Above and Beyond KM

If you’re in law firm management, you’ve probably been feeling a bit like Ebeneezer Scrooge staring at an unhappy future as several bloggers** recently painted a relentlessly challenging picture of the law firm of the future.  (In Charles Dickens’ A Chrismas Carol, Scrooge’s deceased partner, Jacob Marley, warns him in a dream that he is headed for a dismal fate if he does not pay attention to the message of the Ghost of Christmas Past, the Ghost of Christmas Present and the Ghost of Christmas Yet to Come.) Over the course of the last week, Toby Brown, Ron Friedmann, Jordan Furlong, Steven Levy, Bruce MacEwen, John Wallbillich and I have written about the growing pressures on law firms to refine their business models and business practices so that they can flourish in the new law firm economy.  Toby Brown describes that new law firm economy as one in which there are three tiers of firms:

• Tier 1 — high stakes matters; 15-20% of the market and declining
• Tier 2 — mid-level stakes; 50-60% of the market and growing
• Tier 3 — nuisance matters; 20-25% of the market and relatively stable

While every lawyer likes to think of their firm as a top-tier firm, chances are that very few firms will actually be able to survive and thrive in Tier 1.  John Wallbillich suggests that about 40 global firms will inhabit that top tier.  The Lawyer.com points to their transatlantic elite “Sweet Sixteen.” Even if we don’t know the exact number of firms in Tier 1, we know that it will be a number that is substantially smaller than the AmLaw 200.  And, we know that getting into and staying in that group will take considerable effort.  These firms will need to attract and keep legal stars.  These firms will need to support those star lawyers with law firm machinery that can deliver excellent services at a defensible price.  In this regard, any firm that aspires to remain in Tier 1 needs honesty and discipline.  Where does the honesty come into play? Each top tier firm has to be brutally honest with itself — understanding its strengths and weaknesses, acknowledging that while it may charge top dollar for its work, not all of its work is necessarily complicated, innovative or high risk.  Some of it is routine, repeatable and could benefit from a more systematic approach.

One way to think about the array of work within a firm is to plot it against John Wallbillich’s Legal Fee Pyramid (PDF).  In a high-stakes matter, the judgment and experience of the senior legal expert on the team may be worth more than $599 per hour (in some firms more than $1000 per hour). But what about the work of less experienced personnel on the due diligence effort? Or the eDiscovery work? Or drafting relatively routine documents? Or planning a closing? For each task or phase of a matter that falls low on the pyramid, a firm must carefully examine the workflow to ensure that it is as streamlined and economical as possible. Done well, this means imposing law factory discipline on those parts of the practice that are most susceptible to client fee pressures. There is no substitute for a clear-eyed honest effort in this undertaking.

Why? Isn’t the whole point of being a Tier 1 firm that you’re free of fee pressure? Not exactly.  Even Tier 1 clients want to prevent runaway legal spending.  And, as I heard at a recent conference, there is growing pressure on Tier 1 firms to curtail spending on litigation matters.  Surely non-litigation matters are not far behind.  In fairness, while the conference participants might grouse about the highest billing rates, they did not dispute the value provided by the most experienced lawyers in Tier 1 firms. Rather, they were focused on ensuring that the work done by the less experienced or less expensive people in the Tier 1 firm was necessary, focused and efficient.

At the end of the day, even Tier 1 firms are not immune from client concerns about legal spending.  Those client concerns may get expressed in a variety of ways such as a request for a discount, an unwillingness to pay for certain “overhead” expenses or a decision to move eDiscovery in-house or off-shore.  Smart Tier 1 firms intent on not only surviving but thriving will undertake a close self-examination to ensure they understand how they work before those client concerns about spending are expressed.  Otherwise, those firms will be looking at involuntary discounts, lower realization rates, and growing competition for the spots on a client’s shrinking legal panel — all of which add up to diminished partner profits.

All of this calls for more disciplined firm management.  Gone are the days when a firm’s one sentence billing statement (i.e., “For services rendered….”) cloaked a variety of work and expenses.  Just as clients are demanding more transparency on the bills, firms should be insisting on more internal transparency.  Until a firm truly knows itself, it will never be able to explain and fully defend its value proposition to its clients.

