Social: location, listening, connection, reciprocation

As happens from time to time, there is a bit of a backlash against Twitter and other forms of social media at the moment. Jon Ronson is publicising the paperback edition of his book, so the headlines focus on his ‘disenchantment with social media’. Ed Sheeran has chosen to concentrate on some new experiences ahead of releasing his third album, so he has turned away from social media. In highlighting these examples, we run the risk of misunderstanding what being online can mean. Despite the stories we are told, it is more important that social media are social, rather than media.

Deansgate

A city street might have many purposes, and see many forms of human behaviour: teenage shopping, adult drunkenness, coupling, casual conversation, protest, police brutality, acts of charity, theft, commercial deliveries, commuting by car, walking, running, sports events… the list is potentially endless. But we rarely define the street by one, or even a small group, of these activities. We are more likely to talk about the activity itself, with the location either ignored or sidelined.

We have yet to reach that level of maturity when talking about online interactions. Too often it is still the case that the medium in which something happens is identified as a cause of that something. Our understanding of these platforms is thereby impoverished.

I have been ‘online’ in some form or another for almost 25 years, starting with places like Usenet and CIX. Over this time, I have noticed some recurring patterns in the way people become social online.

Where to go?

As we become familiar with our own towns and cities, we learn quickly where the best places are for particular types of gathering. There is no point in holding a protest where we can’t be seen or heard. Likewise, an intimate dinner isn’t likely to be found in a casino. There is a huge range of online places, each of which supports different kinds of interaction. Some are also specialised as to the topics they cover. On the larger platforms, such as Facebook, Twitter and LinkedIn, everyone needs to create their own community.

When things start to go wrong online, the cause is often a lack of common understanding about the nature of place. If one person thinks they are in the right place for a contemplative discussion about life, but someone else considers that their agressive responses about the government’s political choices, there is no common ground. Sadly, this kind of mismatch still happens too often — often because people forget or don’t know about the next point.

Lurking/listening

This step is one that many people do instinctively, but is sometimes missed by those who don’t understand its importance. Euan Semple wrote about this very well today:

We’ve all had that situation of having agreed to link with someone on LinkedIn and then second message they send is trying to sell us something. Or maybe we’ve been reading that influential industry blogger’s posts for years and, thanks to their easy going style, feel like we know them – but how would they react if we reach out and try to connect with them?

This is why lurking matters. Finding the people you want to connect with, working out where they spend time and watching how they behave. You need to learn the ropes, get to understand the rules and the etiquette of people and situations. Think about the person you are about to connect with. What are their challenges and priorities? What sort of language do they use? What is your motivation for connecting with them and is it mutually beneficial?

For many people, it is enough to listen. Nearly a decade ago, Jakob Nielsen drew together a number of strands of research to suggest that as a rule of thumb, 90% of participants in online communities merely observed the discussion. (Of the rest, 9% contributed occasionally and 1% were responsible for most of the contributions.) This 90-9-1 rule has been challenged more recently by researchers at the BBC, but their data was gathered by survey rather than from monitoring actual community usage.

Whatever the figures, lurking is a natural human behaviour. As we circulate round a drinks party, we listen to the conversations around us and familiarise ourselves with what is going on before joining any of them. And we only join in when we have something interesting to add. Listening skills are valued as a means of generating trust. The same should be true of lurking. Learning about a community by sitting respectfully and observing what it does and what the key norms are only helps when the time comes to join in.

Making connections and sharing

When the time comes to speak up, rather than listen, normal social convention requires that one adds some kind of value to the conversation. That is true online just as it is in the pub. Commenting on a blog post or joining a Twitter conversation is most meaningful when the original participants benefit and the remaining audience gets something they might not have had without the intervention.

This cycle of connection and reciprocation is common offline, and is reinforced by all sorts of social and implicit norms. It is often harder to express (let alone enforce) similar norms online, which is why trolling can become a problem. Online, it is also much more likely that there is no homogeneous audience. The troll’s audience is almost certainly completely different from that of the person he attacks.

I have no deep-seated aversion to ‘content marketing’ — after all, this blog is probably an example of the genre. However, there is a growing body of material that is pushed willy-nilly via various ‘channels’ with no real appreciation of the way other people interact in those fora, and with little engagement by way of conversation. I do have an aversion to that because it uses a social medium in an unsocial way, and thereby taints it.

[In January, I will be running a workshop aimed at PSLs, but possibly of wider interest, on good social media use. Sign up on the Ark Group website if you’re interested.]

Why things stay the same

A common refrain amongst those interested in improving the way legal services are provided is that there is too much similarity in the market. Few law firms differentiate themselves fundamentally from the rest, and there are only a handful of different business models available to select from. The assumption that novel business models will improve competition for the benefit of clients surfaced again in a policy paper published by HM Treasury at the end of last week, “A better deal: boosting competition to bring down bills for families and firms”:

2.10 According to a recent survey by YouGov, 62 per cent of adults have used a law firm or solicitor at some point in their lifetime and the cost of legal services is now considered the most important factor when searching for a legal representative.7 The government wants to ensure that innovative businesses are able to enter the market, providing greater choice for consumers. Alternative business models are around 15 percentage points more likely to introduce new legal services than other types of regulated solicitors’ firms.8

The policy paper has been analysed in more detail by Nick Holborne on the Legal Futures site and by Dr Steven Vaughan at the University of Birmingham, so I just want to raise an eyebrow at the idea that new business models will deliver what the government seeks.

Pont du Gard

Law firms: inevitable isomorphs?

Earlier this week, prompted by a blog post on a completely different topic, I read an article from the American Sociological Review of 1983: “The Iron Cage Revisited: Instutional Isomorphism and Collective Rationality in Organizational Fields” by Paul J. DiMaggio and Walter W. Powell. I suspect that this is a well-known piece in the right circles, but I had never seen it before. As the authors state, they set out to answer the question why there is so little variation between organisations in the same field.

Once disparate organizations in the same line of business are structured into an actual field (as we shall argue, by competition, the state, or the professions), powerful forces emerge that lead them to become more similar to one another.

This similarity is termed ‘institutional isomorphism’. As one reads further into the article, it becomes clear that law firms and other providers of legal services are under the same pressure to conform to a particular model, which thereby limits the variation between them. DiMaggio and Powell point to three types of pressure acting on organisations in the same field:

  • Coercive isomorphism — resulting from both formal and informal pressures exerted on organisations by other organisations on which they are dependent and by cultural expectations in the society within which they function.
  • Mimetic processes — in conditions of uncertainty, organisations may model themselves on other organisations.
  • Normative pressures — these arise from professionalisation, especially when (a) there is a common cognitive base derived from universities and professional training institutions and (b) strong professional networks arise, spanning organisations.

It seems clear to me that these three components exist in the business of law. DiMaggio and Powell’s work appears to explain why differentiation in the sector is minimal, and why changes in form tend to spread across the sector fairly rapidly. It may even suggest that new entrants will be only temporarily distinct from their more traditional competitors.

Whither competition?

