heavy focus on Steven Pinker who is one of my favorite writers, was the focus on “multidisciplinary.”

I asked a few lawyers what “multidisciplinary” meant to them, and got the expected answers: corporate and litigation, finance and tax. Not exactly what Parrish meant.

Parrish focused on Pinker’s form of multidisciplinary thinking. Start with your hypothesis, but then look at it from many perspectives. In Pinker’s case, this can mean psychology, sociology, economics, and history. This technique takes you much farther from your home base than what lawyers traditionally do. But, it doesn’t mean you must become an expert in every field.

Now, many lawyers will say they are not asked to do what Pinker, a professor at Harvard, is asked to do. The role of a lawyer, they say, is not to delve deeply into the “why,” it is to solve the problem facing the client. Hence, the lawyer’s technical and narrower focus. A client does not need her lawyer to ask why companies in many European countries use employment agreements for senior and even mid-level employees when U.S. companies do not. That client needs her lawyer to provide an enforceable agreement that specifies the relationship between the company and the employee.

If that is all lawyers have become—technicians and scriveners—then game over. Software can perform the drafting function, with some input from the client. One lawyer could perform the work of hundreds, perhaps thousands, and that is why I and others talk about excess labor in legal services. I also argue that excess labor for technical tasks can be re-deployed to value added strategic activities.

The lawyer could, of course, choose a different path. With the number of employment-eligible people increasing who choose freelancing over full-time gigs for one employer, the entire structure of “employment” shifts. The multidisciplinary lawyer could look at what that means for employers and employees, and think about how to understand that world through the law. That lawyer advises her client on a broader scale, while ensuring that tasks such as drafting agreements is done in the most efficient and least costly manner.

Two Stories Highlight the Multidisciplinary Problem

We should go back to the Twitter Tool Story and the Global Metric Story. The challenges they raised exposed more about what my two Twitter followers don’t know about statistics than anything else. Both favored the general over the specific. In the Twitter Tool Story, the flaw in my challenger’s reasoning lay in trying to use conclusions from general data on a specific case, given that we had superior data. There may come a time when my Twitter followers resemble the population of Twitter users included in the studies he relied on. But not today. For whatever reason (perhaps because my Twitter followers do not mirror the population of Twitter users at large) my specific data does a much better job than the general data in predicting the behavior of my Twitter followers.

The Global Metric Story takes us down the same path. An attempt to build a metric that we can use around the globe, in over 240 countries (and many more jurisdictions within those countries) to predict quality favors the general over the specific. We need to measure quality. But, quality to a corporate client in Jakarta, Indonesia does not need to mean the same thing as quality to a corporate client in Alabama, United States. In fact, from past experience, applying the same quality metric in both places would be a disaster.

Those who know more about statistics may be muttering that there are tools we can use to compare the populations from which we pull data, ways to compare the metrics, and on and on. All true. My point is not that my challengers needed to be statisticians, only that their lack of knowledge about some basic issues in statistical measurement and social sciences hampered them. More significantly, it limited what they could do for their clients. A quote from Steven Pinker helps sum up the predicament my Twitter challengers faced:

If you’re just manipulating numbers, you never know whether you’ve wan­dered into some preposterous conclusion by taking numbers too seriously that couldn’t possibly reflect reality.

It would help them to know more about statistics, but it would also help to have a multidisciplinary perspective so they could see how to use statistics in the real world. Remember, knowing about a field is not the same as becoming an expert in the field.

Our Greatest Asset Is Curiosity

My Twitter challengers highlighted another reason why lawyers (and here I do mean lawyers, not legal services providers) will find the road ahead increasingly difficult to travel. The obsession with time-equals-money has squeezed curiosity out of lawyers. In law school, an increasing number of students draw a line between the courses they take, passing the bar exam, and getting a job. Yes, to practice law you must (still) pass a bar exam. But, the obsession means a narrower focus on relevancy when picking classes.

Once law school and the bar are behind a lawyer, the focus on a niche increases. Again, the driver is money. Clients will pay for specialists—those who can answer a question on the phone, without research, and in the shortest time possible. That type of specialization works for the tactician, not the strategist. As problems grow in complexity, the tactician must know each step to get from start to goal, while the strategist must see the bigger picture and have the perspective to question the goal.

The data shows that over many decades, lawyers have become excellent at tactics, but not very good at strategy (see this article to read a bit more). Lawyers have abandoned their curiosity. They aren’t multidisciplinary and even within “law” they know less and less about more and more.

Of course, it is a reversible trend. In fact, it is one of the easier trends to reverse. The antidote for over-specialization has two parts. First, don’t do what you don’t need to do. By this I mean turn over to computers those things computers do better than you (automation) and eliminate those things no one needs to do. Both steps free up time (up to 50% of your time, by recent conservative estimates). Second, use that time to become multidisciplinary. Employment lawyers should know more than the latest case on race discrimination. They should know trends affecting employees, what employers want when hiring, theories about workplace sociology, risks from freelancing, and so on. By expanding their knowledge set outside law to psychology, sociology, organization behavior, economics, etc., they become applied knowledge providers, not just technicians.

If all you have is the technical capacity to provide legal services in a defined area, then all you have to offer clients as a competitive differentiation is price. If you re-define your role from technician to problem solver, and re-jigger what you know beyond the law, you increase your value (to yourself, not just clients). I get asked why I write on a broad variety of topics instead of focusing on, for example, lean thinking applied to legal services. My answer is that I do write about lean thinking applied to legal services. I just define that topic in real life terms instead of how many experience it: the technically narrow field of how to do tasks such as process mapping. In real life, lean thinking is not about cutting costs, it is about freeing people and resources to focus on the strategic initiatives of the organization, to help people perform at the top of their skill levels.

* Many of you know the debate about using “non-lawyer” when referring to anyone who does not have a law degree. While technically accurate, the term has a negative connotation, suggesting those without law degrees lack some characteristic that elevates those with law degrees higher in the social order. I have switched to using the term “legal services provider” to mean anyone—with or without a law degree—who provides legal services. A lawyer is one type of legal services provider, but so is a project manager, legal solutions architect, legal data scientist and so on. Similarly, I use the term “legal services organization” to mean any organization that provides legal services. A law firm is such an organization, but so are an e-discovery business, a legal technology company, and a contract lawyer service. A lawyer working at a bicycle repair shop is not a legal services provider and the shop is not a legal services organization. But, a legal data scientist working at a legal managed services company is a legal services provider working at a legal services organization. Once I have established the terms in the text, I switch to using “provider” and “organization” (or their plural forms). I also use “lawyer” and “law firm,” but only when I mean those specific individuals and organizations.

LawDeptWe move forward by challenging the way things are today. It is easy to look at the world, see what is happening, and assume that is the way it has been and will be. It is hard to imagine a different future, but if we do, we often find ways to improve. The chatter today is about a world with different types of large law firms. In this essay, I’m going to ask a different question, “Is there a future with different types of law departments?”

Law Departments Are Not Immune to Change

There was a time when large corporations operated without law departments or, at most, had a general counsel. The legal work was done by law firms. Often, a lawyer from the main outside law firm representing a corporation would sit on the corporation’s board of directors. Practicing law was not considered, in the terminology we use today, a core competency of a corporation. Law firms were trusted advisors to corporate leaders.

If the corporation had a small law department, the lawyers were gatekeepers handling the legal work flow between inside clients and firms, and they handled simpler matters, such as routine corporate governance for subsidiaries. A general counsel might be a well-respected internal strategist, but the substantive work was done outside the corporation.

For many corporations, having a law department is a recent thing. Forty years ago, when I started working in law firms, it wasn’t hard to find a large corporation, even a Fortune 500 corporation, without a law department. I remember when Continental Bank, one of the largest banks in the United States, outsourced its law department to the law firm known then as Mayer, Brown & Platt. My first in-house job was with a Fortune 500 corporation that had started its first law department less than a year before I joined.

If you have been around corporations long enough, you have seen them go  through organization philosophy phases. At one time, corporations boasted large IT departments charged with running the heavy metal computers that comprised the IT infrastructure. The people in IT were not closely intertwined with the business. They were there to make sure the corporation’s backbone (accounting, ordering, etc.) functioned.

Over time, the heavy metal phase gave way to lightweight servers which gave way to the cloud phase. IT departments became integral business partners often charged with developing technology structures to support or implement new business models. IT leaders still must make sure the bills are paid and the orders tracked, but they do far more than that in a good corporation. At the same time, they have shed the routine, day-to-day work to outside providers.

