The Firms

January 4, 2009 5:50 AM

Welcome to the Future: Time for Plan B in 2009

Posted by Paul Lippe

For those fortunate enough to have been unplugged over the holidays, a quick recap shows the ongoing drumbeat of change:

Jeff Immelt, the CEO of GE, said: "The economic crisis doesn't represent a cycle; it represents a fundamental emotional, financial and economic reset."

Evan Chesler, the presiding partner of Cravath, Swaine & Moore, called for more work to be done on a nonhourly basis. "Clients have long hated the billable hour, and I understand why," Chesler wrote in Forbes. "The hours seem to pile up to fill the available space. The clients feel they have no control, that there is no correlation between cost and quality.”

The Am Law Daily covered the Legal Innovation Summit (of which I was a participant) with a detailed discussion of the likely changes in law from an all-star crew.

There is no longer any serious debate as to whether change is law appropriate. In 2009, the question to be answered is what form that change should take. To answer the question, you've got to start working on a Plan B.

Plan A in law was to “play it safe”--some combination of “let’s keep our options open,”  ”leave no stone unturned,"  “don’t make a mistake,” “pick the safest firm,” or “find the nits in the other guy’s ideas before he can find them in yours.”  While these mantras may represent the height of professionalism or prudence to some, to me they always have represented the ability to avoid responsibility in the context of a boom.  I have never seen any evidence that caution and effective risk management were synonymous.  

But now we’re in a time of reckoning where excellence and professional survival will require much more focus.

Whereas Plan A was all about keeping options open and avoiding decisions, Plan B will require committing to something we believe in and pursuing it with passion.  For some folks, that will mean something outside law (if you're one of these folks, then this column is not for you).

For the rest of us, what does Plan B look like? The good news is we don’t have to invent anything new; we just have to find those things that are already working and make them work for us.

Let me tell you about some successful Plan B's from Bohrer, Bartlit, Baxter and Boats.

Just a few blocks from my office, past Google and Microsoft, is Dave Bohrer’s new office.  Dave is a 50-year-old graduate of Stanford and Northwestern. He just left a partnership at Morgan Lewis to start a new firm, ConfluenceLaw.  Dave’s Web site pretty much says it all: “High Quality IP Litigators, Fixed Prices, Lower Costs, Budget Certainty.”  Dave’s philosophy is that you can deliver superb law from a lower cost platform, and enable clients to litigate complex IP cases cost-effectively.  Dave’s move illustrates many things, but most importantly I think it represents the absolute necessity of lawyers having the ability to access the market for their services through whatever mechanism makes sense.  Simply put, if you don’t believe you can make it on your own, you will not be able to make it in the context of a big organization either.

Last week, I skied with Fred Bartlit. Fred shows what happens when you pursue Plan B for a sustained period. Fred was the managing partner of Kirkland & Ellis. Fifteen years ago he left Kirkland to found Bartlit Beck Herman Palenchar & Scott (the firm was chosen as Litigation Boutique of the Year by the editors of The American Lawyer).  Fred’s firm tries incredibly interesting cases, uses technology to simplify drudge work, has far more partners than associates, generates most of its revenues on a success fee basis, and most likely makes better profits than 99 percent of firms. seems to be working.

Ralph Baxter is the CEO of Orrick.  While Dave and Fred illustrate the possibilities in smaller organizations, Ralph represents the absolute necessity for any firm, especially a large one, to add as much value to its lawyers as possible. For any law firm to succeed, it must answer the fundamental question: how does the firm create value for partners, associates, and clients? Part of that will be reducing unnecessary costs (if a partner with a $3 million book of business can make $1 million at one firm and only $700K at another because of a disadvantage in cost structure, the firm with the higher costs is in trouble), part will be demonstrating true firm level value add.  Ralph is clearly a leader in taking unnecessary costs out of a big law firm (Orrick has consolidated many operations in West Virginia) and creating value at the firm level.

Perhaps history’s greatest example of Plan B was Hernando Cortes’ decision to Burn his Boats as preparation for the conquest of Mexico (following the example of Alexander the Great). The message to his crew was clear--go forward or die.  Cortes recognized that there were many ways to fail, and only one way to succeed, and that keeping options open was not prudence, just indecision.

As Susan Beck wrote in her Innovation Agenda series last week, participants at the Legal Innovation Summit considered whether law firms today are like GM. While there is some value in the analogy, it is incomplete. For me the key parallel is that GM was so successful, for so long, that it lost the ability to contemplate and manage change. Of course, if I was working for GM, there simply was no other way for me to imagine bringing a new car to market other than via a large, capital-intensive organization like GM. The good news is that in law, there are many ways to succeed, and now is the time for lawyers to develop a Plan B that works for them and their firms.

Let’s return to Immelt. "This economic crisis doesn't represent a cycle. It represents a reset," he said. "It's an emotional, social, economic reset."

"People who understand that will prosper," Immelt said. "Those who don't will be left behind."

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Hi Paul--Great to focus on Immelt's comment. As an economist I agree that what we are witnessing is a fundamental structural reset. I don't think that recovery in law is at all likely to see a return to the previous structures. Those structures--law firm organization, billing, delivery models, etc.--have been increasingly out of step with the changes wrought by globalization and the web. The corporate need for speed, adaptability, flexibility etc. simply cannot be met effectively with the slow expensive systems law has created over the past century. As you know, I've been advocating reducing the protectionist barriers in law practice (non-lawyer ownership, financing and management, restrictions on practice, etc.) in order to increase the competitive pressure on law providers to innovate new models to meet new economic needs. But the collapse and resulting financial pressure on law firms may accomplish the same goal as you point out.

Great article. Thanks for reminding us that passion driven career choices have more traction in the end. And, an excellent point that if you can't make it on your own, you can't make it in an organization. As true as it has ever been.

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