The government’s policy paper seems to suggest that deficiencies in competition are causing the public to be poorly-served, particularly in areas such as probate, conveyancing and litigation. Conveyancing is singled out for particular criticism:

2.20 The government wants to consider and address the way the real estate and conveyancing markets have developed around the existing regulatory frameworks, encourage greater innovation in the conveyancing sector and make the legal process more transparent and efficient. The government will therefore publish a call for evidence in the New Year on home buying, exploring options to deliver better value and make the experience of buying a home more consumer-friendly.

As a former competition lawyer, it is a little surprising to hear legal services mentioned as an example of poor competitiveness. Competition law is concerned broadly with agreements between entities that might reduce or eliminate competition, and with situations where markets are (or might become) dominated by one participant. My instinctive view is that neither of these situations prevails at the moment.

In political terms, however, I understand that competitiveness has a different complexion. Even in this more general sense, though, I am far from convinced that traditional legal services providers are the right target.

The policy paper follows an Autumn Statement in which the Chancellor announced restrictions on small claims in cases of personal injury and on damages for whiplash injuries. These changes make it harder for firms specialising in this kind of work to be confident about future income levels (as shown by a sharp drop in the share price of Slater & Gordon — one of the largest such firms). It is difficult to imagine that such fiscal uncertainty will tempt many new providers into that market. Instead, it is possible that the pace of consolidation will increase. This is one situation in which size may be a safeguard against changes in the market. Without close examination of the market, my hunch is that PI work is one area in which legal services comes closest to being dominated by a small number of very large firms. Consolidation will only worsen the competitive position.

Turning to conveyancing, it is interesting that the Treasury’s view is that the problem is a lack of innovation and low levels of transparency and efficiency in the legal process. It is a long time since I bought a house, and I was never a real estate expert, but my impression is that the last 25 years has seen a significant change in conveyancing services. The cost of conveyancing fell significantly when it ceased to be the exclusive preserve of solicitors in England & Wales. Domestic conveyancing services were also in the vanguard of developing legal technology. It is still the case that conveyancing systems tend to be much more sophisticated than those in other areas of legal practice where the volume of work is lower and there is less price sensitivity.

The hidden player

Returning to the DiMaggio and Powell paper, it is interesting to note one of their hypotheses about the factors determining the extent of isomorphism in any given field:

The greater the extent to which the organizations in a field transact with agencies of the state, the greater the extent of isomorphism in the field as a whole.

All legal services providers engage with the state in some way, even if it is only to apply or comply with laws or regulations. Litigation and conveyancing, however, require a deeper engagement with state agencies. Litigators are accustomed to working with the courts and their rules, whilst land transactions will often involve agencies such as the Land Registry, HMRC, local authorities and so on. The behaviour of any or all of these bodies will have an impact on the way related legal services are provided to the public.

A policy paper, such as the current one, which examines only the private actors in a process without considering the way state agencies might affect quality of service must be a flawed one.

Isomorphism amongst legal service providers will probably persist. Where changes are successfully introduced by new entrants into the market, it is likely that they will be rapidly copied by traditional firms. Even in this homogeneous market, the number and variety of participants means that there is almost certainly no risk of market dominance. If competitiveness is considered more broadly, the public sector plays a significant part in those areas where service failure has been identified. It seems facile, therefore, to assert that the answer to all our problems is more variation in business model.

Fighting the right battles

Perhaps a more appropriate title for this post might be “not fighting the wrong battles.”

Over the past few weeks, I have come to a realisation that at various points in my career I have spent too long trying to achieve things that were actually impossible.

They weren’t impossible because they couldn’t be done. They were impossible because something about the organisation made them so.

Sometimes these were small projects, sometimes major programmes of change. The detail is irrelevant. The point is that, even though I could persuade important people to join me on the journey, I didn’t spot that success depended on a number of factors that would never fall into place.

So what are the right battles? Simple: the ones that are genuinely winnable. Anything else is a waste of effort. Hope rarely triumphs against institutional inertia. No matter how much someone wants something to happen, if success depends on someone else who doesn’t care or who actively works against it, it will never happen.

What does winnable look like? The key is to be sure about the essential components. The following questions should help.

  • What is the bare minimum to demonstrate success?
  • What resources are needed to make the project work?
  • Will the support you are promised really materialise, or are people just paying lip-service to your ideas?

The first question is probably the most important, but the hardest to answer. It’s important because you have to know when a project comes to an end. Goals like ‘creating a knowledge culture’ are really difficult because they seems to promote a worthwhile end, but it is impossible to say when the job is done. If something can’t be said to be complete, its success or failure cannot be assessed. What measurable change is there?

Breaking a vague notion into measurable components then leads to the next two questions, which are simply a means of gauging how likely it is that the end might be reached. Few projects, especially in the knowledge context, can be completed without significant assistance from other areas of the organisation:

  • IT: is this a technology project that needs to fit with other things that the business is demanding?
  • HR: does your project affect the way incentives are managed across the organisation? Is that an easy change, or something that demands significant realignment?
  • Finance: few things are free — what other costs are coming up, and how are they prioritised?

The reality is that few organisations can do everything that might be suggested. Projects will often be dropped because there isn’t the resource this year or because too many other things are happening in a similar area. But if the things you want to achieve keep hitting resistance, it is more likely that your goals don’t fit what the organisation is comfortable with. In other words, you’re trying to achieve the impossible.

What to do in such a situation? In general, there are only three real options when faced with difficult challenges: accept things; change them; or leave.

  • If change in the organisation is impossible, can your goals be achieved in different ways?
  • If no change is possible, is there any merit in staying just to maintain the status quo (and possibly make some minor tweaks)?
  • If neither of these is attractive, take the decision to leave as quickly as possible. The sunk cost fallacy applies.

 

Thoughts on Randi Zuckerberg’s 10 trends…

Last week’s London Law Expo was drawn to a close by a rousing keynote address given by Randi Zuckerberg. I have never seen such a rousing speaker at a legal conference (even though she claimed to be jet-lagged).

Ten trends

After giving us a vivid account of her history (New York, Harvard, Ogilvy & Mather, Facebook…), with a few digs at her dropout brother,  Randi introduced us to ten trends that she considers will affect all aspects of life in the near future. These all have a link to technology, but they aren’t technology trends. She has done similar presentations at other events in the past, but it is good to see that older versions (which can easily be found on the web) are appreciably different. There is an simple account of the version I saw online at Urban Source in Australia.

The beauty of Randi’s list is that each member of the audience probably had their own reaction to the trends she identified. Here are some of my thoughts.

Trend 1: The age of the entreployee

2015-10-13 15.57.43The ‘entreployee’ is someone employed by an organisation that encourages its people to spend time coming up with ideas that might be interesting (just like an entrepreneur). Randi referred to Google’s 20% time and Facebook’s hackathons. She was under no illusion that the ideas coming out of these events would all be useful — she mentioned a Facebook engineer linking a mini-trampoline to an iPhone so that the phone could be unlocked by replicating a particular jump. That was probably the worst idea she had ever seen.