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** Here are links to various posts on the Law Factory vs Bet the Farm (or Bet the Company) Firm Debate to date:

• Apple Meets the Law Factory
• “Bet the Farm” versus “Law Factory”: Which One Works?
• Fourth in Our Series on Strategy: Tier 1, Tier 2, Tier 3
• Law Factory, Education Factory
• Law Firm Investment Portfolios
• Legal Billing Rates: The Next Wave 2
• Legal  Project Management and the Law Factory
• Tier 1: Know Thyself
• The Law Factory Debate: Another Perspective
• The Stratified Legal Market and its Implications

[Photo Credit: Jake Bouma]

Every good conversation invites participation, and I’ve found it impossible to resist jumping into the very interesting conversation Toby Brown and Ron Friedmann have begun online regarding possible business models for large law firms.  The genesis of the conversation was a session at the 2010 International Legal Technology Association Conference in which Ron Friedmann, Gerard Neiditsch, Jeffrey Rovner and I proposed two extreme law firm business models:  “bet the farm” practices and “law factory” practices.  (You can find our slides, as well as links to some discussion summaries, in  Ron’s blog post regarding the ILTA session.)  While we limited our discussion to the purest form, where a firm focuses on one business model or the other, real life isn’t quite so tidy.  In fact, law firms may reluctantly discover that they need to support examples of both business models simultaneously.  But what’s the best way to handle this? Toby draws inspiration from large banks, while Ron analyzes the example of large hotel chains.  In both cases, they show how it is possible for an organization to offer a variety of services at different price points without damaging that organization’s brand.  In so doing, Ron and Toby challenge a large law firm concern that moving away from marquee (bet the farm, high-touch) legal practices will cause such confusion in the public’s mind that the firm’s brand will suffer.

While both the banking and hotel examples have much to commend them, I have a smaller, more personal example in mind intended to help law firms understand that they may no longer have much choice regarding these business models.  What if law firm leaders were to consider their firm’s practices in the same way any prudent person considers the investments in their retirement savings account? For example, one golden rule of investing is to diversify your investments to achieve the correct balance of growth and protection.  Consequently, it won’t be appropriate for most investors to invest solely in high-risk high-return targets.  Typically, investors are advised to put some portion of their money in fixed income investments or money market accounts.  While these investments may provide lower rates of return, they also tend to preserve the monies invested.

Now what happens if law firms were to treat each practice area as a type of investment.  For example, a mergers & acquisitions practice might be likened to a higher risk investment that provides great returns at the top of the business cycle, but may not perform so well in an economic downturn.  By contrast, a bankruptcy practice theoretically should provide better returns during a downturn, as should any practice (such as project and infrastructure finance) that depends on governmental stimulus funding.  In each legal market, the mix of high-risk and high-security will differ depending on local conditions.  Of course, things become more interesting (and undoubtedly more complicated) when a firm spans many legal markets.  Achieving the correct balance between risk and security across geographic boundaries requires even more insightful investing.

Another way of thinking about various investment opportunities for law firms is to compare “bet the farm” (or “bet the company”) practices with “law factory” practices.  Ron Friedmann has written extensively about these contrasting business models for law practices.  In brief, a bet the farm matter tends to be relatively rare and high risk, where the client is more willing to pay what it takes to get the right result.  In these practices, there may be less fee pressure and fewer opportunities for routinized (and cost-controlled) work.  By contrast, the law factory practice is high volume, low margin.  These practices operate under tremendous fee pressure and, therefore, put a premium on producing work in a reliable, repeatable fashion at a competitive price.  To achieve this goal, they tend to rely heavily on efficient business process, standard form documents, automated document assembly, expertise systems, and lower cost professionals.

Taking the investment portfolio approach suggests that a law firm should seriously consider “hedging” each of its bet the farm practices by investing in some practices that thrive in economic downturns as well as some law factory practices that produce steady results despite fluctuations in the state of the economy.  Given the pricing pressures on these practices (e.g., court or governmental oversight of legal fees or a well-established market that prices legal services efficiently), these hedging practices need special attention from law firm leadership. This means focusing on making these hedging practices super-efficient and properly packaged and priced for the relevant market.  It may mean making additional investment in practice support lawyers, automated processes and the kinds of rigorous business performance standards that we are told apply to the best manufacturing facilities.

While the wisdom of a well-balanced, diversified investment portfolio is self-evident, this approach is not entirely without its challenges.  For example, since the bet the farm practices operate under some different constraints from that of law factory practices, law firm management will have to be careful to calibrate firm support services and infrastructure investments so that they are appropriate for each type of practice.  Further, how do you handle the potential for income disparity and differing levels of respect for the lawyers in each practice?  To be fair these challenges are not entirely new.  Even a firm that focuses entirely on bet the farm work may accord different levels of  compensation and respect to the rainmakers versus the service partners.

While large law firms may be comfortable with the notion of building practices areas that thrive at different points in the business cycle, they may have a tougher time accepting the idea of off-setting their high risk bet the farm practices with some lower risk law factory practices.  Then, they may have an initial struggle as they realize that their traditional bet the farm approach to work will not yield the intended economic results when applied to law factory work.  The resulting self-examination and re-engineering will not be easy, but is critical for success.  Firms that accomplish this may well find that the efficiencies forced on them by the law factory business model have a salutary effect on the parts of their bet the farm practice that are relatively repeatable.