We have seen corporations go from no law departments to large, labor-burdened law departments. Is it time for a phase-shift in law department philosophy?

Shifting the Corporate Law Department

Obviously, there are no legal barriers to operating a corporation without a law department, though in some corporations we would need to pull out the  compliance functions and keep them in the corporation. Law departments have advantages over law firms in many (not all) situations. But, advantages are not barriers to outsourcing. There are advantages law firms enjoy over law departments. In fact, most corporations do not have law departments until they reach a certain size or need level. Smaller corporations often operate without law departments, and “smaller” can be quite large including $1 billion corporations.

The question I’m posing, then, is whether we will get to the point where multi-billion corporations go without law departments or at least scale the law department down. Think of a law department with a general counsel and a few subject matter leads (securities, employment, etc.), but no one else even though the corporation ranks in the top 50 on the Fortune 500 list.

Today, the answer would be no. The cost gap between in-house lawyers and outside lawyers continues to grow while the skill gap shrinks. Over the past 30 years, and particularly over the last 5 years, corporations have learned they can bring in-house the same lawyer they use in a law firm, but at a greatly reduced cost. This knowledge has led law departments to go on a hiring binge as they trade outside spending for in-house payroll.

A New Model Law Firm to Support Law Department Change

What would it take to change? Let’s engage in a thought experiment. Imagine a new large law firm. The organization structure is similar to what we see in many businesses, with a central services function composed of centers of excellence (CSE). Those centers include human resources, technology, marketing, finance, and supply chain management. What does supply chain management do? It handles retaining and integrating resources outside the law firm that are needed for particular matters. These could include e-discovery vendors, managed service providers, and specialized technology services.

The CSE functions work together on a common platform (something like SAP for law). They each use specialized modules that hang off the backbone of this common platform. The modules talk to each other through the backbone, eliminating much of the complexity that exists in the modern, siloed law firm world. The backbone also could be used by law departments, allowing law departments to work seamlessly with many law firms and law firms to work seamlessly with many law departments.

The client-facing part of the law firm is more interesting. First, the firm has three major brands. We’ll call them Queen’s Counsel, Middle Lex, and Average Joe. All three use the CSEs, but each presents a different (though at the margin, overlapping) face to the world. In fact, each business is housed in a separate legal entity, all owned by the parent firm.

Queen’s Counsel markets itself as the best of the best. It is a high end purveyor of bespoke legal services that clients use when price isn’t the issue. It has partners with tremendous experience and the price for legal services reflects the premium quality. When Queen’s Counsel handles a matter, the matter leaders (not all lawyers) quickly disaggregate it into the high-end work (usually strategic planning and work on key documents), and other work. The other work is performed by a combination of one or both of Middle Lex and Average Joe, and outside service providers hired by the supply chain CSE. Very experienced project managers coordinate the process using the project management module attached to the backbone.

Middle Lex handles what the lawyers jokingly call “department store” issues. Clients are somewhat price sensitive when it comes to this work, but it still has a fair amount of non-standardized elements. Occasionally, the Middle Lex lawyers will call on Queen’s Counsel lawyers for expertise, but generally Middle Lex uses its team supplemented by the Average Joe team and outside providers arranged through the supply chain CSE. Middle Lex also uses project managers very experienced in handling its type of work.

Average Joe is a volume shop. The attorneys have specialized teams organized to very quickly and efficiently handle simple or routine (but not necessarily simple) legal work, heavily relying on technology. Most of the team involves domain specialists who aren’t lawyers, but are very well trained in their specialized areas. It has a steep pyramid structure, with very few supervisory personnel compared to the number at the base of the pyramid. Process improvement specialists fine-tune everything Average Joe does to make sure waste is kept to a minimum.

Average Joe is a supplier to both Queen’s Counsel and Middle Lex, because their matters generally have components well-suited to what Average Joe does and using Average Joe brings down the price. But Average Joe also does a lot of work directly with clients. For example, Average Joe can turn many types of contracts very rapidly at low cost. With its sophisticated software, database of tens of thousands of contracts (growing rapidly), and dashboard analytics, Average Joe can input a contract and tell in seconds where to focus its energy during negotiations.

Clients know the three businesses are owned by the same firm, just as they know hotels at various prices ranges are owned by the same company. Clients choose among the law firm businesses based on the matter at hand, just like they choose the hotel where they stay depending on need. The law firm operates the three businesses on different revenue and cost models, rolling the results up to the parent law firm. Lawyers own the firm and bear liability for all it does. But the firm manages the three units differently. Hiring, compensation, work environment, marketing, and more are differentiated based on the market for the services. Technology is held in a separate subsidiary that handles research and development and licenses specialized modules to other firms and law departments.

One of the key CSE teams is the Data Analytics Group (DAG). DAG captures streams of data from all of the legal work flowing through the firm. It gathers basic information, such as lead time, process time, and percent complete and accurate. It also does natural language processing and computational analytics. Each text document is stored in the same, prescribed format. As part of the storage process, the document is tokenized (broken into chunks, such as words), annotated (each word assigned a label), and parsed (relationships assigned within the document). Using machine learning and other tools, DAG creates the dashboards lawyers use as part of their workflow.

When a lawyer is asked whether a term is “market,” she can instantly query the firm’s database using DAG analytic tools and provide an answer across all similar matters the firm has handled and across all similar matters the firm can access. DAG combines the firms’ data with external sources, to provide rich models used as part of the firm’s predictive analytics offering. For example, the firm can look at all single plaintiff employment lawsuits it has handled, the results of all reported cases, and the results of all EEOC investigations. From that analysis it makes recommendations to the clients that could decrease or eliminate the risk from such lawsuits.

Evolving the Law Department

With this law firm model in mind, we can go back to whether a corporation needs or wants a law department. The corporation could decide to outsource its legal work to one or several firms of the type I just described. The work could be organized by geography, product line, or risk level and distributed among firms. All of the work would be done under value fee arrangements. The firms bear the risk, under the assumptions agreed to between the firms and the corporation, of cost overruns but the business model enables them to manage the risk.

Going to my question: would a corporation outsource its legal work and eliminate its law department? Probably not. More precisely, it probably would keep a small crew of lawyers in-house. The role of the in-house lawyers would change, however. The in-house lawyers would not oversee teams of lawyers, but would oversee the interface between the corporation and outside providers. They would also focus most of their time on strategic, business focused issues. The law firms would be far more cost efficient than the corporate law departments under the model I described.

If you think this theoretical law firm is unlikely, then consider a variation. The Big 4 accounting firms are all moving into the legal industry again. They already have all the capabilities I described for the new law firm, though they don’t use them as part of providing legal services—yet. A Big 4 firm would not have to move far to create the law firm structure I described, and already has the CSE and technology infrastructure to pull it off. The accounting firms tend to focus on the Middle Lex work right now, but adding subsidiaries to do Queen’s Counsel and Average Joe work would not be difficult.

We look at the way the industry is structured today, recognize that it has been structured the same way throughout our lifetimes, and assume change will happen slowly or not at all. Law firms are very fragile organizations (in the words of one of the largest law firm leaders, they start as a new firm each year). Changing the legal service delivery model is more about culture and habit and less about technology, processes, and costs.

Just as law firms will evolve into many models, law departments should evolve and some should become more like the model I describe—skeleton in-house teams managing sophisticated and multi-layered outside law firm models. Law departments have tremendous opportunities to re-shape legal practices, not just through their outside law firm spend but by re-designing their internal models to meet what clients need. Just as law firms have been slow to evolve, law departments are sticking largely with mini-me law firm models (even the law departments in the UK, where we have seen the most evolution). For law departments to really cut costs, become highly responsive to clients, and reduce risks, they too need to re-think their legal service delivery models and evolve.

MeteorYou must have seen the movies. Even if you haven’t, you know the plot. Computers (typically, but not always, in human form which makes them more threatening and/or more likable) have intelligence surpassing that of humans. Things go bad, but at least one human is on top of it. In the end, humans win and computers lose.

This story now plays out in the minds of lawyers, but without the happy ending as they read article after article telling them computers (artificial intelligence or robots, the language varies) are one transistor away from taking over their jobs. Startups are signing deals with law firms and from what we read, the day of the pleasant voiced iEsquire robot taking over an associate’s job is virtually here.

Before you start cruising the Internet for your next career (sustainable farmer looks good, you always did like vegetables), pack up your office and head for the elevator, I suggest you read a bit further.