Interestingly, hackathons seem almost always to take place outside normal working hours and Google’s 20% time is now understood to be something like 120% time. But any sensible business (including law firms) should try to find out about the ideas that its people have to improve things. Some have ideas banks of some kind (online or otherwise), and I visited a Magic Circle firm this week that was in the midst of a ‘jam’ event along the lines of those developed by IBM. Events like this are ideal to surface insights that could be taken up by pioneer groups like the ones I described in my last post, and are becoming much more common.

Trend 2: Think like a media company

2015-10-13 16.01.43The key here is capturing attention. Randi gave some great examples of consumer brands using events or subverting traditional media to get people to share their experiences across social media. Media success has never been purely a product of sales — readership is the metric that matters. One copy of a newspaper may be read by only one person, if it is good enough. If it is great, it will be read by many people.

This is more of an issue for consumer-facing law firms, but it shouldn’t be ignored by commercial firms. I am aware of just one that has created a genuine media brand for itself. The Rethink Law videos (UK/US) are another example of attention-grabbing media use, this time by a new-law business. These were shared widely across the legal world — students, law firms, clients. They were even emulated by others.

Trend 3: Reinventing retail

2015-10-13 16.06.54The focus here wasn’t so much on the retail experience as the matter of consideration (as contract lawyers might say). Using the streamline, “cash is not the only currency,” Randi had some intriguing examples of retailers allowing customers to exchange something other than money for their wares. That might be a hotel in Sydney offering a free stay to people with 10,000 Instagram followers, or a webshop where people pay with their talents (even talents as odd as sounding like a car horn).

Billing and pricing have been hot issues in law firms for at least the last decade. However, I would be surprised if many firms have allowed clients to pay their bills with their reputations. (And there may be regulatory or other reasons why such exchanges might be difficult.) But there may be other forms of ethical and interesting non-pecuniary compensation.

Trend 4: Start ’em early

2015-10-13 16.12.16Randi’s message here was to encourage children to learn to code as early as possible. I am not sure that everyone has to be a coding prodigy, but understanding the basics of computing has been important for some time. I was lucky enough to be exposed to BASIC programming using punch-cards to create simple programs and then moving on to the mainstays of late-70s/early-80s educational and personal computing. I am no technical wizard, but that experience has made me comfortable with technology in a way that I don’t see in those who missed out on it.

The practice of law, like every other area of work and life, depends on intelligent use of technology. But this is not common amongst lawyers. One GC, Casey Flaherty, was so disturbed by the lack of technical acuity amongst his external lawyers that he developed the Legal Tech Audit (now called the Service Delivery Review). His recent experience suggests that, even amongst current law students, technical ability still falls short.

Trend 5: The maker movement

2015-10-13 16.16.15Curiously, wide use of the internet created the conditions for traditional crafts to flourish alongside global retail behemoths. Etsy and similar platforms allow small artisanal producers to sell their products to the world.

It is now possible to run a legal business with little of the infrastructural paraphernalia associated with the traditional law firm model. Platforms like this one can be used to create a meaningful web presence at a low annual cost. Organisational email and internal collaboration can be bought on a per person basis. Secure client collaboration is also possible. Firms built on cloud-based platforms can add new lawyers quickly in comparison with others, and they inevitably concentrate on the important aspects of their business — leaving support and development of technology to experts in those fields.

The ‘maker culture’ crops up in other ways in the law. Rather than create a firm, people are building apps that give access to the law in a different way. The traditional firm is thus being squeezed from both directions.

Trend 6: Virtual reality

2015-10-13 16.20.44Some time ago, firms were looking at moving into virtual worlds, such as Second Life. Some years later, Second Life is looking a bit tired. Nonetheless, virtuality still holds a strong allure for some. The current poster-child for virtuality is Oculus Rift, which is currently intended primarily as a gaming device. Doubtless it is a short leap to a device for presenting objects to consumers in a better way than is currently possible on a normal website. I am sceptical that this will make a significant difference to the business of law.

Trend 7: Life logging

2015-10-13 16.24.39In a sense, lawyers were early on the life logging scene. After all, what else is time recording than a log of events during a lawyer’s working day. When life logging was in its infancy, significant amounts of work would be needed to create something like Nicholas Felton’s annual report “weaving numerous measurements into a tapestry of graphs, maps and statistics reflecting the year’s activities.” Now, the Apple Watch is just the latest and most sophisticated device that can monitor a wealth of personal information and aggregate it into meaningful (and actionable) insights. It is worth noting that Felton’s most recent annual report will be the last:

The world of personal data has changed considerably since the project began in 2005 and this edition attempts to capture its current state. While previous editions have relied on custom solutions to gather ethereal personal data, this edition is based entirely on commercially available applications and devices. Using an array of products and software, the author’s car, computer, location, environment, media consumption, sleep, activity and physiology were instrumented and logged.

Lawyers are still mostly in the land of manual (slightly automated) timesheets. There are tools to monitor the things people do (emailing, telephoning, drafting, etc), but few of them match the power of personal technology devices. Even where it exists, few law firms have adopted this kind of technology, and fewer still present the results of the information gathered in a meaningful way for their fee-earners. Those that do are stealing a march on their competitors by having more information to use as a basis for understanding their position in the market as well as the performance of individuals and teams.

Trend 8: The new frontiers — education and healthcare

2015-10-13 16.27.57The internet has moved on considerably in these areas. People used to try and find out more about health issues (and self-diagnose). Now, treatment is possible using things like guided simulations and 3D printing. On the education front, real learning is now possible — taking people beyond mere information.

In the law, there is still a lot of work to be done on improving the availability of information. Free services like the Statute Law Database provide a useful service, but they need additional work (is this text still in force? is there anything else that might be relevant?) for people to be sure that they are reading the law as it applies to them. As that work progresses, the position of lawyers as gatekeepers to legal insight will decline. Just as some aspects of education and healthcare are being de-professionalised, so lawyers will need to rethink their position in the knowledge chain. As Jeremy Hopkins puts it, in a review of Richard and Daniel Susskind’s new book, The Future of the Professions:

Another area where I suspect we have not yet seen the full impact is what is described as “commons”, the free sharing of knowledge through open, online collaborative communities. One of the real benefits here is the ability to address latent demand, in enabling access to legal services for the many who can’t afford it. The challenge here is that there may be a considerable overlap between those who fall into this category and those who do not have the capability to make best use of “self-help” solutions or indeed to know they are in need of such help in the first place. The positive argument here is that some degree of access to justice is better than none at all.

Networked knowledge has changed the nature of education and healthcare. It is doing the same for the law too.

Trend 9: Gamification for motivation

2015-10-13 16.30.48The important word here is ‘motivation’. Gamification became popular a few years ago when people realised they could mirror the practice of ‘favouriting’ or ‘liking/unliking’ familiar in social media tools within business platforms. The thought was that people would ‘like’ an intranet page or internal blog post, but it wasn’t always clear what purpose that would serve.

In a sense, gamification has existed in workplaces for generations. The gold watch or carriage clock awarded for long service can be seen in the same light as achievement badges in gaming on or platforms like Foursquare. But people never stayed with an employer for 25 years or more just to get the clock. They stayed because there was some other motivation — they enjoyed the work or the people, or they just liked getting paid to do something they could do. Modern gamification contains a similar risk — people find their motivation in a variety of different places (possibly from a unique combination of factors for each person). Trying to second-guess where motivation might arise is a fool’s errand. It is better to make the work meaningful and the management sensitive to each individual’s needs and interests. Gamification risks de-motivation.