At the end of the day, the key is to focus on a well-balanced array of practices that are designed for optimal results under the business model that governs them.  Unfortunately, although we’ve all heard the advice to diversify and re-balance our portfolios, there will always be those investors who forego diversification and decide to stake their lives on a “sure thing.” Let’s hope your law firm isn’t that type of investor.

[Photo Credit: th.omas]

Efficiencies for Your Bottom Line: Five Steps to Reducing Costs in the Next 6 Months

Panelists:

• Joy Saphia, Huron (Moderator)
• Mary Pape, Director of Global Complex Litigation, Dell
• Gary Nelson, Medtronic
• Ellen Rosenthal, Chief Counsel, Pfizer Legal Alliance
• Lani Miller, Litigation Department, Bank of America

[These are my notes from LegalTech NY 2011.  Since I'm publishing them as soon as possible after the end of a session, they may contain the occasional typographical or grammatical error.  Please excuse those. To the extent I've made any editorial comments, I've shown those in brackets.]

NOTES:

• Dell — they have created a system of online auctions in which tasks are unbundled and put out for bid by outside counsel. This is particularly useful for non-litigation work. (They also use it for class action administrators and eDiscovery service providers.) In addition, it allows Dell departments to have access to a wider range of counsel at better price points than they could negotiate by themselves. The psychology of the auction often encourages service providers to offer better rates.
• Medtronic — they hired Huron to help them create a system for managing costs. They have formed a network of preferred providers that includes the outside counsel with whom they regularly work.
• Pfizer Legal Alliance — Pfizer sets flat ANNUAL fees with 18 preferred law firms. These tend to be firms with multiple high quality practice areas. The Alliance system allows these firms to grow their relationship with Pfizer in a natural way. This Alliance accounts for 75% of Pfizer’s legal work. (They don’t include certain local counsel work.) Each firm receives 1/12 of their annual fee each month, regardless of actual costs. This means that Pfizer lawyers are relieved of the burden of reviewing and approving monthly bills. At the end of the year, there is a bonus process to reward superior performance. The Alliance system includes narrative feedback and opportunities to evaluate the teamwork between client and counsel, as well as the quality of the work product. This is a 360 degree process — Pfizer lawyers rate each of the firms; each firm rates Pfizer and each other to assess quality of work and quality of collaboration. The Pfizer Legal Alliance is jointly governed by Pfizer lawyers and outside counsel.
• Bank of America — is moving from 100s of firms to just 30 to handle defensive litigation. (They haven’t included corporate/transactional work yet.) They also have put in place some alternative fee arrangements with their outside counsel.
• 1st Step to Reducing Costs: Identify who does the work — Who is doing the work? Should it be done internally or externally> Who should be doing the work?
• 2nd Step: Assign (and pay for) external matters based on the value of the work
• 3rd Step: For work sent outside, unbundle tasks and reasssign as appropriate.
• 4th Step: Find the Right Firm — the right law firm staffing leads to the right rates.
• 5th Step: Leverage Your Experience & Data — Use what you’ve learned to negotiate rates an evaluate alternative arrangements such as fixed fees
• Managing Outside Counsel — improper management can lead to unnecessary costs. Dell stays closely involved with their matters — they often attend depositions and hearings. Bank of America has created a database of subject matter experts across the country. These are the outside counsel they rely on. Most of Bank of America’s high volume low risk cases are handled on a fixed fee basis by 13 of the their 30 preferred firms. This caps the costs for the Bank and encourages firms to improve efficiencies.
• Firms Don’t Always Behave Rationally — Pfizer anticipated that their law firms would revise their internal processes immediately to accommodate the new flat fees. Instead, many retained their hourly billing mentality and processes, and then came back to Pfizer when the law firm exceeded its budget. Pfizer said that meeting the budget was the responsibility of the law firm. Further, while Pfizer may recommend use of its preferred providers, it ultimately is the choice of the law firm since hiring excessively expensive service providers will cut into the law firm’s margins.
• Flexible Fixed Fees — Pfizer builds some flexibility into its fixed fee arrangements to take account of fluctuations in case load. If a firm ends up handling more work than expected, the fixed fee will be adjusted accordingly.
• Unbundling Services — Dell has unbundled eDiscovery, document review, research work, appellate work. With respect to research, for example, Dell may give research to a particular subject matter expert even though that expert’s firm is not handling the entire the matter.
• eBilling Data – Initially Medtronic used eBilling as an invoice processing machine. Over time, they have learned to use the eBilling system for data mining. They can now determine law firm staffing efficiency, whether the work is dispersed too widely, etc. This allows Medtronic to have a productive conversation with outside counsel to help improve efficiency and reduce costs.
• How Pfizer Sets Annual Fees — Pfizer uses a combination of a bottoms approach (asking each Pfizer practice group to say what they expect to spend in the following year) plus a top-down approach whereby Pfizer determines at a strategic level which firms it wants to encourage by giving them more work. In addition, they are in regular conversation with their outside counsel.