A Stimulating Un-conference

I had the privilege of spending much of last week at the SubTech 2016 conference hosted by the University of Richmond School of Law. SubTech (which stands for substantial technology) has been held every other year since 1990 (Richard Susskind was one of the early attendees). The conference had about 40 participants and, unlike most conferences I attend, had a somewhat academic bent. In fact, the focus of the conference is substantive technology in education, not just in law schools but also in law firms and legal services for consumers.

The conference planners expanded the group attending this year to include a few more from outside traditional academia. We had individuals from publishing, tech startups, consulting, hybrids (that would be me), and a few other fields. And, of course, a heavy sample of those from traditional academic environments (law professors and law librarians).

The conference is, and has been for a long time, an “un-conference.” We are all used to going to conferences where an individual spends 30 or 60 minutes talking about topic A or a panel spends an hour discussing topic B. The audience spends half the time listening and the other time reading email, tweeting, or catching up on the latest story to come through on their newsfeed (cute cat videos are saved for the break). We learn some things at these conferences, make a few hasty connections as we grab another cup of coffee, and hopefully have some interesting conversations at the receptions.

An un-conference focuses on sharing information. We start with very informal presentations on a topic by one or few individuals. Knowledge of the topic is assumed, and the presenters focus on updates, tweaks, nuances, or interesting personal experiences. Most of the time is saved for discussion in small groups where we talk about areas of shared interest. In those groups we focus on, among other things, developing ideas that we can take outside the conference and continue developing.

WIIIFM

We started the session by going around the room and introducing ourselves, and then touching on two questions: 1) what is the promise of substantive technology, and 2) what is the peril? I’ll address those questions in a bit, but before I do let me give you some examples of typical conversations from the law conferences I attend:

Idea Person: If you look into this idea, I think you will find that it helps with your practice.

Lawyer: Sounds great, what’s in it for me?

IP: Well, as I said, it will help with your practice by [fill in the blank: reducing workload, making you efficient, automating repetitive tasks, etc.]

L: Sounds great, but what I really want to know is what’s in it for me?

IP: What more can I tell you?

L: Will it make clients give me more work? Will it really increase my billable hours? Will it allow me to charge more per hour? You know, what’s in it for me?

IP: Well, it will make your clients more satisfied and less concerned about your bills, which could mean they will send their work to you instead of someone else.

L: Yeah, I suppose, but what’s in … sorry, I have to take this call because I can bill for it. If it ends before the break is over I’ll grab you because I really am interested in hearing what’s in it for me …

Okay, that was a bit tongue-in-cheek, but it also was disappointingly accurate. I have had consultants and trainers who do not regularly work with lawyers express their shock after meeting with lawyers. They say the same thing—as a group lawyers lack the curiosity and drive to do better they see in others. Lawyers replace those characteristics with a “what’s in it for me” attitude.

The Promise and the Peril

Back to SubTech 2016. On the promise question, the group was optimistic to a person. This was impressive because some of the people in the room have been tilting at windmills for 40 years (on the other hand, as some said, you can’t tilt at windmills for 40 years unless you are optimistic). Everyone believed that technology is making more in-roads in legal education and law practices, and everyone expected continued progress.

That brings us to the peril. On this question, our answers varied. At the risk of over-generalizing, I’ll highlight some categories:

  1. Hype. Each day we see a new article promising that AI will take over law tomorrow, robots will replace lawyers, and we are one-step away from a dystopian universe where computers rule the legal industry (and the world). Hype outdistances reality and not by a small amount. Don’t fret, computers will not take over the legal industry. If you don’t believe us, check out this McKinsey Report which just came out. It concludes that professional occupations, including lawyers, are one of the groups least likely to be replaced by AI or robots anytime soon. (Teachers rank least likely, which means as a lawyer teaching, I’ve got it made!)
  2. Chokepoints. In academia, the curriculum committee and the academic dean hold considerable power over what courses are available for law students. If you have one or both on your side, you can get courses approved and if not your course will not see the light of day. We have some very forward-thinking individuals in these roles, but the majority aren’t with us yet.
  3. Fear. The more successful we become with technology, the more fearful many become. This is a bit different than the first point. Even modest advancements in technology raise the threat that knowledge workers will be displaced to some degree by computers. As much as lawyers may hate some manual tasks, they still prefer them to unemployment.
  4. Meteors/Dinosaurs/Segways. This one requires a big hat tip to John Mayer. He arrived wearing a T-shirt showing a dinosaur riding a Segway while a meteor screams toward the dinosaur. It was a nice metaphor for lawyers (the dinosaur) using outmoded tech (the Segway) just as we are about to be blindsided by the future (the meteor).
Working Together

After 2 1/2 days and 3 nights of listening, sharing, and learning, it is hard to summarize the event in a few words. The biggest outcome was building greater bonds (and we have things in the works to build more) between academia and the greater legal community. Unlike other disciplines within universities, law has remained a field of silos. Very few law professors know what practitioners do, much less work with them. Startups tend to work apart from universities and practitioners. Practitioners do their best to ignore startups and academia. This all must stop.

Some work done in universities should be theoretical, just as it is in physics, chemistry, and so on. But, we need more work that ties into what happens in the real world. We saw signs that is happening, but there is much more that we can do. Startups are, in a few cases, blazing new ground (though all agreed that much of what we see in startups is work aimed at making better mousetraps). Still, it is disappointing when a startup publishes work tackling a problem that scholars attacked (and sometimes solved) years ago. Startups can leverage work academics did that was before its time, and academics can blaze ground that startups can use.

Of course, I saved practitioners for last. WIIIFM defines practitioners’ lives. What is in it for me, they constantly ask? This focus on the next billable hour and next rate increase seems to drown out paying attention to almost anything else.

The Lawyer as Frog

I enjoyed the SubTech 2016 conference, more than other conferences I attend. In part, that was because it was intellectually stimulating and other conferences are heavily focused on money not the mind. It was stimulating, partly because of the diversity of interests attendees brought to the conference.

As we talked, complacency emerged as another conference theme. Clearly, those in attendance have been and still are fighting complacency. There is an old metaphor about frogs and hot water. The metaphor (which, for those who don’t know, is absolutely wrong) says that if you put a frog in a pot of boiling water, the frog will jump out. But, if you put a frog in a pot of room temperature water and slowly increase the heat, the frog will stay put until it dies.

The frog metaphor may be wrong, but the lawyer and technology metaphor will prove to be true if we don’t change things. Most lawyers seem content to sit around while technology heats up around them. Law students aren’t just uneducated when it comes to technology, many won’t dive in when given the chance. Law firms are willing to continue doing tasks by hand which computers could handle many years ago, as long as clients are willing to pay for efficiency. Corporate clients seem willing to pay for inefficiency. Individual clients simply go without legal services (and not always by choice).

Despite the attendees’ optimism, lurking in the background and a few times stated out loud was the thought that if we don’t move away from complacency, we will end up in obsolescence. By simply staying still, lawyers will allow (already are allowing?) the world to move past them. One morning we will wake up and the world will have moved on. There will be few things left for lawyers to do because others will have absorbed them and develop new ways to do them.

Get Out Your Blasters

Lawyers are intelligent and have the ability to adapt. Like all organisms that have the ability to adapt, they will adapt given the right conditions and enough time. For lawyers, the key condition is motivation—what will it take to drive us to change. As to time, the question is whether we will have waited too long to change.

So far, at the corporate end of the legal services scale, we have placed our bet on clients forcing change. That isn’t working, because clients just are not that interested in change. At the client-as-individual end, we have placed our bet on shame forcing change. Lawyers will see themselves as professionals letting down society and will force themselves to do more, through pro bono or other charitable acts. That also isn’t working.

Because lawyers are focused on WIIIFM, perhaps the simpler tack is to focus on self-preservation. Within humans, the urge to survive is very strong. Lawyers will not disappear overnight (the meteor striking the dinosaur on the Segway). In fact, lawyers may never disappear (we will morph, like the few dinosaurs that survived). Lawyers can defeat the meteor by adapting and embracing new things—technology and new business models, at least. New lawyers in particular have strong incentives to see themselves and the profession adapt.

Law students should seek out opportunities to learn about the changes, through classes, workshops, and attending conferences focused on new ways to practice law. Newly licensed lawyers should do the same, and should force themselves to incorporate these new ideas into their practices (even lawyers in large firms can do that). Students and lawyers can become active in those parts of associations that focus on change and the new, instead of reinforcing the old. They can seek out mentors who are at the forefront of change and become part of the push for change.