Gamification works when there is already a desire to do something, but a little more motivation is needed. When there is no interest in doing something, gamification is more likely to put people off. One of the examples Randi gave was an app that helps people keep up their training routine by persuading them that they are being chased by zombies. The key factor here is that the desire to exercise is already present. A zombie app won’t actually get someone off the couch in the first place if they are more interested in catching up with their soaps than in going for a run.

Trend 10: Unplug to refresh

2015-10-13 16.33.49I thought this was an important point to make. Randi highlighted the growing interest in deliberate disconnection. (Even to the extent that there are hotels and resorts that charge more for the peace that comes with an absence of connectivity.

Lawyering can take many forms. As lawyers have become able to connect and communicate with clients using tools that go beyond the telephone — email, SMS, collaboration platform, social media — they may have forgotten the power of meeting someone and talking face to face. Unplugged communication like this can refresh a client relationship in a way nothing else can. Likewise, if a difficult point has derailed a negotiation, it can often be understood better if the parties get in a room together without electronic devices. There is a reason why mediation is an increasingly important tool in a range of commercial and personal situations.

Finale

At the beginning of her keynote, Randi described how her ambitions to sing on Broadway had been thwarted when she couldn’t get onto the Music major at Harvard. Despite this setback, she got the opportunity to appear in a show last year. No doubt inspired by that success, Randi finished her talk by singing — probably a first at any legal conference. The organisers, Netlaw Media, were filming the conference, so visual evidence of the performance may be available in time. If so, I will update this post with a link.

Three steps to the future

In the last two blog posts, I looked at the limits on improving productivity compared to growth, and suggested that real changes in yield come with improved working practices and products or services that do not depend on contemporaneous fee-earner input. Coincidentally, yesterday I saw a very good explanation of the issue (defined as ‘the problem of constant cost’) in a guest post by Michael Mills of Neota Logic on the Beaton Capital blog.

…quantity in legal services is not necessarily a good thing. We have the diseconomies of scale—internal coordination costs, quality variation—but not enough of the economies, other than branding and cross-selling (when it works).

In short, law practice missed the industrial revolution. We didn’t build power looms, and we certainly didn’t build Jaquard looms, programmed by holes in paper cards (the model for the 80-column, cropped-corner punch cards of computing’s adolescence).

Forget about billable hours, alternative fees, and ABS’s. The problem is constant cost.

Neota Logic’s systems are good examples of the kind of thing I described in my last post — a combination of knowledge and technology increasing law firm productivity. This and systems like it are an inevitable future for firms. The problem, I think, is not in creating these new ways of working, but in ensuring that when they are developed that they flow into the firm as well as possible. How, in other words, does the innovative become the norm?

New embedded in old at the Royal Exchange Theatre, Manchester

As technology teams have faced this problem for longer, it is not surprising that a model has been created to describe how an IT function might be structured to allow it to deliver new things while continuing to support existing products and services. Gartner has invented ‘bi-modal IT’:

the practice of managing two separate, coherent modes of IT delivery, one focused on stability and the other on agility. Mode 1 is traditional and sequential, emphasizing safety and accuracy. Mode 2 is exploratory and nonlinear, emphasizing agility and speed.

But these are two complete opposites, and the gap between them is cavernous. Unsurprisingly, things can fall into the cavern and never escape. Simon Wardley (whom we have met before) is scathing about Gartner’s idea:

I couldn’t stop howling with laughter. It’s basically 2004 dressed up as 2014 and it is guaranteed to get you into a mess.

Wardley’s alternative is a system with three parts rather than two.

When it comes to organising then each component not only needs different aptitudes (e.g. engineering + design) but also different attitudes (i.e. engineering in genesis is not the same as engineering in industrialised). To solve this, you end up implementing a “trimodal” (three party) structure such as pioneers, settlers and town planners which is governed by a process of theft.

The three roles are summarised neatly in this diagram (taken from Wardley’s blog under the Creative Commons Attribution-Share Alike 3.0 License).

map

The bi-modal model advocated by Gartner only considers the two extremes — pioneers and town planners. Filling the gap with a specified role or function helps to prevent the work of the pioneers being rejected by town planners for being undeveloped. As Wardley puts it:

The problem with bimodal (e.g. pioneers and town planners) is it lacks the middle component (the settlers) which performs an essential function in ensuring that work is taken from the pioneers and turned into mature products before the town planners can turn this into industrialised commodities or utility services. Without this middle component then yes you cover the two extremes (e.g. agile vs six sigma) but new things built never progress or evolve. You have nothing managing the ‘flow’ from one extreme to another.

(In an update to his original post, Wardley adds that a similar model was identified by Robert Cringely in his history of Silicon Valley, Accidental Empires. Cringely’s model used different archetypes — commandos, infantry and police. The relevant passage is in Chapter 12 of the book, published online by Cringely in 2013.)

Whichever terminology is used, the idea is the same.

The first wave of change is the responsibility of highly expert groups who work hard and fast to create products and services that might meet particular needs. Some of these might fail, but the speed of work is such that there is always something new to work on. In established businesses, this might be a dedicated research and development function, or it might be an activity open to all (as at Google, for example, where there was an expectation that everyone could spend 20% of their time on their own ideas).

When complete, the successful experiments might have proved their worth, but that doesn’t make them ready for widespread adoption. There will inevitably be some rough edges to smooth off, and some issues that could not have been foreseen until the idea needs to be scaled up for general use. That process of perfecting a new product or service is the responsibility of the middle group (the settlers or infantry). Some ideas may fail at this stage too — an idea that works in a lab may hit obstacles when it encounters real life and work.

Once a product or service has been proved worthy of inclusion as part of the core business, it still needs to be maintained and developed. That is the responsibility of the third group —  the town planners or police. As their archetypes suggest, this group needs to ensure such things as stability, good governance, predictability and reliability. But their work is not immune from disruption — as Simon Wardley’s diagram shows (click to embiggen):

trimodal

Wardley’s model was designed with technology development in mind, and with the benefit of his extensive experience running successful technology companies. However, I think it is also a valuable template for development more generally in law firms (and probably elsewhere).

As an example, knowledge teams in law firms are now an established concept. They commonly work in similar ways when dealing with established aspects of legal practice. The fact that there is a lively market in Professional Support Lawyers between firms, and that many firms have created career pathways for those teams, suggests that this is a ‘town planner’ type of function. But that was not always the case. The first PSLs were experimental. They created their own roles: trying different ways of working, some of which were successful and some weren’t (the pioneer phase). As  firms became more familiar with the concept, they jumped on the bandwagon, perfecting the role in different practice groups and in different types of firm (the settler phase).

The same process can be seen at play in the way firms are adopting concepts like process-mapping and project management. Here, though, the pioneer phase can be massively foreshortened since these are concepts that have been tried and tested in different sectors before finding their way into the law.

