Posted Mar 21, 2011 1:53 PM CDT
By Paul Lippe
I attended an excellent meeting at Georgetown University Law Center last week, “Trends in the Delivery of Corporate Legal Services.”
The theme was “is change really happening?” We can point to conflicting signs: Some firms are thriving, some are failing, many clients are touting “alternative” fee structures, others are hesitant to move away from the status quo.
My takeaway from the conference was that change is accelerating, but by definition the folks who speak at conferences will reflect that view.
So I thought it would be helpful for those of us “scoring at home” to provide a basic scorecard to keep track on the evolution to a legal “New Normal” over the next 24 months.
First, a comment on change. As Pat Lamb suggested, change in law, as in most fields, is a distributed phenomenon—some people do something different, others replicate, sometimes it spreads, sometimes it doesn’t.
A simple model of law would suggest that 2 percent to 5 percent of folks are innovators, 60 percent are fast followers, and the rest are laggards. This model was borne out in the adoption of PCs, email and the Web among lawyers. It suggests two conflicting and hard-to-reconcile conclusions:
(a) The innovators will always be out there and won’t always be predictive of where others will go; and
(b) The laggards are always out there and are never predictive of where others will go.
But here’s the implication. Because there are relatively few innovators in law, and the followers tend to move as a herd, once we cross over 10 percent or so of adoption of anything new, that indicates the innovators have coalesced and the fastest followers are following, which means the die is cast. Once 60 percent have done something, it’s done. There’s nothing left to discuss. So the interesting part of change is tracking what happens between 2 percent and 10 percent adoption.
Here’s my “New Normal” scorecard:
1. Use on of nonhourly fee structures. Forests have been felled to fuel the debate on the billable hour, so there’s no need to repeat it. The question is simply this: Is the percentage of fees paid on an other than hourly basis increasing? According to one very knowledgeable source of mine, 40 percent of legal departments now report using nonhourly fee structures, up from 10 percent two years ago.
2. Use of “formal” methods to measure quality. The ACC Value Challenge represents the first effort to standardize performance assessment of lawyers. This is a mature model in other fields, including medicine, with a mix of subjective and formalized assessment tools. I think the numbers are still quite low, but keep an eye on this one. The key will be the emergence of a common language around value in terms of outcomes, not inputs.
3. Emergence of “nontraditional” service providers. “Outsourcing” is a bit of a red herring, to the extent that folks think it means moving work to India. Just think of work going to non-law firm providers, such as Integreon, Axiom, Pangea3, Novus or CPA Global. I call it “unbundling.” My impression is that unbundled revenue is up five times over the last three to four years, and may prove to be among the most important and catalytic of these trends. As every major client will enter into at least one unbundling relationship, they will measure performance in a more structured way in those relationships (see No. 2 above). And unlike law firms’ relationships, which are pretty fragmented, companies will tend to have only one unbundled service provider.
4. Failure of traditional firms, creating of new firms. This is more of a lagging than leading indicator, but certainly one to watch.
5. Emphasis on technological substitution. Collaboration, project management, document automation. There are lots of ways to substitute technology for expensive lawyer time. I’m not sure how to precisely track this.
6. Change in talent development model from law schools and early-stage development of associates. There clearly is an innovative model stirring in the law schools and law firms. One key discussion at Georgetown was an innovative legal department looking to hire students straight from law school, and cooperating with faculty to develop an apprenticeship curriculum.
As law departments self-assess, some will clearly understand themselves to be innovators, and others as laggards. The vast majority in the middle may want to start by scoring themselves against these criteria and comparing themselves to respected peers.
So is change happening? Let’s check back in six months.
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.