Like any social movement, changing the legal profession will be a grass roots thing not a top down thing. If lawyers start pushing harder now, we have the time and tools to adapt. Instead of watching for the meteor, let’s figure out how to blast the thing out of the sky.

SalaryIncreaseWhen starting salaries at many of the “elite” law firms jumped to $180,000 several weeks ago, Twitter lit up, the blogs started pumping out posts, and in-house counsel were deluged with requests to comment (criticize) what had happened. Now that things have slowed a bit, I thought I would chime in with what some may find a surprising viewpoint: the increase was a good thing for all of us. Now, in this essay I talk about “elite” law firms, by which I mean the 20 or so firms that have put themselves at the head of the profit pack in the AmLaw 100 list. Many use the term “elite” to describe them, which is why I’m using it. Don’t read anything else into it.

Start with the Bad

Before we get to the good, let’s dispense with the bad. First, there is no free lunch. Associates going to firms willing to pay $180,000 a year (and I’m ignoring bonuses), should go in with their eyes open. Firms expect those associates to work for that money. Each time the starting salary ratchets up, the expectations for associates ratchet up.

Firms probably will not say anything as crass as “we are paying you more, so work harder” (some partners might get there, but not the firms). But, the pressure will be on. Associates already at the firms probably thought there wasn’t much room for working harder, but the pressure will still be there, even if implicit. Hint to associates: if you got a job at an elite firm, you can get a job elsewhere.

Second, to state the point causing everyone to fuss, the money to pay the increased salaries must come from somewhere. Since a firm’s revenue stream comes from clients, the presumption is that clients will pay for the increases. That is an excellent presumption (where else would the money come from?). It isn’t clear whether the firms will cover the raises by increased rates, billing more hours, reducing future payouts to partners, or some combination. The expectation is that partners will bear little of the burden and the brunt will fall on clients through increases. Bad for clients (who, of course, can use other firms, but I digress).

Third, there is the “this is bad for the profession” argument. Clients and the public already show low confidence in lawyers (about 21% of the public trusts lawyers, down from around 34% over a decade ago). In part, the public perceives lawyers as driven by money. Increasing the starting salary adds to that perception. For lawyers at the elite firms, this might be called truth in advertising.

Fourth, we hear about the trickle-down effect. The elite firms will match the salary price leader. The next tier may will not match elite firms, but will move up incrementally, and so on down the ladder. Again, since revenue comes from clients, the overall effect is to increase costs to clients at a time when they already think costs are too high. Most commentators stop here. Higher salaries are bad. But with a little creativity, we can look at this another way and find good in it for all of us.

Ask Why

Having surveyed key reasons for not increasing salaries, the commentators then ask “why did the firms do it”? The working presumption is that elite firms are ignorant (or impervious) to the concerns of clients. Starting salaries have been stable for many years. So, elite firms did this without thinking it through and to serve some mysterious, narrow purpose.

The explanation offered most often is “the market made them do it”. The pool of applicants to law schools has shrunk dramatically since the 2008 recession. In fact, it has reached levels last seen in the 1970s. In addition to the pool shrinking, the perceived quality of the applicants has dropped (measured across the pool). For example, median LSAT scores have dropped. Since LSAT scores seem to track with bar passage rates, the score drop raises concerns. And we have seen first time bar passage rates drop.

The change in the applicant pool has flowed through to graduating students and newly licensed lawyers. When applications were high and demand for law school slots was strong, elite law firms felt comfortable hiring deep from within graduating classes. As the pool has shrunk, elite law firms are not comfortable going deep into classes.

Of course, elite law firms are hiring fewer lawyers, so not going deep has been offset to some degree by hiring fewer associates. But, there are other market pressures. Elite law firms, once an attractive place to work (or at least not as unattractive), have lost much of their luster. Students struggle to understand, apart from the money, why they should spend time working in environments known for all sorts of horrible things. They are looking for alternatives and there are many.

To get what they think are the best of the best, elite firms had little to offer beyond money. The partnership track moved from a highway (single lane), to a gravel road, to a path hidden in the forest. Odds of getting on that path are slim and not going to change. When your business model is based on hard labor, it is difficult to talk about a balanced work-life experience. As organizations outside the legal industry look for candidates with characteristics beyond the ability to grind away for long hours each day, even the resume-burnishing aspect of working at an elite law firm is tarnished.

Money addresses the problem. Some portion of the best of the best will use money as the deciding factor when choosing an employer. Going to a startup may look very attractive, but it has a high risk profile. The pay isn’t great (lawyers are not data scientists) and most startups fail. Startups have many other desirable elements, but if you have loans to pay the security of a large salary can make the difference. Money is one way elite law firms can nullify what competing environments may offer.

Then Ask How It Helps Us

We have heard the arguments about why the increase is bad, so now let’s look at the alternative arguments. This increase could really help us.

First, while the impact may be small, some of the new lawyers who go to elite firms will use the salary increase to pay off their student loans faster. In a world where the typical debt held by a student graduating from a private law school is around $120,000, and where those students probably also have debt from their undergraduate days, more money to pay off loans helps. The faster students pay off loans, the better for all of us—less risk of default, the sooner those lawyers can go on to other careers, and the sooner they can participate in other aspects of the economy (buy cars, homes, etc.).

Second, the salary increase may push clients closer to the tipping point. Think about the scene in the old spaghetti westerns. The outlaw starts pushing the good guy in the chest. The good guy stumbles backwards and warns the outlaw not to do it again. This happens three or four times until the good guy snaps—he punches the outlaw who hits the ground. The crowd murmurs appreciatively.

Elite law firms feel comfortable. Clients need them for large, risky things. Cross-border mergers and acquisitions, bet-the-company litigation, complicated financing packages, and other sophisticated legal transactions demand the skills of elite firm lawyers, the elite firms argue. Clients who purchase their services tend to be price-insensitive (yes, we saved money on the lawyers, but of course we lost the lawsuit and the company). Elite law firms probably feel the risk from the increase is outweighed by the benefits.

But we could view this as the outlaw (elite law firms) pushing the good guy (clients). Each push to the chest increases the likelihood clients will reach the tipping point. A few more clients may get there and, instead of taking a swing at the elite law firms, vote with their wallets. “Are these elite law firms really worth the higher price,” they ask? If not, they move to less expensive service providers. Law firms that offer more attractive value propositions should cheer as should the clients who get pushed too far.

This last point is key. Clients pay elite law firms. As long as clients are willing to pay, elite law firms will keep pushing. If clients don’t like getting pushed, they can simply walk away. If they don’t walk away, we learn something. Economists and antitrust lawyers know this situation well. The question involves the market and clients not leaving tells us that they do not believe there is an adequate substitute for elite law firms.

Take the Lesson and Run

Imagine you sell ice cream. Your store has competitors. One is two miles away, another three miles away, and a third eight miles away. Like everyone else, your costs go up each year. You decide to raise your prices to cover those costs (and maybe make a bit more profit). You decide to test the market.

You increase your prices by 2%. You lose a few customers to the store two miles away, but the price increase more then compensates you for the lost customers. So you raise your prices another 2%. Again, you lose a few customers to the store two miles away and you also lose some to the store three miles away, but the price increase more than covers the lost revenue.

Finally, you increase your price another 2%, so that your prices are now 6% above where you started. Suddenly, business at your store drops precipitously. Your former customers stream to the store two miles away, many go to the one three miles away, and some even travel to the one eight miles away. At a 6% price increase, you found that your customers view these other ice cream stores as substitutes for your store. If you want to stay in business, you better drop your prices or find another way to entice customers back.

So far, we have not seen clients streaming to the stores three and eight miles away. Certainly some have left for the store two miles away. The salary increase will probably drive away a few more clients. But the real question is whether they will stream to the lower cost legal service providers. My guess is that they won’t.

Why? I think elite law firms are right. At the high end of the market, they have not reached the point where most clients will see substitutes for their services even with a price increase. The danger comes to law firms below the elite level.

For those firms not in the elite crowd, raising prices (salaries and rates) comes with greater risk. The deeper you dive below elite firms, the more likely clients will find substitutes for what the firms offer. Those substitutes include small firms with lower overhead (and lower prices), alternative service models (e.g., fixed fee firms) and alternative service providers (e.g., software as an alternative for labor). The firms below the elite level will have to be careful that they don’t exceed the market price threshold encouraging their clients to switch.

