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The New Normal

Why Changing From Rate-Focused to Efficiency-Focused Biz Model Isn’t Easy, Not Even Close

Posted Jan 25, 2011 2:00 PM CST
By Patrick J. Lamb

Patrick Lamb

The Hildebrandt Baker Robbins/Citi Private Bank 2011 Client Advisory (PDF) contains this remarkable insight:

“As law firms struggle to adjust to their rapidly changing competitive environment, many are finding that—like Lewis Carroll’s Alice—they must run ever harder just to stay even. In the first place, shifting one’s management paradigm from a rate-focused to an efficiency-focused business is not easy. It involves revisiting, and sometimes changing, basic assumptions about a firm’s fundamental relationship with its clients, about how work is performed and priced, and about how performance is evaluated and rewarded. It may also require looking critically at the “basics” of a law firm’s economics and structure.” (emphasis supplied)

Not easy? It is hard to imagine a greater understatement. Ever. I’m talking about since-the-dawn-of-man ever. Not easy? It would be easier to run a marathon if you’ve never run a step than it is to change from a rate-focused to an efficiency-focused business.

I know that some will accuse of me hyperbole. Perhaps many will. But let me share this with you. Valorem (my law firm) just celebrated its third anniversary. My partners and I started this firm fully believing in and committed to running an efficiency-focused business and jettisoning those practices that were part of a rate-focused business. In other words, we had no past practices, no history, and no passive-aggressive resistance movements amongst the lawyers in the law firm.

From a change standpoint, that it as good as it can possibly get. And yet we found ourselves over and over again resorting to old (bad) habits. We had to learn to walk all over again.

Now, think about a firm where every aspect of the firm’s business, from accounting to timekeeping to advancement to partnership to compensation has been built up around the idea of more hours is good, fewer hours is bad. Think about those associates who lost their jobs because they weren’t working hard enough.

Suddenly everyone is going to be comfortable doing less? Maybe it looks easy on paper, but my guess is that the firm’s members will divide into four groups: those who get it and change; those who get it but are too uncomfortable with change to change; those who don’t get it and want to undermine the change; and those who don’t get it, don’t care to get it, want nothing to do with change and are biologically incapable of change. Heck, even figuring out in which category your lawyers fit is “not easy.”

But look deeper. Who has the most to lose from the changes that are “not easy”? It is the people who have been most successful under the old model. Who, generally, has the most power in law firms? The same people.

So forgive me when I chuckle at the vision that popped into my head when I read this particular paragraph in the 2011 Advisory: A group of firm leaders at a retreat of all partners “agreeing” to change. “Will that change be in the second or third quarter, Bob? Second quarter? No problem.” Sure.

Patrick Lamb is a founding member of Valorem Law Group, a litigation firm representing business interests. Valorem helps clients solve their business disputes and coping with pressures to reduce legal spend using nontraditional approaches, including use of nonhourly fee structures, coordination with LPOs or contract lawyers, joint-venturing with other firms and implementation of project management tools to handle lawsuits or portfolios of litigation.

Pat is the author of the the recently published book Alternative Fee Arrangements: Value Fees and the Changing Legal Market. He also blogs at In Search Of Perfect Client Service.

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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