The New Normal

Are Law Firms Long-Term Greedy Enough?

Posted Feb 3, 2011 2:16 PM CST
By Paul Lippe

Paul Lippe

There’s a nice expression (sometimes attributed to Goldman Sachs) describing the right way to balance self-interest, risk-taking, institutional interest and investment: “Be Long-Term Greedy.”

Obviously, long-term greed recognizes that folks will generally act in what they understand to be their own interest, but if they act in their long-term self-interest, they are more likely to avoid ethical pitfalls, make tough choices that may require some near-term sacrifice and investment, and value loyalty and long-term relationships.

I was reminded of this axiom by two talks I saw this week in New York.

The first was a presentation by Michael Weber, a partner at Littler Mendelson (full disclosure: Legal OnRamp has a commercial relationship with Littler), to a group of New York law students participating in an innovative class on knowledge management.

Weber described how Littler has organized its internal legal research and document information so it could provide answers to legal questions “at the touch of a finger,” thus providing fast and reliable advice to clients, but doing so in less time and therefore at lower fees. Not content with just creating an internal environment, Littler has also streamlined and automated the high-volume administrative dispute work for one very large client through technology and developed a pool of former associates who could manage basic procedures virtually. In this scenario, Littler was doing work that other firms might dismiss as “commodity,” but at profitability levels comparable to normal billable-hour work.

In both cases, Weber explained that Littler had to take “an R&D approach,” led by Littler’s innovative Chief Knowledge Officer Scott Rechtschaffen, making a short-term investment (and therefore necessarily impacting near-term shareholder distributions) to be able to create the capacity to deliver better value at lower costs, thus also impacting short-term revenues to some extent, but creating a better platform for long-term revenues.

The second talk was a keynote at LegalTech by Michael Rogers, an author and “futurist” for the New York Times and MSNBC.

There’s no way I can readily summarize all of Rogers’ talk, which was a tour d’horizon of the literature on innovation and change and some insights on how that is likely to play out in law (my one key takeaway: any lawyer who doesn’t understand Metcalfe’s law is committing per se career malpractice). But let me share a few key snippets from the talk (as with my previous report from LegalTech, Twitter provides a good summary).

• Change of the kind that has transformed the music and newspaper industries is coming to heavily regulated industries like law, albeit later and more slowly.

• Going forward, everything will be online, and most things will be virtual.

• Powerful videoconferencing (e.g., TelePresence from Cisco) will transform the way lawyers collaborate.

• Powerful, “intelligent” computers like IBM’s Watson that beat experts at chess and Jeopardy will be deployed by large law firms to help answer legal questions.

• There are many entrepreneurs out there (including young lawyers who can’t find work) looking for ways to “disrupt” the legal industry.

• As in every other industry, legal industry insiders will say “it’s not going to happen to us.”

• Peers are now a more trusted source than experts.

• Open source is a powerful model for change.

• Governments may become a source of legal innovation, as they seek to better serve their customers (taxpayers).

But Rogers’ key point is that most lawyers won’t, at least initially, react to all this like Weber and Littler have. Instead, they will apply their institutional “immune system” to try to expel the foreign antibody of change.

Rogers’ prescription: “law firms should develop an R&D culture to fight the immune response,” and give folks room to get away from the day-to-day and tackle longer-term investments.

Sound familiar?

So why aren’t more law firms like Littler, more long-term greedy?

This answer is a mix of leadership and governance; awareness; accounting; and culture.

More on these another day.

Paul Lippe is the founder and CEO of the Legal OnRamp, a Silicon Valley-based initiative founded in cooperation with Cisco Systems to improve legal quality and efficiency through collaboration, automation and process re-engineering. Lippe formerly was an executive at the electronic design automation company Synopsys and later was CEO of Stanford SKOLAR, a medical digital library and e-learning company sponsored by Stanford Medical School.

Editor’s note: The New Normal is an ongoing discussion between Paul Lippe, the CEO of Legal OnRamp, and Patrick Lamb, founding member of Valorem Law Group. Paul and Pat spend a lot of time thinking, writing and speaking about the changes occurring in the delivery of legal services. We hope you will join their discussions.

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