Be True to Thyself

Richard Burcher, one of the leaders in the field of legal service pricing, argues that legal service pricing will get a lot more complicated in coming years. I agree. As the supply chain gets more complicated, the pricing possibilities will multiply. Law firms will need to assess where they fit in the supply chain, what value they provide, and what the market will pay for that value. The idea that there are no substitutes will slowly dissipate.

For those firms who can play the elite law firm game, I say go for it. Your clients are doing the same thing in their businesses. For those firms that can’t play the game, be careful about pricing above your weight class. The stratification of the legal industry, with a growing gap between the elite and the rest, means you must get comfortable competing at a different level. Those non-elite levels necessitate doing things elite firms can skip.

This is where many firms trip. Some percentage of lawyers at each large law firm believes they are among the elite, maybe not as a firm but within their practice area. The firm then wants to present many faces to its clients: elite when competing for high-end business, efficient when competing for mid-level business, and so on. Maintaining balance in this world of competing value propositions is very hard and leads to fractures, and the firms spend time fighting within instead of competing externally.

I think the salary increase will move the industry closer to the tipping point. Elite firms will still be there. Some non-elite firms will mistake their place in the market and make bad decisions. They will get weaker. Some (fewer) will take advantage of the increase and differentiate themselves in a good way. They can become stronger mid-market players. For the New Law world, this is a great opportunity to showcase the substitutes for elite firms. For clients, this is another opportunity to move work to places where the price better matches the value (and to the general counsel who complain but don’t move work, look at your own company’s pricing model).

Finally, for those who like to talk about another misstep in the legal industry, the increase gives you something else to write about. See? The increase really is good for all of us.

DataStupidIt was the 1992 election campaign, and James Carvill, candidate Bill Clinton’s campaign strategist, was fighting to keep the troops focused on what mattered. He hung a sign in the campaign’s Little Rock, Arkansas campaign headquarters with three messages:

1. Change vs. more of the same

2. The economy, stupid

3. Don’t forget health care.

Nothing stays quiet in politics, the contents of the sign made it out, and now we all know the phrase “[it’s] the economy, stupid.” The phrase has been modified and used in many situations, including: it’s the data, stupid!

The Four Revolutions of Legal Materials

We can segment the history of legal materials using several dimensions. I divide the history into four phases:

  • Parchment to paper
  • Paper to published
  • Published to digitized
  • Digitized to data

At one time, legal materials meant writs penned by lawyers or scriveners. The few things written were put on parchment (sometimes called vellum, an animal skin paper). While it is easy to think we are far past this phase, the House of Commons and House of Lords in the UK recently debated whether official acts should now be recorded on paper instead of vellum (answer: no, vellum will still be used).

The next step was from paper (by now, wood pulp or cotton based) to published. Books of cases, closing binders, treatises, all became the place to go for collections of documents.

In the latter part of the 20th century, we moved from published to digitized. Documents were created and stored on computers and case books became online research databases. Today, we live mostly in the digitized era. But in law, even though documents are digitized they aren’t very useful.

The Era of Legal Data

Digitization still represents state-of-the-art for law firms and law departments. But the next revolution is digitized data, and that move already has started.

The world of law is the world of unstructured documents. Imagine working on a document with the following sentences:

Grainger accepted payment from Duncan. Duncan delivered the payment to Grainger by handing him a check made payable to “Grainger Consulting, Ltd.” in the amount of $2,150.00, dated April 21, 2014.

The sentences mean nothing to the computer. They could as easily be written this way:

Xxxxxxxx xxxxxxxx xxxxxxx xxxx Xxxxxx. Xxxxxx xxxxxxxxx xxx xxxxxxx xxxx Xxxxxx. Xxxxxx xxxxxxxxx xxx xxxxxxx xx Xxxxxxxx xx xxxxxxx xxx x xxxxx xxxx xxxxxxx xx “Xxxxxxxx Xxxxxxxxxx, Xxx.” Xx xxx xxxxxx xx xx,xxx.xx, xxxxx Xxxxx xx, xxxx.

This is unstructured text. The computer does not have information about the characters or words telling it, for example, that “Grainger” and “Duncan” are named entities or that “payment” is something different from “handing.”

We can easily give the computer more information, and we often do this through something called “tagging.” You already know about tagging. You tag photos with the names of the people in them, you tag blog posts with the subjects covered, and if you are an SEC lawyer you have seen XBRL tagging of financial data in 10-Qs. The tagging you see and do (with the exception of financial data) requires that you manually assign the tags. But, much of the tagging for text, as with financial statements, can be done automatically. Instead of a digitized, but unstructured, document lawyers could have data—a document broken into pieces that can be manipulated with the proper tools.

Legal Data and The Future

Of course, the key question is not whether lawyers can convert text to data, but what is the value of doing so? It the conversion simply means computer geeks have another thing to play with, then it makes no sense for the world at large to shift.

The value of doing so, I believe, is deep and will accelerate the change from law being a religion of the past practiced by a cloistered tribe, to a flexible tool of the future that can help individuals and organizations at all levels of the economic ladder. That is big value, so the next question will be “what do you have to back up that belief?”

We all know by now that data—as an augmentation to what we can do as humans and not as a replacement—will play a big role in our future. The same is true for lawyers. Let’s go through some examples.

As a transactional lawyer, one question I was often asked was whether what we were proposing to do or what the other side was proposing to do was “market.” This simple question usually leads to a spirited, but worthless, debate between opposing counsel. The proponent of the clause argues it is market, the opponent argues it isn’t market. Clients sit there perplexed: surely this is a question that can be answered objectively? The answer is “of course,” but not as law is currently practiced.

Three years ago, as I was working on a large (over $1 billion) financing agreement, the question came up all the time during negotiations. The firms on either side of the negotiations were (and are) top tier firms recognized as “the” firms to use for financing. Yet, neither firm could answer the market question. The usual response was “we could have our library staff look at recent financing documents to see if there is a pattern.”

The documents they would search were “materials agreements” to the companies involved, and so they had been attached to filings with the SEC. That is, they were publicly available. Anyone could download the document, convert it to data, and do searches on the documents. In fact, collecting these documents, tagging them, and using them as a corpus would have put any firm in a great position. But, to my knowledge, no firm has gone that far.

As a second example, consider the many briefs filed in lawsuits each day. Judges consistently complain about the quality of brief writing. Their complaints, by the way, are not directed solely at small firms or lawyers who occasionally appear in court. The epidemic of poorly written briefs extends up through the ranks to the largest firms.

If those briefs were turned into data, we could use the data for many purposes. For example, we could perform quality studies on the briefs. We also could compare the briefs to the court decisions (did the brief overlap with the decision, were the cases cited used by the court, did the arguments make their way into the decision, and so on). We could compare briefs across firms and even develop quality measures to tell us which firms and which lawyers have the best written most persuasive briefs. Instead of measuring the quality of law firms based on where the lawyers went to school, we could measure quality based on the legal product.

The list of ways we can use legal data is long and growing every minute. Legal data can be combined with data from other sources to construct predictive modeling. Data streams from sensors and mobile devices can be combined with legal data to create early warning systems—predictive analytic models that tell us when certain actions may lead to a lawsuit. Turning documents into data also is the first step in converting contracts into smart contracts, connecting law to the world of blockchain technology.

I’m a Lawyer, Not a Computer Scientist

Most lawyers are dizzy at this point. They don’t understand technology in its basic form (Can you describe to me how the internet works? What happens when you hit “send” for an email?) and now I’m asking them to go from those .docx files to computational linguistics and natural language processing. Time to run!

The key is understanding the difference between the lawyer trying to do it all, and the lawyer managing a collaborative team that does it all. None of us can do everything (despite what we think), but we all need to learn to manage teams. Law departments should move from hiring lawyer after lawyer to hiring one or two legal data scientists (who may be lawyers with technology training). By using the legal data scientists to automate certain steps (document assembly) and combine that with data tagging, a law department would take itself instantly into the 21st century. The future of law belongs to teams.

One final note about legal data. What law firms and law departments seem not to realize is that stored on their servers is 21st century gold. Today, Google, Facebook, and Amazon have put themselves in enviable positions. They each control massive data sets that enable them to analyze the world in ways we didn’t believe possible a decade or so ago. It will be difficult for other companies to build comparable data sets. IBM CEO Virginia Rometty puts it nicely:

What steam was to the 18th century, electricity to the 19th and hydrocarbons to the 20th, data will be to the 21st century. That’s why I call data a new natural resource.