Policing and town planning need to change when the context changes. Established knowledge functions need to pay attention to new ideas thrown up by pioneers. That message is at the heart of a recent call by David Griffiths for knowledge and HR functions to start disrupting themselves. When they do, they should consider how the three stages of development might be adapted to their situation.

Firms that cannot identify their pioneers need to consider where new ideas are going to come from. (Without those new ideas, the market will move on without them.) If they can point to a group of pioneers, but they expect ideas from that group to become part of ‘business as usual’ without additional work, they risk failure and frustration with the whole process. The latter situation is probably as bad as having no new ideas in the first place.

As usual, if you are keen to work out how these archetypes of development might work in your firm, we should talk.

Pulling the right financial levers

One of the links I provided in my last post was to a Financial Times report from six months ago, “Professional services at heart of UK productivity problem”, which suggests that depressed productivity is a particular problem for services sectors:

Lawyers, accountants and management consultants lie at the heart of the UK’s productivity problem, explaining almost a quarter of a shortfall since 2008.

Financial Times research shows that the stagnation of productivity since the crisis is largely explained by just four sectors — professional services, telecommunications and computing, banking and finance and manufacturing.

Why might this be? The article’s authors suggest a couple of reasons:

Productivity in professional services has stalled for many reasons including corporate reluctance to fire staff even as business dried up in the recession and subsequent new hires taking time to become more productive.

And they also quote a view from the legal sector:

Stephen Denyer, head of City and International at the Law Society, said staff in law firms were spending more time than before on activities that were not “billable hours”, such as business development and compliance.

“You have to work harder to win each mandate, and a lot of time on compliance, the requirements not only of our regulator but also in relation to money laundering, sanctions, particularly for people doing international work.”

These are probably good explanations, but a much more thorough analysis was provided by Steven Toft for the UK Commission for Employment and Skills. In his piece, Toft concluded that poor productivity at the national level stemmed from poor performance in the workplace.

Much of the fall in productivity is due to what the ONS calls Multi Factor Productivity (MFP) or Total Factor Productivity (TFP):

Output growth which cannot be explained by increasing volume of inputs and is assumed to reflect increases in the efficiency of use of these inputs.

In other words, how resources like capital and labour are managed. As the Growth Through People report comments:

One big part of TFP is the ‘black box’ of the workplace, and how employers turn skilled workers and tools into products and services which customers value. We may have a more qualified and – if qualifications are of good quality – a more skilled workforce, but are those skills being used effectively? It seems that as world markets have become more difficult in the past decade, many of our work-places have struggled to adapt.

The inability to turn a highly skilled population into high productivity is a symptom of failure in the workplace.

By comparison with some enterprises, law firms derive much more value from their people. Without doing the comparative revenue per lawyer analysis that I described in my last post, it is impossible to be sure that law firm productivity is not stagnant. My suspicion is that even if the sector as a whole looks more productive, few firms stand out as particularly good performers. (Sadly, I don’t have access to the relevant data and I can’t afford to buy it at the moment.)

Twisted rootsMy conclusion comes in part from thinking about a very simple model of law firm operations. (Please excuse the very basic nature of the next few paragraphs. I find it helpful to go back to first principles.)

(In the background to this analysis is a continuing downward pressure on fees. One reason for productivity apparently being depressed is that, although output (if measured in terms of chargeable hours worked) may be constant, clients are no longer willing to pay the headline hourly rate for that work. The need to extract maximum value from each hour worked only reinforces the importance of increasing productivity or yield.)

At its most basic, a firm can be understood as a facility for producing legal advice, information or execution capability. It contains people who do those things in return for fees. There are a number of ways in which their output can be increased.

  • If there is still capacity for additional work, any new instructions (and the fees that come with them) go straight to the bottom line — all additional income increases profit and the profit margin.
  • If there is no additional capacity, new work will require additional people to do it. In this situation, additional work will not increase the profit margin, but it should increase the size of the firm’s profit.
  • In order to extract additional value when capacity appears to have been reached, a firm may insist on more intense production. If, for example, the current target for chargeable hours is 1400, the firm might push for a higher target of 1600 or more hours. (Information about the current range of hours targets in the UK has been collated by the Legal Cheek website.) A change such as this is unlikely to be possible in a short time period, and will almost inevitably come with a cost as salaries rise alongside the additional work requirement.
  • Firms can make changes to the fee-earning machinery. They can shift work from qualified lawyers to paralegals. They can move staff from high-cost centres like London to cheaper areas of the country. They can change their resourcing model to use more contract staff rather than permanent employees. If the value of the work produced does not change, any and all of these changes will shift the revenue per fee-earner equation in a positive direction for the firm. It will look more productive.
    But each of these shifts (what Bruce MacEwen calls ‘labor market arbitrage’) is a one-off gain. Once work has been moved to paralegals and contract staff in a low-cost city, that tactic cannot be tried again. In effect it is a re-basing of the productivity curve, giving no recurring advantage to the firm. It is also a tactic that is easy to adopt, so it gives no firm a lasting advantage.
  • Looking to more long-term changes, a firm might turn its back on low-value work and build a capability to do higher-margin work. This is not an easy strategy, unless few other firms identify the same opportunity.
  • Real increases in productivity or yield will only come if firms find ways to generate more income from the same amount of fee-earner work.
  • Alternatively, continuing improvements to productivity and yield come from products or services that can generate income without incurring costs at the same time. At present, however they resource the work that they do, most firms incur salary costs at a similar rate to the income they generate (unless they run below capacity). Firms with products or services that ‘make money while we sleep’ (as a managing partner once described them to me) will produce income that goes straight to the bottom line once the investment costs of creating those products or services have been met.

Looking at these options, there are clearly limits to the power of firms’ business development (sales and marketing) or HR functions to improve the long-term financial health of the firm. They can affect work levels and resourcing (the first four bullet points), but they are unlikely to play a central role in shifting the firm’s focus (the last three bullet points).

To go back to my agricultural metaphor, the combination of successful sales/HR work is like a farmer buying a new field. The farm will generate more income with that field, and more profit, but overall profitability or yield is not changed. Real improvements in yield come from using the land more intelligently by developing better farming techniques or leveraging new technology to extract more value.

Similarly in law firms: changing the way work is done, the kind of work that is done, or the products and services the firm provides, is a job for those who understand the work best — together with those who can see into the future. In a law firm, those people should be in the leadership function together with knowledge leaders and (because that is the direction of travel for the foreseeable future) technology leaders.

Firms that really want to make lasting changes to their productivity beyond one-off improvements to process or labour market arbitrage and without overworking their staff, need to use their knowledge and technology teams better. If they continue to rely solely on BD and HR, their gains are more likely to be short-lived.

When firms turn to their technology and knowledge teams, they need to be sure that those teams are capable of providing the help needed. That will be the subject of the next post.

Measuring success

I have written before on the difficulty of measuring the return on investment in knowledge activities. Prompted by a couple of recent conversations, I have been pondering the issue a little more. What follows is a rumination on how successful knowledge activities might be identified within a law firm, especially over a period of time.