I had to ask the panel: Given how much time and effort in-house lawyers spend monitoring and arguing about outside counsel bills, why wouldn’t every company’s legal department want to follow the Pfizer approach? After some slightly rueful laughter on the part of the panel (and audience), one panelist said they felt they needed more eBilling data before they would feel confident enough to move to a fixed annual fee system. At this point Ellen Rosenthal of Pfizer interjected and said that while they had some financial data before starting the program, it really began on the strength of a strategic and pragmatic decision on the part of their General Counsel who was convinced that the hourly billing system was not working for Pfizer and that they needed a better way. In other words, the main prerequisite for this is COURAGE.

What’s the proof of the system? After Pfizer and Wyeth merged, the workload of the combined in-house legal department was much larger than that of the Pfizer lawyers pre-merger. Despite this, their legal expenditures have declined by 15%.

Leveraging Technology to Achieve Quality and Competitive Excellence. This session is focused on how lawyers provide “value” to their clients. The presenters are Brad Blickstein (Principal, Blickstein Group, Inc,) and Kimberly Townsan (Senior Manager, Legal Administration, United Technology Corporation).

[These are my notes from LegalTech NY 2011.  Since I'm publishing them as soon as possible after the end of a session, they may contain the occasional typographical or grammatical error.  Please excuse those. To the extent I've made any editorial comments, I've shown those in brackets.]

NOTES:

• Value, Like Beauty is in the Eye of the Beholder — The ONLY beholder that matters is the client. The key for outside counsel is to focus on delivering to the client the outcome desired by the client. Don’t focus on the means of production. The panelists quoted David Cambria of Aon who once said that when you hire a gunslinger, you don’t pay by the bullet.
• ACC Value Challenge — Every firm that is interested in providing value to clients should study the ACC Value Challenge. The panelist recommended the blog post exchange on the ACC website between Seyfarth Shaw and Wolverine.
• Leveraging Data — How can we use data to more effectively price and bill for legal services and manage outside counsel? These are the challenges that clients and their lawyers face. Seyfarth Shaw, as a preferred provider to United Technologies Corporation (UTC), spent considerable partner time and effort to review their matters and accurately price the work they were proposing to provide to UTC. (As part of this effort, they examined and revised their work processes.) UTC believes that each provider needs to determine its own costs and margins and then make a proposal; this is preferable to the client dictating the AFA.
• UTC’s Experience with AFAs — UTC started requiring alternative fee arrangements (AFAs) with intellectual property work, but are now asking for it for more types of matters. At this time, approximately 50% of their matters are priced on an AFA basis. They are trying to reach a balance whereby both UTC and its law firms prosper. Their experience is that firms tend to start the AFA conversation by proposing a price based on a historical average. However, these prices often prove to be unreliable. UTC prefers to set a banded price. This sets a cap on the ultimate price, plus it gives outside counsel an incentive to improve efficiency and thereby improve margins. UTC has coupled these AFAs with detailed arrangements concerning what UTC will or will not pay for and which preferred providers UTC wants their outside counsel to use.
• How Do Clients Evaluate Outside Counsel? — AON has a series of detailed lawyer dashboards that show how outside counsel have performed with respect to a number of criteria determined by AON that cover everything from efficiency to quality of advice received. UTC analyzes several areas of outside counsel performance including the extent to which counsel provide sufficient review and comment time to UTC lawyers, and whether outside counsel treat senior UTC personnel differently than junior UTC personnel.
• Process and Efficiency — How can we leverage technology and process to improve efficiency and get more “bank for the buck”? UTC works with its preferred legal providers to ensure both eBilling by outside counsel and the efficient payment of bills by UTC.
• Knowledge Transfer Inefficiencies and Matter Management — UTC has 270 lawyers in-house posted around the world. These lawyers supervise thousands of matters. UTC implemented matter management in the late 1990s, but it was initially for housing information on legal costs rather than a means for actually managing their various matters. Since then, UTC has been looking for ways to integrate outside counsel in the matter management system (LT Online) rather than making the UTC lawyers work with different extranets provided by every outside firm. UTC tried to minimize “rework,” which involves taking information from outside counsel and reworking it so it can be added it to UTC’s matter management and knowledge repositories. They have 30 US firms that access their matter management system directly. This accounts for about 85% of UTC’s US docket. UTC provides training to their outside counsel to ensure they can use the system efficiently. The system includes staffing information, legal documents, matter updates, etc. The matter management system is not intended to capture all matter information, just critical information about each matter. UTC’s experience is that providing matter management system access to outside counsel has greatly diminished the need to rework data from these lawyers. In Townsan’s view, this is one of the best efficiency enhancers they have.
• How Legal Project Management and Quality Programs Help — applying quality improvement techniques (e.g., lean six sigma) may involve significant investment of time, money and effort on the part of a firm and may not always be absolutely necessary. However, every firm can benefit from creating project plans or doing after action reviews. (Interestingly, very few members of the audience said that their firms did either.) Consider using a battery of tools to cut your costs, and then price matters so that the law firm improves its effective hourly rate (its margin), while reducing the client’s overall expenditure.
• Is the Recent Focus on AFAs a Fad or the New Normal? — In Townsan’s view, the AFAs introduce reliability and predictability into their budgeting process. This keeps the legal department and finance department happy since both of them hate surprises (especially unpleasant financial surprises). Further, during times of corporate belt-tightening, companies remain contractually bound to comply with their AFA arrangements. By contrast, they can always trim the number of hours they are willing to pay for. As a result, she thinks that AFAs are here to stay. Blickstein, on the other hand, is a bit more cynical about this. He believes that once the economic pressure is off, firms (and inside counsel) will revert to the familiarity and relative comfort of hourly billing. He noted that we’ve been talking about the importance for AFAs for decades, but they haven’t yet become the norm. Nonetheless, he observed that any firm that finds ways to provide its work product more efficiently at a thoughtful price will always flourish.