In the law, the large legal publishers have data sets that also give them an advantage. Other publishers are looking for data sets that will help them build positions in the publishing industry similar to what Google, Facebook, and Amazon have done in their respective domains. For example, Elsevier recently announced it is purchasing the Social Science Research Network (SSRN). SSRN is a significant publishing platform for social sciences and humanities, and one of its main libraries is devoted to law. Overall, it has about 673,000 papers. Elsevier will be combining SSRN with its technology platform, Mendeley:

SSRN is devoted to providing “tomorrow’s research today” through specialized research networks in the social sciences and humanities. We facilitate the free posting and sharing of research material (e.g., conference papers, preprints, non-peer-reviewed papers) in our subject areas. Social science papers tend to have fewer co-authors, so networking and sharing ideas, hypotheses and drafts during the research process are critical; SSRN helps authors evolve their research and communicate their results worldwide.

Mendeley is a researcher workflow tool that helps researchers organize, discover and share their research. Mendeley is also becoming a collaborative environment for sharing early results of research but is more focused in science, technology and medical fields. Its technology platform, enhanced by Elsevier’s investment, uses metadata from articles and usage on its site to develop a suite of analytic tools that directs researchers towards the best people to collaborate with and what to read.

What does the combination really mean? It gives Elsevier unprecedented access to an enormous database. It isn’t the papers, it is the data. In this case, data represents influence or impact within the scholarly community which is something very valuable to scholars and institutions. As one blogger put it: “The reason is obvious to anyone who works in the university: impact = higher rankings, higher rankings = more and better students, more donors, more reputation for the institution… all of which translates into the ability to hire more high impact researchers.” The motivation to access data may be different for lawyers, but the need is no less than in academia.

Lawyers also object by saying that the knowledge of how to convert text to data and manipulate it is a computer science, not something for humanities majors who became lawyers. Ironically, text tagging grew out of the humanities where language, history, philosophy, and other professors have been tagging text for decades.

Lawyers love to find excuses for resisting change. In fact, a recent Altman Weil survey shows that over 90% of large firm managing partners know their firms need to change (become more efficient), and yet over 64% of partners resist change (up 20 points from a year ago). So be it. There will be a few firms that can get by ignoring change, while technologists and clients (the real clients) work behind the scenes on software that reduces or even eliminates the need for lawyers (don’t chuckle, the software already exists).

Lawyer are their own worse enemy. The profession is changing slowly and will not disappear overnight or perhaps ever. In the meantime, the demand for lawyers (versus legal work) shrinks, alternatives pop up daily, and the world moves past the era of scriveners with their vellum. If you don’t believe me, just check—it’s in the data.

MusicI remember going into the basement of our house in the 1950s and 60s and listening to music on the large record-payer we kept there. The LPs, as they were called (LP for long playing) spun lazily at 33 1/3 revolutions per minute. The discs were thick, heavy vinyl and you had to handle them carefully or you would scratch the surface (and incur a fair amount of displeasure from your dad). If you liked music, you had to master the skill of gently letting the needle down onto the LP and then lifting it up when the album was done playing. None of that “automated” needle moving!

Music was special, I think, because it wasn’t so easy to come by. You could turn on a radio (AM) and fiddle with it to get a clear channel. But the station played what it wanted to play and if your musical tastes were not the same as your parents then the radio sitting in the living room was probably off limits. For many of us, a record player in our room didn’t happen until we got to middle school. Even with a record player, your record collection was limited.

Because music wasn’t everywhere, it became a group activity. Your friends had some records, you had some records, and someone would “borrow” their older brother’s or sister’s record player. By pooling records, you could spend an afternoon listening to a broader variety of music than you could get at any person’s home. If you look at pictures from the time, you often see groups of kids gathered around the record-player. Today, you see the individual with earplugs listening to iTunes. Music was a team-event.

Growing the Orchestra

Most large law firms, though certainly not most lawyers, accept that clients have moved from tolerating inefficient lawyers to expecting more efficient partners. Say the words “project manager” 10 years ago and you got a blank stare from everyone in the room. Today, ask a firm about project management and it will immediately jump to tell you about the firm’s program.

Project management and process improvement are just getting their start in legal service delivery. Lawyers have grown tired of hearing about them, so the number of conferences and webinars on the topics have dropped off. My friends outside the industry are astonished when I tell them that most law firms think they have control over the project management thing and aren’t that interested in learning more about process improvement. These are disciplines that take decades to understand and apply to complex work, yet lawyers think they have them mastered after 60 minutes.

It is difficult to explain to lawyers and firms the gap between where they are in these fields and and masters of the methodologies. More recently, I have used this metaphor. Imagine your five year old tells you she would like to learn to play the violin. Pleased, you take her to her first lesson which lasts about one hour. You sit in on the lesson, so you know what the teacher has told your child and can reinforce it during practice.

The teacher explains the basics of the violin. It is a stringed instrument, she explains. You can bow the strings or pluck them to make sounds. The teacher explains the parts of the violin, shows the basics of moving the bow across the strings, and how to hold a violin properly. The teacher then takes your child through the steps to play a few notes and asks the student to practice the tune during the week.

You leave the lesson with a happy child who goes home and promptly ignores the new violin sitting in its case. That night, your tell your husband about the lesson. Then, you say that you are ready to play a concert at Carnegie Hall. After all, you say, you heard the violin lesson, you are a lawyer, you got this because how hard can it be? Lawyers are smart and quick and can learn new skills in a flash. You must be a violin player, because you sat through that one hour lesson.

You have a few children and you repeat this exercise with each of them. The next week it is a clarinet lesson and the week after it is a flute lesson. Each time, you return home claiming you are ready for the big concert because you sat through that one lesson.

The story sounds ridiculous, yet I meet the lawyer in this story every week. After a one hour lesson in project management or process improvement, they feel ready to play the big house. “Of course I know project management,” they want to tell clients. “Yes, we are all over process improvement,” they proclaim to general counsel. The metaphor works for me, because the one-hour violinist is just as silly as the one-hour project manager or lean thinker.

Make Your Own Kind of Music

To keep the metaphor alive, I tell lawyers that if they really are looking for their place in the story about musicians, they are the composer. This shocks many lawyers, because they expect me to put them in the place of the conductor. Lawyers are not good conductors, as a general rule, but they fit naturally into the composer’s role.

A good composer understands the capabilities of each instrument and how to blend them to make the music. Each composition calls upon different combinations of instruments and explores their capabilities in unique ways. A good composer excels at blending these capabilities. The composer typically plays one or two instruments herself, so she understands the role of the instrumentalist, but her forte is not as the soloist it is as the creative person who can craft the beautiful music.

The conductor serves a different role. He helps the orchestra interpret the composer’s work. The orchestra is guided when to go faster or slower (adagio does not mean the same thing to everyone). He blends the voices, increasing some and decreasing others, so that the combination achieves what the conductor thinks the composer wanted.

If we translate roles, the conductor is the project manager. The members of the orchestra are the lawyers, process improvers, analysts, paralegals, and other legal professionals who form the team executing the composition. The composer is the lawyer whose creative vision (the structure of the deal) is being played out.

Many lawyers (especially litigators) believe they must be the conductor and some are very good at the role. But, that usually assumes that the client has no concerns about cost and is willing to pay whatever it takes to “win” the lawsuit. In some cases, the composer conducts and the outcome is fantastic. But “some cases” does not a rule make, and most clients are cost sensitive on most cases. Too many lawyers think they are Leonard Bernstein conducting the New York Philharmonic in the first rendition of West Side Story.

The Future of the Legal Orchestra

It is easy to overuse a metaphor, and I’ve probably already gone past the point of no return. But, perhaps the visual image will stick with you. It takes a long time, over many years and performances, to learn do something well. A good project manager or process improvement guru will have spent years polishing his or her trade. They did not just jump into the role. An astute lawyer should know that he must use talented people in each role on the team that is executing his vision, and that it would be bad for the lawyer to try to jump in and play a role for which he is unprepared.

Lawyers have great difficulty, having been trained in law school and law firms to rely upon their own skills, in ceding their autonomy to the group. In the early 1900s when legal “teams” meant two lawyers working together, the skill of the individual lawyer was paramount. Louis D. Brandeis did much of the work himself on many of his famous cases. Today, Brandeis would have large teams with dozens or more lawyers working on the same cases. The skill lies in leading the team. The leader must provide direction, but it is the rare leader who can provide that direction and give day-to-day guidance at the same level.

The 21st century buzzword for the orchestra in business and law is “collaboration.” Collaboration is the way today of explaining that team-event we used to do when I grew up listening to music. By pooling our resources, just as we pooled our records, we can improve over what any one of us could do on our own. It seems we are returning to the need to get along with one another.

