One of the nice parts of being, along with Pat, the Wayne and Garth of the New Normal, is that I get pulled into more interesting conversations than I might otherwise, as happened to me last week in Washington, D.C.
Mark Cohen and Bryce Arrowood are the two founders of Clearspire, a brand new DC-based law firm. Clearspire is the purest of the pure-play New Normal firms, with all the optimal pieces you’d want to see (value-based pricing, low leverage, modern approach to quality, sophisticated use of technology, progressive management, low overhead, flat organization, sharing IP with clients). I won’t bother to recap their virtues, which have now been discussed in depth in several
places. (See Fast Company, the Washington Post, the Economist, Prism Legal and ABAJournal.com.)
But the element that most struck me in talking to Mark and Bryce was their commitment to transparency. Not only do they try to be explicit on expected outcomes with clients and how that will drive Clearspire’s fee, but they are even transparent with the client on how that impacts the involved partner’s compensation. So there is a ‘radical’ degree of transparency and alignment between firm and client.
My second conversation was with the General Counsel Roundtable (GCR), the clearinghouse for legal department best practice. GCR is part of the Corporate Executive Board (CEB), which runs a series of executive “roundtables,” e.g. CFO Roundtable, GC Roundtable, CIO Roundtable, etc., allowing executives
to share best practices with peers. So not only is GCR the largest in-house network, but they are the only major legal network that is housed in an organization which integrates with non-legal folks. (Disclosure: Legal OnRamp has business relationships with Clearspire and GCR, as well as Pfizer and FMC, which will be mentioned later).
I am part of a panel on value next week in Chicago (PDF), and we were discussing what drives value. Having done studies of value in other professional fields, they found that, while it is possible, but difficult, to get better agreement on what value is, it is relatively easy to get better agreement on what improves value. When it comes to improving value, the key is get the best effort from your service providers.
But what does it take the best effort from your service providers? If we listen to what I called last week the “Professional Autonomy” school, there is a presumption – reinforced by the self-regulatory structure of the legal profession – that lawyers will always deliver best value, and the best thing to do is just leave them alone to do it.
But that’s not what CEB found. CEB found that the things than drove value – understanding the client’s strategy and goals, feedback, openness to risk and innovation, and willingness to go beyond the basics of what you were being paid for – were all improved by very tight partnering between clients and service providers.
So what does this suggest in the New Normal? That both sides will have to give up something they cherish.
I first became a GC in 1988, so I have had a ringside seat at the rise of GCs. Most GCs tend to fragment law firm relationships, and keep firms at arm’s length (this was never our approach). That disconnected approach may not be the best way to improve value. Instead, Pfizer’s model of intense firm “Collaboration” (PDF) may be the best way to improve value.
Many lawyers in law firms cherish the notion of “autonomy,” and believe (reinforced by the quite naïve consensus in law school ethics faculty) that “professional distance” is a virtue without which judgment would be clouded. But if the CEB research is as applicable to law as it is to other fields (and it certainly resonated with me), then the basic elements of the model most law firms prefer – “we’re the best at what we do – leave us alone to do our jobs,” “clients don’t know enough to give us feedback, “and “it’s unreasonable to expect us to work and not get paid for every 6 minutes…” are actually counter to improving value.
When my New Normalist friends dump on the Billable Hour, while I don’t defend it, I generally downplay its importance. But it may be, as the CEB work suggests, that the Billable Hour, in addition to being a disincentive to efficiency, is an impediment to quality. Instead, FMC’s ACES model (PDF) of tight coupling with firms and alignment around objectives and fees may be the best approach.
After a recent post, one ABA colleague challenged me to provide specific suggestions for how to deal with the changes we describe. So here goes:
A. Set up a systematic way of providing feedback from clients to firms, and from firms to clients;
B. Make sure firm management tracks feedback and ties some compensation to it;
C. Make as precise as possible a statement of the matter objective at the beginning of the engagement and tie at least some portion of the fee to achieving that objective;
D. Make sure that firm compensation and management systems can adapt to performance-based fee structures, and don’t punish lawyers for providing innovative or more valuable service.
Models like Clearspire’s, which align and connect firms and clients, will certainly succeed. But the real management challenge will be for firms that have been built on more conventional approaches to adapt to the New Normal.
Paul Lippe is the 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.