This session on Legal Process Outsourcing (LPO) was presented by Mark Ross, VP Legal Solutions at Integreon and David Stanton, a litigation partner in Pillsbury’s Los Angeles office. Mark is an experienced UK litigation solicitor and former partner at the UK law firm Underwoods Solicitors. Underwoods was the first UK law firm to outsource legal work to a lower cost common law jurisdiction. David has a large outsourcing practice. Pillsbury has experience managing a global team of eDiscovery providers while meeting US legal and ethical obligations.

[These are my notes from LegalTech NY 2011.  Since I'm publishing them as soon as possible after the end of a session, they may contain the occasional typographical or grammatical error.  Please excuse those. To the extent I've made any editorial comments, I've shown those in brackets.]

NOTES:

• Outsourcing is nothing new — it basically is delegation. While lawyers have outsourced and delegated tasks for years, the difference today is that we are delegating these tasks to people who work in another country. This raises new issues.
• Ethical Obligations Differ Depending on What is Outsourced. Are you outsourcing administrative support or “substantive legal support services”?
• Client Confidentiality in the Cloud is a Big Issue — however, these go beyond legal process outsourcing. That said, firms considering LPOs are often most worried about preserving the confidentiality and security of client information.
• ABA Formal Opinion 08-451 key points — US lawyers may outsource, but they remain responsible for rendering competent legal services; US lawyers need to ensure that the conduct of personnel performing outsourced tasks complies with the US lawyer’s professional obligations; US lawyers must retain direct supervisory authority of outsourced personnel and work; US lawyers must make appropriate disclosures to clients; the fees charged must be reasonable; US lawyers much avoid the unauthorized practice of law by the personnel performing the outsourced tasks.
• Avoiding Aiding the Unauthorized Practice of Law — the mere fact that an LPO provider hires US-qualified lawyers to carry out the work doesn’t relieve law firms of their ethical obligation to prevent the unauthorized practice of law. While outsourcing to US-qualified lawyers may improve the quality of work product, it doesn’t answer the law firm’s ethical obligations. The law firm must closely supervise the work in order to ensure they aren’t aiding the unauthorized practice of law. You need to be sure that non-lawyers are not doing a lawyer’s work. The responsible law firm needs to have a transparent system in place to measure and report on quality/success and to ensure that tasks are carried out by appropriate personnel. What is the response mechanism for addressing inadequate performance and improving performance? How do you document to show that tasks are appropriately assigned and performed adequately? What happens when the client has “preferred vendors” who carry out the work, regardless of the identity of outside counsel — what does that outside counsel need to do to meet their ethical obligations.
• Review Your Firm’s Malpractice Insurance Poliy — be sure it allows for the hiring of outside providers. If there is any ambiguity at all, be sure to discuss it and resolve it with your insurance carrier.
• San Diego County Bar Association Ethics Opinion 2007-1 (January 2007) — this is an important opinion and should be read by every firm considering outsourcing. It discusses a hypothetical in which a firm fails to meet its ethical obligation to prevent the unauthorized practice of law because they lacked the necessary substantive legal knowledge required to assess accurately the quality of the work performed by the LPO provider.
• Disclosure is Key — you need to disclose the LPO arrangement to your client if any confidential information is involved, if the LPO arrangement constitutes a significant development in a matter, if a client has a reasonable expectation of disclosure.
• Conflicts of Interest — since LPO providers are not bound by the ethical obligations imposed on US lawyers. Nonetheless, US lawyers should be sure to ask their LPO providers to undertake conflicts checks to ensure that they are not doing anything that makes it difficult for the US lawyers to meet their own ethical obligations to avoid conflicts of interest.
• Confidentiality and Data Security — Ross and Stanton belive this is almost a moot point since most LPO providers have put in place confidentiality and data security measures that are more stringent and effective than that of most law firms.