By 2020, about 50% of the workforce will be freelancers. Law departments will realize they can’t afford dedicated staffs encompassing all of the skills needed to do the legal work for their clients. They will build ad hoc teams using combinations of dedicated staff, law firms, and freelancers who will work together for a project or tow and then disband (this already happens – think company, law firm, and Axiom).

While companies will use more freelancers with a wider variety of skills, the real change will be this: technology will be the glue that binds them. Instead of a world with dozens of software packages that don’t play nice music together, we will use platforms that interconnect with dozens of programs (SAP for lawyers). Corporations will plug in law firms, freelancers, and other parties as needed and then close out the team when the matter is done. As this happens, the team will get more creative, the tools more useful, and the results more powerful. Then we will really hear some beautiful music.

EliteMany years ago, I stepped away from practicing law for a while and ran a large manufacturing and distribution facility. I had started at the company as a lawyer, but almost overnight I became a vice president and general manager leading over 500 people (soon to grow to 700). I had an MBA, which meant I had some classroom leadership training, and before law school I had worked for a few years so I had some exposure to working outside the law firm environment. But, I also had 15 years in law firms and departments and law school training, so by the time I got the job my leadership skills had been ground almost to dust.

As a manufacturing and distribution facility, this operation needed line shift supervisors. These individuals were really the first level leaders in the organization, at least by title. For eight hours, a line shift supervisor had around 50 to 70 individuals reporting to him or her. The line shift supervisor was much more the boss than I was as general manager.

The line shift supervisor was part of the management pipeline. The company had shifted from a traditional manufacturing setup about three years earlier and was now at the beginning of its transformation into a lean manufacturing organization. We had re-organized production lines into factories. A line shift supervisor worked in a factory and reported to the factory manager. The factory managers reported to me. When we thought about succession planning, the line shift supervisors were part of the chain leading to the general manager role (except for oddities like me).

Our facility operated five days a week with three shifts and during busy periods that expanded to six days a week with three shifts. We had six factories, which meant a minimum of 18 line supervisors. But, we also had distribution (three more supervisors) and speciality shops so we had around 25 supervisors when fully staffed.

Being a line shift supervisor on a production line was a demanding job, especially in a facility going through a lean thinking transformation. In other words, we often were not “fully staffed.” We regularly looked at prospects in the facility and interviewed candidates from other companies. When I started, the HR director would bring in the candidate, have him or her interview with some supervisors and factory managers, and then ask me to interview those who made it through the gauntlet. I would interview the candidate and promptly reject him or her. We did this dance several times before the HR director had a meeting with me to discuss life in the facility.

The HR director had worked for one of the best manufacturing companies in the world. He was on the last stop in his career and he and his wife were going to retire in the somewhat remote corner of Georgia where the facility was located. He had a lot of experience and wisdom. He explained that, while my goal of finding the best of the best was nice, it wasn’t realistic. In a facility that needed 25 line shift supervisors, not every one had to be a potential factory manager or general manager. We needed many who were really good and comfortable with line supervision, and a few who fit into the pipeline. Put into another language, I needed to stop looking for equity partners and find competent associates.

The Wrong Mix

Roll forward many years, a few jobs, and a lifetime of talking to lawyers, and I have a new theory I would like to test: we have too many graduates of top law schools. I do not mean this in the way that many talk about law schools overall graduating too many students. I mean this as a proportion of the total graduates. Whether we graduate 50,000 or 20,000 each year, do we have too high a percentage coming from the elite schools? This is a blog post, not a law review article so I will not explore every argument and permutation. For example, one assumption I make is that the mix of legal work has shifted towards more routine work and less creative work. That may be a very bad assumption (another thing we would need to test). Think of this as the famous 30,000 foot view.

Let’s start by taking some arguments off the table. We can assume that as the demand for graduates increases or decreases, the mix of graduates needed varies. That is, at times we may need more graduates who can become judges and at other times we may need more who can provide routine legal services. This isn’t an evaluative statement (one is better than the other), just a recognition that the needed skill mix varies among jobs.

Another argument is that students at elite schools have better skills, on average, than students at other schools. As you will see, my argument isn’t that some skills are better or worse, but they are different. In other words, elite school students have a different mix of skills than students in other schools.

With those two arguments addressed, let me move on to the theory. As we know, graduating from an elite school means passing through a series of filters. A student must get from high school into college (grades, test scores, extracurricular activities). The student must then get through college and get into an elite school (test scores, grades, extracurricular activities, jobs, other). Once into an elite school, a student has an extremely high probability of graduating. He or she must pass a bar exam, but that is not much of a barrier (passage rates are above 90% for many, maybe all, of these schools).

Students who go to other schools must pass through the same filters, but the filters are more porous. They let in more students. That means the variation and mix of skills is greater. Again, I am not saying some skills are better.

The Hiring Filter

For many decades, the filters used by large law firms to screen law school graduates have focused (not exclusively, but mostly) on three areas: 1) school, 2) grades, and 3) journal membership. In fact, this system (excluding journal membership) dates back to the early 1900s when Paul D. Cravath came up with what is known as the “Cravath System.” There are many aspects to the Cravath System and it often is mis-described. But, one component was hiring associates from the top of the class at the best law schools (Harvard and Columbia, at the time).

Cravath’s approach made sense in the early 1900s for a firm doing high-end corporate work. The variability among lawyers was significant, in part because of training variability. Many lawyers were trained as apprentices, some had a mix of apprentice and classroom training, the few law schools that existed varied widely in quality, and many lawyers had no undergraduate training. New lawyers varied widely in quality and skill. By setting certain filters, Cravath was narrowing the variability of lawyers his firm would hire.

The legal system also was at a different stage in development. In the early 1900s, we had not gone through the tremendous explosion in statutes that we face today. Lawyers had more creative freedom (fewer constraints) and so skill included a heavy dollop of creativity. It is not hard to imagine that lawyers with more and better training may have faired better in that situation. Today, we face a world with a tremendous number of legal restrictions and those restrictions grow every day.

Once Cravath established his system, it grew from firm to firm and even jumped species. Accounting firms, consulting firms, and other professional firms have used the Cravath System. Over the years, however, the conditions that gave rise to the system have changed and, of course, how it was implemented has changed. But, one thing has remained constant: there still is a strongly-held belief, at least in many law firms and law departments: hiring a graduate of an elite school is better than hiring a graduate of another school for one’s law practice.

We Need More Line Shift Supervisors

So this is my theory. It is only a theory and we would need to test it. As the demand for law school graduates drops and enrollment drops, many have argued that the pool of applicants has dropped. That is, we see students with lower grades and admission test scores applying for school. At the elite schools, this change has not made a difference. The elite schools have been over-subscribed for a long time, so the mix in skill performance of elite school applicants has changed little (or if it has, it has changed among the many not accepted, not among those accepted). The change has been felt in the other schools.

The elite schools also crank out graduates at basically the same rate as before the drop in enrollment, while other schools graduate fewer students. That means the total mix of graduates changes and, presumably, the percentage of elite school graduates increases.

As the number of jobs for law school graduates decreases, and given the bias toward hiring graduates of elite schools, the mix of graduates hired shifts. Again, the percentage of elite school graduates among those getting jobs becomes higher and graduates from other schools disproportionately do not get jobs.

As law is becoming, in many cases, not a creative endeavor but one focused on large amounts of routine work, navigating statutes, turning out repetitive documents, and doing other tasks that require depth of knowledge in an area and strong technical (drafting) skills, the mix of what we need from graduates varies from the mix of skills we get. We have jobs that need people equipped to do more routine work and we are filling them with lawyers trained to be creative.

Going back to my manufacturing days, we are hiring supervisors as if every one should become a general manager when what we really need are good line shift supervisors. We know that even elite school graduates are having more difficulty finding jobs, because, among many reasons, traditional employers (large law firms) need fewer associates. Part of this is because the world is (very slowly) moving away from a labor-centric model, but my theory is part of this hiring reduction is due to a shift in the mix of skills needed (for example, firms use contract counsel rather than associates).

If this theory is correct, one logical solution would be to reduce the number of graduates from the elite schools, and increase the training in certain skills at the other schools (I’m not holding my breath). What skills? The lawyers at these other schools would need significantly increased training in how to work with computers, project management, process improvement, and similar operation skills. Their jobs will require more operational expertise. Knowing the law will help them, but they will spend less time creating novel legal solutions.