It's a prickly questionIn the past, some knowledge folk might have responded to a question about the value of the work they do by pointing to volumes of documents in a know-how database. All this demonstrates is the amount of work done — it doesn’t help people understand how the firm benefits. Nick Milton helpfully summarised some ways in which business might benefit in a blog post earlier this year (together with survey results showing which measures were most commonly used).

In addition to the kind of successes that Nick points to, I have also been fond of using qualitative assessment of knowledge activities. Often it is easier to ask people (whether inside or outside the business) about their experience of KM work. Their responses serve a double purpose — as well as indicating how successful past activities might have been, they can also suggest fruitful directions for the future.

However, I have become more doubtful about the merit of highlighting one-off successes or of depending on how people feel about a service that is designed to make them feel good. These may give an impression of how well certain parts of the knowledge function perform, but they don’t help with a wider picture.

After reflection, I think the answer can be found in an analogy I have used before. Back in June 2014, I likened knowledge management to farming.

In order to improve the yield of the organisation (by whatever measure is appropriate), managers need to enhance people’s natural capabilities (fertilising for growth), while reducing the impact of adverse conditions (sheltering crops from bad weather). That isn’t possible without a deep understanding of the environment within which the organisation works, the natural capabilities of the people within the organisation, and the value of whatever the organisation produces.

The key to measuring the value of our knowledge activities is yield. If the set of things that we do to improve productivity are successful (allowing for the fact that some may be more successful than others), the firm’s yield will improve.

The next question is how yield might be measured in a law firm. The answer here, I think, depends on whether you want to consider the firm in isolation or compare it with the market as a whole. Financial data that is available within the firm may not match what is made available for publication.

Generally speaking, productivity is an expression of the ratio of outputs to inputs. At the national level, the UK Office for National Statistics derives labour productivity estimates by dividing measures of output by some measure of labour input. In professional services, productivity is measured by the turnover of companies adjusted for average wage rises in the sector.

Within a firm, inputs and outputs can be measured precisely. Firms know how many people they employ, how much they are paid, and how long they work. They also know which of these people contribute directly to the firm’s turnover. Productivity could therefore be measured as a ratio of turnover per person (full-time equivalent or otherwise) or per hour worked. Such a measure would not be useful for comparison over time, since inflation might increase fees without a real increase in yield. Using the ratio of income to salaries would smooth out such variations, since inflation in fees is likely to run at a similar rate to pay inflation.

Over time, then, a firm can see how productivity changes from year to year. As law firm knowledge management efforts tend to focus on the income-generating side of the business, examining the productivity of fee-earners in isolation over a significant period might help to show whether those efforts have had a real impact.

If comparison beyond the firm is needed (does our productivity match changes in the market?), then firms need to find publicly-available datasets. The most easily-accessible data is collected annually by The Lawyer (in the UK) and The American Lawyer (in the US). Both the Lawyer UK 200 and the AmLaw 100 calculate revenue per lawyer (RPL), which can be used as a proxy for more precise measurement of productivity. Because this measure does not take account of inflation, comparison between firms is only possible in a single year. On its own, that comparison is almost worthless. Factors such as the firm’s employment profile (does it depend on low-cost associates or is it partner-heavy in high-cost locations?), its client types, or work profile, little real insight is possible. At best, firms might pick comparators they know to be broadly similar.

There is a useful way to use published figures for revenue per lawyer. That is to compare the trend in a firm’s performance with a larger set. For example, the median RPL figure for the top 100 firms can be plotted against time. That line is likely to ascend, with occasional dips when the wider market was under stress. (I would use the median in preference to the mean, in order to reduce the impact of particularly high- or low-performing firms in any given year.) When the RPL for a single firm is plotted alongside the whole set, one can see whether the profile of the line matches that for the whole set (performance in line with the market) or whether it rises more steeply (outperforming the market) or more shallowly (underperforming against the market).

This graphical information, when combined with what is known inside the firm about any special factors, allows the firm to understand better how well it is doing in the market and what might be causing any difference in performance. The special factors could include investment in knowledge activities, as well as significant client wins or losses, so some caution is still needed.

I suspect very few firms do this kind of meaningful analysis. In a later post, I want to explore the implications for law firm support teams of not having this kind of insight.

Experimentation for success: the people factor

In a few weeks, the London Law Expo will take place at Old Billingsgate (pictured below). It is an interesting event, especially the keynote speakers it attracts. This year, Randi Zuckerberg (founder & CEO of Zuckerberg Media, a boutique-marketing firm and production company) heads the bill. Last year, the main attraction was James Caan, the entrepreneur. (Disclosure: I also spoke at last year’s event, and I am on the advisory panel for this year’s.)

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I meant to write about James Caan’s speech at the time, but couldn’t find the right hook. A few things recently have brought it back to mind.

Caan’s investments have always focused on businesses that depend on people. He started with a recruitment business, then moved into property management and has even invested in a law firm.

His keynote last year was packed with valuable tips on running people businesses. He was clear about the metrics he used to keep an eye on the health of all of his investments. He was adamant about the need to support people and to make sure they were right for the role the business needed. And then he said this:

But I like to do things a little differently. If I have found somebody that has the right characteristics, I will always try and find a role or a space for them within one of my businesses.

The very best and the most talented individuals can come from any walk of life and from any background. Experience and qualifications are of course hugely important and should always be taken into account, but sometimes it helps to look beyond these. What can really make all the difference is a person’s character and the strength of their personality.

Despite being highly focused on performance and fit, Caan occasionally allows himself to take chances on people who may not fit a role perfectly, but who feel like good people to work with.

When I heard this, I was struck by the contrast with my own experience in recruiting. The process of making business cases, proving that a particular role wasn’t unusual in law firms (often a challenge for KM teams whose structure can be very context-specific), and then finding someone to fit the role profile is a very taxing one. And yet this is one of the few areas where firms can experiment with ease.

Law firms are complex systems. As Dave Snowden tells us, the best way to start to manage complexity is to undertake safe-to-fail experiments. Here he is describing this approach in a historical situation:

Experimentation in a firm is tricky. Clients don’t often appreciate it, and the internal culture often militates against it.

James Caan’s approach to hiring is a type of experimentation. If you see someone who might work well within the firm, hire them even if there isn’t a perfect place for them. If they are as good as they appear to be, they will create real value that you couldn’t have expected.

This has worked well for me personally in the past. When I joined Addleshaw Booth & Co’s Trade & Regulatory team as a Professional Support Lawyer in 2001, the partners were taking a risk. They hadn’t had a PSL before, and they weren’t really sure what one could do for them. But we got on very well at interview and they decided to take a punt. It worked. Between us, we created the conditions within which the team grew and became very successful, winning Competition Team of the Year in the 2006 Lawyer Awards.

The current market is one in which firms should be experimenting as much as possible. The past few years have been hard and, although things may feel better at the moment, the market has fundamentally changed so that none of the old certainties apply any more. There are all sorts of things that could be subjects of experimentation — delivery models, client engagement, business structures, and so on. But what I see across the market is a small amount of experimentation and lots of copying. And on the recruitment front, there is little change from the past in terms of the specialists that firms are looking to hire.