As I venture out onto what may be thin ice, I’d better start with some disclaimers.  I’m not  a law librarian, although I have had responsibility for a law firm library.  I’m not a management consultant with 14 different ways up my sleeve to help you figure out your business strategy. However, I am a longtime consumer of the services provided by law librarians.  And, I am a longtime collaborator with law librarians.  It is from these perspectives that I’m compelled to say that the strategy Greg Lambert suggested in Testing Your Law Library Strategy may not be the best one for law librarians.

To be fair, most of what he says about using the McKinsey tests as a way of examining and strengthening your strategy makes good sense.  While there may not be a 1:1 correlation between the businesses McKinsey usually advises and your law firm library, an exercise like this can often lead you to new insights.  And that’s all good. The part that pulled me up short, however, was the discussion about “beating the market.”  Here’s how Greg defines beating the market:

Beating the Market means that the strategy will better position the law library to compete in the market place against internal and external competitors, and will improve the way the library leverages the use of internal and external competitors.

If that’s the case, good luck to you!

From my perspective as a law firm library client and collaborator, I see things differently:

• Competition is not the best way to frame this.  Focusing on beating and leveraging the competition requires a lot of institutional strength and influence. While some law firm libraries have this, many do not. It may be fun to consider a David and Goliath scenario that pits your law firm library against Google, but do you actually want to try that in real life?
• Google is now engrained in our online lives. It is always available and always ready to help. It works outside regular business hours and doesn’t leave me to hanging while it helps someone else. While it doesn’t always guide us to the right resources, how does it stack up against all the super-busy law firm librarians we know?
• What about the law librarian’s “internal competition”? These are the folks (e.g., paralegals, associates, clerks and secretaries) who are able to provide services comparable to those provided by your library.  Rather than focusing on beating them, I’d focus on understanding them.  Do they really provide a duplicate service? And, are they doing it in a more cost-effective or efficient manner? If so, the law librarian should leave them to it and get out of the way.  If these internal competitors are bringing extra value to the service that you cannot provide, then you definitely should cede this ground.  If, however, they are not bringing value, then it is in the interest of the firm and its clients that you work with them to ensure that the right folks are providing the right services.  This isn’t about competition — it’s about eliminating unnecessary duplication and streamlining your processes.
• Greg also says: “…even if internal and external competitors end up being the best way to accomplish our objectives, it [should be] accomplished in a way that makes sure the law library is still an important player in that market.”  I’m not sure I agree with that either.  Now you are talking about riding the coattails of more successful “competitors.”  Is that really how you want to spend your professional life?  If Online Tool X is in fact the best way to carry out a research project, then work to ensure that the people in your firm are trained to use Online Tool X efficiently and effectively.  Don’t be tempted to force everyone through the library’s intranet page to win access to Online Tool X.  That doesn’t make the library more relevant.  It just makes it more of a hurdle.

I’ve worked with collaborative librarians and I’ve worked with competitive librarians.  As a client and a collaborator, I can tell you that the collaborative law librarian is infinitely better than the one who is constantly battling me and others for turf, influence and credit.  The collaborative law librarian works with me in such a way that our joint work product is appreciably better than anything either she or I could have produced independently.  Once I’ve seen a result like that, she becomes a key part of my team because she makes both of us look good. And, more importantly, the net result is better for the firm and its clients.

In short, Greg’s approach to beating the market seems born of a rather grim, Manichean view of the world.  It really shouldn’t  be about us versus them because if it is, law firm librarians may well be toast.  I’d recommend following a more lighthearted guy, Ronald McDonald, who once famously said:  ”If you can’t beat `em, join `em.”

[Photo Credit: Adrienne Massanari]

What makes lawyers so challenging?

No, this is not the beginning of a lawyer joke! Rather it’s the question that was answered at an informative session held at the Practising Law Institute in New York City.  As part of a day-long program on legal project management, the organizers asked Mark I. Sirkin, Ph.D., to speak about the personality traits of lawyers and their suitability to lead or serve on project teams. (Dr. Sirkin is the co-managing partner of Threshold Advisors, LLC and was formerly a consultant with Hildebrandt.) Using recent research and the Hogan Personality Inventory Scales, Dr. Sirkin identified the following challenges:

