The Firms

March 19, 2010 12:18 PM

Welcome to the Future: Embracing the New Normal

Posted by Aric Press

By Paul Lippe

I participated in four intriguing conversations over the last week.

    •    The general counsel of a major company explained that he had shifted his legal spending from 50 percent internal and 50 percent external to 70-30, thus reducing outside spending by 40 percent.

    •    The General Counsel Roundtable presented data showing that outside legal spending by the S&P 500 was dropping from $16.7B in 2007 to an estimated $13.8B in 2010, a 17 percent decline.

    •    One leading lawyer tried to persuade the other folks in a meeting that "as soon as the recession is over, we'll get back to normal." His definition of normal was framed by the period from 1978-2003, when legal spending as a percent of GDP increased from 0.4 percent to 1.8 percent, a more than four-fold spurt. As Herbert Stein, the fabled economist said, "any trend that can't continue forever, won't," so unless we imagine a world in which law becomes 7.2 percent of GDP, this definition of normalcy ain't.

    •    Along with a couple general counsel and a journalist, I spoke at the Churchill Club in Palo Alto, sharing my view that law is moving to a "new normal", one which is aligned with clients' normal. I had six themes:

1. In law, the attitude has been “more is always better"--smarter, more credentialed people working more hours in bigger firms; for clients "better is better." In the new normal, the theme will be alternate staffing, as clients and firms show that there are a great array of folks who can deliver outstanding work product in different organizational settings.

2. In law, prices have only gone up; for clients, prices of lots of goods and services (including the ones they sell) have gone down. In the new normal, the theme will be predictable pricing, where clients and firms share a reasonable expectation of price and value, and work together to meet it.

3. In law, the attitude has been "what we do is so complex it can't be measured." Meanwhile, clients have grown accustomed to measuring everything. In the new normal, the theme will be defined quality, where work product will be assessed according to explicit, outcome-based criteria.

4. In law, the emphasis has been on "bet the company" matters, driven sometimes by Eliot Spitzer (prescandal) and his ilk. For clients, every day is a "bet the company" day due to intensifying global competition. In the new normal, the theme will be client intimacy, where firms do a better job of enabling success and preventing failure (including preempting "bet the company" scenarios altogether) by being more tightly integrated with and knowledgeable about clients.

5. In law, the way to do things is usually "how it's always been done"; for clients there is a relentless questioning of "how can we do this better?" In the new normal, the theme will be technology enhanced services, where new tools enhance, but don't displace, smart lawyers, enabling them to work better.

6. In law, the attitude toward innovation has been "if it ain't broke, don't fix it"; for clients the underlying awareness has been "somewhere a 26-year old is inventing something that will blow up your business." In the new normal, the theme will be process innovation, where firms and clients find ways to do work better, faster, and cheaper.

As part of the Churchill talk, I reached out to nine law firms we work with in varying capacities--Latham & Watkins, Orrick, Herrington & Sutcliffe, K&L Gates, Fenwick & West, Wilson Sonsini Goodrich & Rosati, Womble Carlyle, Pillsbury Winthrop Shaw Pittman, and Cooley Godward--and within a few days each had sent me detailed examples of client-driven initiatives that incorporate most or all of these six new normal themes. If I had pinged 20 other firms, I would have gotten at least 15 more examples.

A profession like law manages change through conversation--the intensity of these conversations is a sure sign change is afoot. On March 22 lots of folks will be assembling at Georgetown Law School  for the Law Firm Evolution Conference. (Click here for the program agenda.)

I don't pretend to be disinterested--either intellectually or financially--but I do think I am seeing more of the conversations than most folks are privy to. I welcome a debate with anyone prepared to proffer a contrary thesis, although one finds remarkably little intellectual energy or data in defense of the "old normal."

Up the highway from our Churchill Club event, Richard Susskind, the leading theorist and visionary for transformational change in law, keynoted the Law Firm Leaders Forum. The event was cochaired by Brad Hildebrandt, the consultant who had been the tribune for the old normal, and Ralph Baxter, the chairman of Orrick and a law firm leaders who has been at the forefront of pushing the change envelope. Reporting on the reaction afterwards, Hildebrandt's blog offered this take: "While there was some discussion about how quickly some of [Susskind's] predictions would come to pass, there seemed to be little debate that they would indeed come to pass."

So whose normal is it?

Let me suggest that rather than debate the color of the sky, the sensible approach for firms consists of:

-An inventory of steps your firm has already taken toward the new normal, using the six themes above as a guide.

-Asking your top 20 clients, 1) would they like you to do more or less of these things; and 2) which of your competitors have done a better job than you.

-Building a chart showing where you want to be in 24 months on the new normal spectrum. Identify individuals at your firm who want to take steps in that direction, track those individuals, and then learn from those initiatives.

As long as folks really engage in the conversation, they'll find a way to win.

Paul Lippe is the founder of Legal OnRamp. He can be reached at [email protected].

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What I have learned over the years, confirmed by what I and others are seeing/hearing now - I attended some of the events Paul has referred to - is that "normality" is not static. Normal in law is not really "old" or "new" but a point in time snapshot which will inevitably change when a new snapshot is taken. We seem to have forgotten that the practice of law has changed many times over the years. It will inevitably require change, again and again.

The pace of change is now more rapid and what is being struggled with is how to adopt a model that does not just address point in time client requirements, but one that can meet continually changing requirements. Not an easy task. However the first step, it seems to me, is to recognize, that a more flexible model is required. Then one must develop that model.

While clients are the catalyst for change, it is the law firms that will have to design that change.

There is also a new realisation - the model must serve the law firms interests but cannot be driven by those interests. Similar to buinesses, the clients dictate what they want and it is up to business to figure out how to deliver that and be profitable. Clearly those of us who figure it out sooner rather than later, will continue to be in the game, and for a while anyway, be ahead in the game.

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