It is a small risk to take a leaf from James Caan’s book and hire people who would fit well even though there is no obvious role for them. If the firm is honest with the candidate, so that both parties know what the risks are, surely the most dynamic individuals will be tempted to take the risk of their employment being short-lived in return for the opportunity to make a real difference?

(As always, get in touch if your firm is interested in taking such a chance. It’s my job to make a real difference.)

Law libraries: The heart of legal practice

The library has historically had a central position in the life of the law. The popular view of legal practice links it strongly to dusty tomes. Law is bound to texts as closely as theology is. Library at Calke AbbeyUntil recent years, large law firms and barristers’ chambers would often present their library holdings as a mark of their seriousness. National and local law societies established libraries as a priority for their members.

Some modern lawyers have forgotten the significance of libraries in their legal practice. They point to the ready availability of online and portable electronic resources as a better alternative to bound volumes. They resent the space that those volumes occupy at a time when property costs are rising. They encourage their firms, chambers and professional bodies to treat libraries as just another expense: to be trimmed when necessary.

It is true that libraries cost money to establish and maintain, but these costs are different from others that burden legal practice. The value of a library is often as much in its historic holdings as in its current content. Once lost, the older material can rarely be replaced. Like professional reputation, a good library depends on goodwill and credit accumulated over many years.

One of London’s Inns of Court, the Inner Temple, has proposed a major upheaval to its own library. David Allen Green has eloquently noted why these proposals are wrong-headed. He concludes:

A good law library, as I said at the head of this post, is a Public Benefit.  It provides a lawyer – any lawyer – with the same access to the very same legal resources as his or her opponents, however well-resourced or expensive those lawyers are.

And in every lawyer’s case there is a client; and so the access a lawyer has to first-rate legal resources benefits the client.  And the public benefit too: cases which are properly argued are more likely to be properly decided, and the output of our courts has an effect on society generally.

David also links to the Inner Temple’s library committee’s response to the proposals. That document contains many submissions by eminent library users decrying the erosion of the library.

Amongst those submissions, there are a couple of points that are not often enough made about the purpose of libraries, and which I think are particularly important in modern legal practice. Libraries are not just about books and resources — they offer a community focus, and a kind of space that may be missing elsewhere.

Space

A good library is not just a space for books; it is also a space for people. In particular, it is a space for people to focus on a specific task. That is now unusual in the workplace. Technology (whether desktop or mobile) is built around the assumption that all a lawyer’s needs can be provided through the same screen. That might sound useful, but it also leads to distraction and thence (in all likelihood) to poorer quality work. The ability to remove oneself to a desk in a library, to focus on a single task, may improve the quality of work.

This opportunity to find a dedicated working space is particularly important in open plan offices. Firms sometimes forget this. Some lawyers have also lost the habit of working away from their desks. Their fear of missing a particular communication ties them to their technology and renders them more susceptible to distraction. Firms often point to lawyers’ habits as grounds for reducing the space available to libraries, without considering whether those habits are the right ones. Often they aren’t. Designing good working spaces shouldn’t just be a reflection of what people do — it should lead them to do things that are better.

Steve Jobs knew this:

Then there’s our building. Steve Jobs basically designed this building. In the center, he created this big atrium area, which seems initially like a waste of space. The reason he did it was that everybody goes off and works in their individual areas. People who work on software code are here, people who animate are there, and people who do designs are over there. Steve put the mailboxes, the meetings rooms, the cafeteria, and, most insidiously and brilliantly, the bathrooms in the center—which initially drove us crazy—so that you run into everybody during the course of a day. He realized that when people run into each other, when they make eye contact, things happen. So he made it impossible for you not to run into the rest of the company.

Just as Pixar’s building is designed to connect people, shouldn’t legal businesses lead their people to work better? Libraries can help to do that.

Community

In addition to being good dedicated workplaces, libraries can become a focus for communities. This is one explanation for the existence of law libraries run by law societies and the Inns of Court. Those institutions were established at a time when the typical legal enterprise was too small to sustain a meaningful library of its own. Sole practitioners or small partnerships need all kinds of support — starting with access to books and other resources.

As larger legal businesses have become prevalent, many local law societies have struggled to maintain their investment in libraries. Many have closed.

There is no guarantee that large law firms will remain the norm. Cheaper technology (amongst other things) allows smaller organisations or individuals to compete on equal terms alongside the leviathans. The communities supported by thriving law libraries should help that happen.

Although they might appear to hark back to historical legal traditions, law libraries have changed alongside the rest of the legal world. They remain the unsung heart of legal practice.

The multiple dimensions of legal services

No cartells in BesalùOver the last month, The Lawyer published a series of articles in which the natural structure of law firms was debated by Bruce MacEwen, Mark Brandon and Tim Bratton. Each of the articles, and most of the comments on them, is worthy of careful reading and reflection (registration is necessary to read the articles on The Lawyer website, but they are free to read).

There are interesting points in each of the articles, so I particularly want to highlight some of the things that struck me.

The partnership debate

Bruce MacEwen’s position is simple: “Abandon the partnership model.” Amongst the reasons he cites in support of the proposition, his concerns about how partners behave in wielding power are intriguing. He says:

I aver that since lawyers can be legalistic, they (wrongly) translate the legal fact into the operative/managerial fiction that they ought to have a co-equal hand in control of the enterprise. They ought not. Yet it would be unavailing at best, and a career-ending injury at worst, to explain that to most partners when they attempt to grab the steering wheel.

…and thus:

The presumed right of any given partner to issue orders to others who do not in any organisational sense whatsoever report to that individual is nakedly premised on the trump card, “I’m the partner.” (Whether or not the card is actually played is mostly a matter of social grace and discretion; everyone knows the card is held in the partner’s hand.)

The result of this analysis is that perspectives on legal business from outside the partnership are almost always deprecated — even when those alternative views are better for the organisation or for clients, or are rooted in a more robust understanding of business — if partners feel that their personal status might be worsened.

I have seen this behaviour too often to disagree with Bruce’s observations, but I am not sure that it is due purely to the partnership model. I suspect that it is also linked to the undiversified nature of law firms. They are set up to provide legal services, and so legal knowledge, insight and experience is valued above all others. This is changing slightly. As Charlie Geffen, Gibson, Dunn and Crutcher’s London corporate chair, puts it in an interview with The Lawyer:

“Clients go to law firms for three reasons,” argues Geffen. “They either want advice on what to do, they want to know what the law is, something which is now largely available for free online or on websites, or they want an execution capability, which is commoditised.”

Each of these three components is very different now to 25 years ago, and each provides opportunities for different types of expertise.

Clients increasingly want advice on what to do that is not couched purely in terms of the legal options. They want more rounded advice, taking into account the  personal and/or business context in which they act. Lawyers ignoring this dimension are becoming increasingly irrelevant. That, in turn, leads lawyers to have greater respect for expertise that they do not possess.