• Lawyers are not designed for teamwork. Most lawyers have the personality trait of Autonomy, which means they would prefer to do their own thing rather than work with others.  Further, not only do they score high in Autonomy, but also in Skepticism and Pessimism. They are trained to assume the worst, look for problems, issue spot. Taken together, these traits can make them hard to be around.
• Lawyers don’t find it easy to work with others. Lawyers score below the general population in Sociability (i.e., the need for social interaction) and Resilience (i.e., they are thin-skinned).
• Lawyers are trained for independent action. Law schools traditionally have emphasized individual performance. Contrast this with business schools, which require teamwork from their students from the beginning.
• Law firms traditionally have rewarded individual performance. If the compensation system of a firm is individualized and competitive, it does not provide incentives for teamwork and cooperation.
• Lawyers feel fungible. If a lawyer feels like a fungible billing bot, that lawyer will find it hard to identify and pursue an inspiring goal. Sharing inspiring goals is key to establishing team spirit.
• Lawyers tend to be adversarial. Dr. Sirkin’s data show that many (if not most) lawyers tend to be adversarial by nature. Further, they are tough-minded and tolerant of conflict.
• Lawyers have high Urgency. A high Urgency score indicates a tendency to rush to action.  Most lawyers score high in Urgency, which means that they tend to lack patience for the early planning that is required for project management and teamwork.
• Lawyers are not detail-oriented. The data supporting this assertion will surprise lawyers and their critics alike.  When compared to the general population, lawyers tend to be more “big picture” people and less focused on small details.  To the extent lawyers do focus on details, it is often because of their Aesthetics score, which tends to push them toward providing good work product.

While a lifetime of hearing lawyer jokes may predispose you to believe that lawyers have few good traits, the reality is more nuanced than that.  Their self-selection over time tends to concentrate particular traits within the profession, but those traits have been viewed as necessary for survival until now. That said, lawyers at the top of their game are highly functioning individuals who have accomplished a great deal of good in the world.  Nonetheless, from a purely self-referential perspective, I do find this research troubling. What is clear is that the personality traits of many lawyers make them less amenable to general law firm knowledge management efforts. When reinforced by an “eat what you kill” compensation system, they apparently have little incentive to share, cooperate or collaborate.

However, the problem goes far beyond law firm KM. In fact, this discussion left me wondering if the people who had been so successful in a profession that traditionally emphasized independent, adversarial action might now be ill-equipped for the new style of lawyering involving project management, focused teamwork, effective knowledge management and transparency.  Obviously, firms will need to change their training practices.  Will they also have to change their hiring practices?

[Photo Credit: slgckgc]

Are the lawyers you know hiding from bad news? Whether you work in a law firm or an in-house law department, this is a question you have to ask yourself.  As you survey the range of lawyer responses to the economic challenges of the last few years, think about the lawyers you work with.  How honestly have they faced the mirror? How penetrating has their analysis been of the facts on the ground? How creative their proposals? How open have these lawyers been to change?

This last question is particularly difficult.  I’m not talking about the change that inevitably comes from making tough decisions about cutting costs. After all, nearly every law firm I know has done some belt tightening over the last few years. Some are even considering deeper cuts in 2011. Rather, I’m talking about a willingness to think hard about an alternative business model. Are the lawyers you know doing this?

As my regular readers know, my tendency is generally towards optimism in most things.  However, there are signs that indicate that optimism may not be entirely warranted in this instance.  While there always are some noteworthy law firms and in-house counsel who actively look for better ways to do things, what about the rest of the profession? Consider the following:

• Ron Friedmann commented recently on two disturbing observations: the challenges in-house counsel face in demanding changes from their external counsel (see his posts on the under use of ebilling and buying power) and the unwillingness of lawyers to admit that they can no longer run from numbers.
• Doctors undergo a mandatory peer review to determine the causes of failure in patient care.  (For a layman-friendly introduction to these morbidity and mortality (M&M) conferences, see the work of Dr. Atul Gawande (or read this review).) Similarly, members of the military undertake after action reviews.  Some organizations have begun to understand the value of “failure parties.” When was the last time members of your firm completed such a review on a client matter or a business initiative? A doctor I know offered to do an M&M conference-style review for the partners of a major US law firm.  Even though this doctor is an expert in this type of analysis, the lawyers in question decided that they would just rather not open themselves up to this level of scrutiny. How would your firm have responded?
• Aric Press recently reported that The American Lawyer’s annual Law Firm Leaders Survey indicates that the heads of the firms surveyed are frustrated by the slow rate of change within their firms and the profession.  And what was their response when asked what disappointed them the most? “The most common response was the failure of their partners to develop new business, understand the new challenges they faced, and/­or give up their bad old habits.” Interestingly, the resulting preferred course of action appears to be to switch teams: “If the current partners are the problem, the expressed solution is all too clear: a new and better set of partners. In fact, the failure to recruit just such stars was a frequently expressed disappointment.”

While a handful of anecdotes may not add up to an overwhelming case, they may suggest movement in a direction that is not altogether encouraging.  If you’re reading the tea leaves in the same way, what’s to be done?