The reduction in graduates from the elite schools would help us match demand for elite school skills with supply. I am presuming (another theory to test) that elite school students find operational level lawyer jobs less satisfying. They also may not have certain skills at the levels employers need to do much of the legal work that needs to be done.

Altering the Ecosystem

At one time, it made some sense to have lawyers trained as generalists and have them ready to do whatever came across the threshold. Today, that approach does not make sense. We need lawyers with various skill mixes because lawyering has become a profession with a broad range of demands. This isn’t an elitist theory. It is a theory that recognizes ecosystems work best when the participants have various skill mixes and those mixes are tailored to what the system needs, instead of skill mixes set as if everyone does the same thing. Law schools still act, from admissions through curriculum, as if all participants in the ecosystem should have the same skill mix. A legal ecosystem where all participants are the same is like giant grove of elm trees. It looks nice at the outset, but pests and disease realize there is a feast to be had. The ecosystem suffers and, without change, dies. It would have been better to have a mix of types in the grove.

BestBuddiesThelma & Louise. The Odd Couple. Butch Cassidy and the Sundance Kid. Sherlock Holmes. These are some of the greatest buddy movies we have seen. The genre requires two protagonists who take us on a journey. Sometimes the protagonists seem to be at odds throughout the movie (Grumpy Old Men) and sometimes they get along splendidly (The Blues Brothers). Whichever path they follow, we want to go with them on the journey. Although “buddy movies” has been a popular genre for a long time (The Defiant Ones, 1958), there are not many buddy movies featuring lawyers as the protagonists. We may not see them today, because it is hard to convince people that lawyers will trust anyone.

The Age of Trust

Once upon a time, the relationships between outside counsel and their clients resembled those buddy movies where the pair get along very well. Outside counsel worked as buddies with their clients to achieve the clients’ goals. In fact, the relationships were so close that a corporation’s lead outside lawyer would also sit on the client’s board of directors. That structure made for good relationships, although ones that were a bit too close.

Over time, relationships between outside lawyers and their clients fell apart. Initially, the deterioration was driven by the client. Having your outside lawyer sit on the corporation’s board raised some challenging conflict of interest issues (interestingly, the pendulum has started to swing back as boards spend more time wrestling with legal issues). Clients also became concerned about the financial relationships with outside lawyers. Clients still valued their outside lawyers, but they wanted to put distance between them so that clients could objectively evaluate fees. It is difficult to have an open fee discussion when your lawyer also is a director.

Evaluating fees turned into questioning fees, and then micromanaging work, and then simply distrusting outside lawyers on almost every aspect of legal-services delivery. Today, the relationship between clients and outside lawyers seems more like one of nations forced to work together than that of buddies. Russia needs the United States to keep its space program alive and the United States needs Russia to get astronauts to and from the space station. They do not really like working together, but both recognize they benefit from doing so.

The Trust-less Industry

It seems obvious that we will be better off if we turn this situation around. If you are an in-house lawyer, you probably would prefer to trust your outside lawyer. And if you are an outside lawyer, life would be a lot easier if your client trusted you.

In fact, when I meet with in-house lawyers and outside lawyers, the trust issue frequently comes up and both groups say they would prefer greater trust. There — problem solved. Everyone should meet in the middle, shake hands, and get on with it.

Obviously that is not happening, so something must stand in the way. Many have speculated about the reasons for this continuing lack of trust. The billable hour frequently comes up as the culprit. In-house lawyers are fond of asking how they can trust outside lawyers when their incentives are so clearly misaligned? Fair question.

Another possible candidate is the need for speed. In-house lawyers live in a world where “perfect is the enemy of good.” They must constantly get to a “good enough” solution and move on. Businesses do not want to wait until lawyers have vetted all possible issues. Outside lawyers, however, live in the shadow of malpractice claims or, worse yet for many outside lawyers, looking like a fool. If another hour, day or week of work will reduce the chance of missing an obscure argument from one-in-a-million to one-in-ten-million, then do it! The perfect-versus-good-enough tension is sufficient to fuel mistrust about where the other guy is headed.

We can drum up some old chestnuts if those reasons are not sufficient. Outside lawyers think in-house lawyers are not well versed in many legal issues (specialists versus generalists) and in-house lawyers think outside lawyers are arrogant. Outside lawyers believe they will be blamed if anything goes wrong (regardless of the source of the error) and in-house lawyers believe outside lawyers will throw them under the bus (too much micromanagement!).

Whatever the causes, the distrust continues and in recent years seems to be growing worse. According to BTI Consulting president Michael Rynowecer only one-third of in-house attorneys said they would recommend their primary law firm to corporate counsel peers, down from 41 percent a year ago.” That number tells you, among other things, that trust is low and we will not see that meet-in-the-middle handshake soon.

Rebuilding Relationships

I could stop here, leaving you with another tale of the legal industry going off the rails. But I do not like to face a problem without trying to find a solution (too many years in the service industry, I guess). So I am going to give it a try.

To solve the trust problem between clients and outside lawyers, we need to build trust. There it is. Perhaps it is not a remarkable breakthrough in human relations that we can use to achieve world peace, but I think it works.

Trust is not about flipping a switch and moving from one state to another, like crossing from Michigan into Ohio. It is a gradual transition that happens in small increments over time. When I talk to lawyers and clients who do not share trust I find that most of their behaviors focus on reinforcing that lack of trust.

The first step, then, is to go in the opposite direction. This sounds easy but it is incredibly difficult when you belong to a profession where each member believes he or she can do it better than anyone else. We have been trained in this belief from the day we set foot in law school. We have been taught to “not trust.”

Do you remember your professors encouraging you to work in groups, share materials, help each other out and generally rely on one another? Probably not (at least not if you went to law school when I did). I recently asked some students whether they belonged to study groups and shared course outlines before finals. “Absolutely not,” they said, “we were told not to trust other students because they might not understand what was covered in class.”

To reverse the equation, you must take one step towards trust, and then another, and another. Expect that along the way, you and your buddy will stumble. So what? When I was a general counsel at a publicly held company, I set up an alternative fee arrangement for a major chunk of work. It was very visible legal work, it had been handled by a lawyer close to my client, and I was moving the work away from that lawyer to someone I thought could do a much better job. The fee arrangement required the new lawyer, at a much bigger and more expensive firm, to do the work for the same amount my client had paid the former lawyer.

Many in-house lawyers would distrust the new lawyer, suspecting he would keep his costs low by farming the work out to someone very junior and keeping a too-tight lid on the hours worked. The in-house lawyers would act on this belief and the outside lawyers would see and feel that distrust. The outside lawyers would respond in-kind and the relationship would deteriorate.

I had to trust the outside lawyer with whom I “buddied up” to value the outcome first and to trust that I would be reasonable if the fee was inadequate. We stumbled a few times as we got into the work, because we both had made some bad assumptions. We talked the issues over, agreed on some changes, and moved forward.

Each day that the arrangement worked, and each time we dealt with a stumble, we built trust. Over a few years, I trusted the outside lawyer enough to have him handle several major matters for my client, and he trusted that when I asked him to work on a fixed fee I would be reasonable if our assumptions in building the fee were wrong. The relationship worked very well and my client and the law firm benefitted from it.

Yes, This is a Kumbaya Moment

It is not magic. The buddy approach in the movies often lays it out very nicely. You have to trust the other person, and then trust them some more, and then work through the problem when something goes awry. Buddies cut each other some slack.

The benefits of building the buddy relationship are enormous. If you are in-house lawyers and you want your outside lawyers to invest in your business, build their knowledge, spend time thinking about ways to become more efficient, and generally help you out, then you need to “invest” in your outside lawyers. You need to trust them and not abandon them the first time something goes wrong.

If you are the outside lawyers, you need to build trust with your clients. You need to show them you care by going the extra mile. Do not bill them for everything and do not expect them to pay you for everything. Trust them to call on you when the real matter you want comes along by sharing with them beforehand. This is not about giving away your services for free, it is about becoming the advisor who values the relationship over nickels and dimes.

You may have expected, or at least wanted, some strikingly new ideas about how to build trust. But the thing about building trust is that we do not need new ideas, we simply need to do the basics time and time again. I know many lawyers will ignore my advice, continue focusing on the moment and not the big picture believing a dollar in the bank today (or not paid today) is worth more than the promise of a better relationship tomorrow. But I also know that as the shakeout continues in the legal industry, those with the most trust will be the most likely to succeed and those with the least trust will be the lawyers who worked at the firms featured in the highlights of “law firms we lost” during the year.