The kind of legal material that is freely available online may only be capable of answering basic queries about the law, but that is far more than used to be possible without access to a comprehensive legal library. This has effectively taken work away from lawyers, and the process is only accelerating. The availability of such material (and the more detailed content within legal subscription services) has enhanced the utility of anyone within a law firm who is able to extract information quickly and accurately. Often these are not lawyers, but specialist information and knowledge professionals.

Finally, the commoditisation of law firms’ execution capability has moved work from trainees and junior associates to paralegals, project managers, systems specialists and sales and management experts. Very few of these are lawyers, and their status within firms is growing.

The partnership model for law firms may not be dead, but it may need to start welcoming a range of new professionals.

Mark Brandon supports the continuing existence of the partnership model for a range of reasons. His article concludes with a call to history:

I’ve always found that success itself is rather a good guide to, er, success.

Pulling a dusty directory from my shelf, dated 1990, I can scan through the top law firms in the UK, 25 years ago. Clifford Chance. Linklaters. Freshfields. Allen & Overy. Slaughter and May.

If Amazon, Apple, Facebook, Google and Tesla are all still around in 25 years, I’ll eat the tablet you’re reading this on. Freshfields, it is worth remembering, is older than the United States of America.

As I have already suggested, legal practice 25 years ago had significant differences from now. Of the companies he mentions, only one (Apple) existed in 1990. All of them owe their current success to products or services that matured in the last quarter-century. As the advertisements for financial investment products warn:

Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up.

In 1990, law firms only had to worry about competition between themselves. In the decade that followed, they even saw off attempts to enter the legal market by the big five accountancy firms (including Arthur Andersen, whose attempt was undermined by its own troubles). Now clients can look to a wider range of legal services providers, all of which are reportedly growing market share (albeit from a small base). I am not at all confident that the same names will appear at the top of the legal business lists in 2035.

One indicator that partnership is withering has been provided by a demographic study of law firm leaders in The American Lawyer. This found that partnerships are ageing,  and the gap between law firm leaders and their workforce is increasing, compared to corporates. According to the analysis by Bill Henderson in  The Legal Whiteboard:

BigLaw is getting grayer because the 100-year old gold factory is breaking down. Law firms’ portion of corporate legal spending is no longer growing, as in-house lawyers, NewLaw managed services shops (United LexAxiomCounsel on Call), and technology are all curbing demand for traditional law firm services.   The best economic play for 55- or 60-year old equity partner is to ride out the existing model with the dwindling but still substantial number of Baby Boomer senior in-house lawyers who are themselves not too anxious to change.

Henderson concludes:

[S]ome firms are several years into strategies that have the potential to take market share from peer firms.  Further, the innovation teams inside these firms are having the time of their professional lives because the work is so collaborative and creative–the antithesis of billable hour work.  What is also clear is that many competitors just can’t muster the leadership nerve to make similar investments.

In the years to come, some BigLaw firms are going to pull away from the rest, becoming a magnet for talent and then clients.  Younger lawyers are going to thrive there.  Another portion of BigLaw is going to gradually fade away.

The debate about the partnership model may well be resolved by the passage of time, rather than deliberate action.

Full-service complexity

I found the most interesting part of Mark Brandon’s contribution elsewhere than in his article. It was in the comments where he has an exchange with Jeremy Hopkins.

Jeremy makes a point similar to mine above (but more succinctly):

The deficiency of the partnership structure stems from the imbalance of influence – with lawyers leading on things that professional leaders should be – and the lack of permanent capital enabling long term thinking and investment in client relationships. …I doubt many non-partner senior managers from law firms will disagree with me.

Mark’s response ends with this statement:

I think it is because the law, and law firms, are infinitely more complex than anyone gives credit for.

And later he added:

I do think, though, that the challenge was summed up very neatly to me by the ex Big Four marketing professional opining on a colleague’s determination to teach lawyers a thing or two.

“Law,” she said. “You learn, or you leave, simple as that.”

The point about complexity is a powerful one. In addition to the three aspects to legal practice noted by Charlie Geffen, one has to factor in the existence of a range of very different professional practices — litigation, real estate, corporate, commercial, regulatory, and so on. Each of those is susceptible to different market pressures so that one’s approach a partner in the insolvency team would have to be very different to that taken when dealing with a real estate partner. They also practice Geffen’s three facets in varying amounts and in different ways. Commoditised execution capability for a corporate team with a ‘lumpy’ workload would need to be managed very differently from that supporting the steady caseload of a real estate practice. The information and knowledge needs of specialised regulatory lawyers are likely to be very different from those of transactional lawyers.

Blending all these components together should suggest that full-service law firms are far more complex beasts than any legal service provider that concentrates on just one of Geffen’s facets or on a reduced set of practice areas. That complexity may also lead to forms of competition for support and focus of internal resources that is absent in simpler businesses like manufacturing or even some other professional services.

I have discussed complexity before on the blog, and I think it is poorly understood. One aspect of this misunderstanding is that people often try to reduce it to simple terms. That may work for a while but, before long, reality reasserts itself and the simple structure breaks (often to be replaced by another  version). Managing in a complex environment means understanding and accommodating an unpredictable array of actions and activities. Rigid and unforgiving management structures are poorly suited to this. Engagement with a wide range of members of the complex system will almost invariably produce a better outcome. Some aspects of partner behaviour, reward, support and participation should be improved. But as Mark Brandon points out, partnership provides that engagement.

But what about the business model?

Tim Bratton’s take on this debate draws on the same comment by Jeremy Hopkins that I quoted above, which starts: “The whole structure thing is a red herring.” Tim’s own position is clear:

I would like to highlight an important omission from the debate. Which is the voice of the client. What does the client want from ‘tomorrow’s law firm’?

His conclusion?

The Amazon et als do not succeed because of their structure.  They succeed because they not only know what their customers want, but more pertinently they continually invest in knowing what their customers don’t even know they want until they have it.  This is called product development or R&D in most sectors.

When I was a GC looking at professional life through a client lens, the best external advisers helped make my job easier.  They did this by knowing what I needed, in the very best cases before I did.  As someone helping to run a client-focused business, this is always front of my mind.

Business models and product development facilitate effective client service far more than corporate structures ever will.

As it happens, I think these are areas where many traditional law firms fail miserably. There has been a huge amount of innovation in the law over recent years. As Jeremy Hopkins pointed out recently, much of it has taken place within in-house legal teams. Businesses providing legal support services (such as publishers and technology suppliers) have also driven changes within law firms. And then we have the new legal businesses, such as the one that Tim works for, all of which have examined the client experience and adopted a different business model to improve the service they provide. There have been some changes in the way firms deliver their services, especially in the use of technology and specialised execution capability. Very few law firms have fundamentally changed their business model.

Bruce MacEwen recently took a look at the R&D question. By comparison with other sectors, law firms invest much less of their annual revenue in activities that could be termed R&D or product development. That isn’t to say that they don’t develop new things, but that development tends to come about in a more haphazard manner.

Partnership may be fine for the full-service law firm, but other legal businesses whose services are more streamlined and less complex appear to be better at adapting themselves to client need. There appears to be a strong correlation with corporate structure, but I don’t think there is a causative link. Partnerships could easily adapt to invest more in client service than they do currently. They might even be able to do so speedily.