[Photo Credit: Susan NYC]

What’s the future of the legal profession? And what role do technology and knowledge management play in the development of that future? These are the questions I’ve been pondering since I heard that Stephen P. Younger (President of the New York State Bar Association) had formed a Task Force to seize “an historic opportunity to shape the landscape of the legal profession.” The announcement of the Task Force describes an ambitious goal:

A panel of top legal minds comprising a diverse range of legal practitioners, including managing partners, law school deans and general counsel, will study and recommend ways to create a roadmap for the future use of technology in the profession, to improve legal education and training, to establish proper work/life balance for attorneys, and to reform the billing structure in law firms.

If there remains even one Rip Van Winkle lawyer who believes that it is safe to ignore technology, I’d rush them to the nearest litigator for a crash course on eDiscovery. Litigation has been changed in a fundamental way because of technology.  What about non-litigation areas of practices?  Have they undergone a similar change or are they due for a change? And what do these changes indicate about the future role of technology in the practice of law?

Knowledge management’s role is a little less clear cut.  While law firm knowledge management personnel are fond of saying that lawyers have been “doing KM” since the beginning of the profession, I suspect there are many lawyers who haven’t spent enough time thinking about how to embed good knowledge management practices in their legal practice.  Further, I suspect that there are some lawyers who feel that KM is a luxury that only large firms can afford. Against this backdrop, what role can or should KM play?

I’m writing this post in the hope that it will elicit your ideas and thereby enrich the public conversation about this important issues.  What should the technology and KM roadmap look like? What recommendations would you make to the legal profession with respect to its future use of technology and knowledge management?

We pride ourselves on our ability to make logical decisions. Lawyers take this one step further, we believe we are trained to make dispassionate, logical decisions. In other words, objectively good decisions. So why do we make so many bad decisions? I’d suggest it’s because our decision-making capacity is limited by our knowledge and self-awareness.

Consider some facts:

• Most of us don’t know what actually makes us happy. Daniel Gilbert’s research indicates that most of us have a hard time predicting how something will affect our sense of well-being.  Because of this, we often make choices that do not make us as happy as we expected. In fact, our poor ability to predict can lead us to make bad choices time and time again.
• There are folks in this country who routinely vote against their economic best interests in support of positions that have little impact on their lives. Just consider some of the more emotional political debates of recent times.
• There are law firm leaders who don’t appear to know how to maximize the economic returns of their firm. (Or if they understand it, they seem to lack the will to make the necessary changes.) For more on this issue, see Toby Brown’s post on the role of leverage in law firm profitability.
• Many lawyers have demonstrated what Jordan Furlong describes as  a “blind side” when it comes to the fundamentals of their business.  Just like they ignore the tectonic shifts around them, they don’t always see how changes in the business of law should be changing the way they operate.
• Cognitive dissonance helps us screen out information that might challenge our thinking, our approach to life.
• “We stand where we sit.”  Our place in the hierarchy can have a profound impact on how we approach decision making. Unfortunately, we may not be sitting in the right place to make the best decisions. (See Graham Allison’s analysis of decision making based on the “organizational process model” during the Cuban Missile Crisis.)

These tendencies can be highly problematic for anyone (especially a knowledge manager) who is trying to provide support through nonbillable activities.  How do you convince your colleagues that what you are doing is so valuable that they need to be doing it too? After all, they are convinced that they don’t have the time to do this work.  And, they don’t really see the value in it. In this situation, how do you break through the limits of their knowledge and self-awareness to help them understand what is truly in their best interest?

To be honest, as long as cognitive dissonance is operating, I don’t think you can overcome these decision-making limitations unless you act strategically.  For example, find the people who think differently and then turn them into Trojan Horses:

• Find the people in your law firm who are wired to consider and value new ideas and information.
• Introduce them to your knowledge management system and then provide sufficient support so that they get up the learning curve as quickly and painlessly as possible.
• Follow-up on their feedback.  They are a valuable source of insight and may well be able to help you improve the system.
• Once they are happy with the KM system, ask them to share it with members of their network.  In this way, people who might not entertain a helpful suggestion from their knowledge manager find themselves lowering their defenses long enough for a person they consider to be a trusted adviser to make a recommendation.  Then you need to follow up with support and a high level of responsiveness to their feedback.
• Rinse and repeat.

While people may seem hidebound in their unwillingness to even try the tools you’ve designed specifically for their benefit, don’t give up.  Sometimes the key is to find an advocate of such great credibility that they are able to overcome the natural reluctance of their colleagues to devote the time and energy required to try something new. The power of a trusted adviser working her network should never be underestimated.  It is one way to help people rediscover their ability to make rational decisions.

What other ways have you found to help people overcome their natural barriers and make important changes?