The Global Legal Post – ALSPs and Big 4 exceed expectations

« The report reveals the two main users of ALSPs, law firms and corporate legal departments, have increased their employment of ALSPs and expanded how they use them. »

Among law firms, use has become even more commonplace with 87 per cent of large law firms, 81 per cent of midsize law firms, and 57 per cent of small firms surveyed saying they are using ALSPs in at least one service category.

23 per cent of large law firms reporting they had lost client business that the firm had expected to win to one of the big 4.

The American Lawyer – To Keep Young Lawyers Healthy and Practicing, Humanize Big Law

Some law firm environments can reinforce the [imposter] syndrome by not giving kudos in annual reviews, even when praise is due, and by failing to encourage or require supervising attorneys to provide feedback. Relationship partners may not remember to communicate a client’s appreciation for a job well done to an attorney who handled a critical matter for that client, and lawyers may associate silence with disapproval. Many law firms can also perpetuate a culture of fear and perfectionism, which does not encourage lawyers to learn from potential mistakes or admit weaknesses.

A firm may unconsciously withhold affirmation of its young lawyers. This practice is likely the product of our hypercritical profession and training to be issue-spotters in law school. Consequently, the feedback model in a firm insufficiently supports young lawyers. Firm lawyers should not rely on law school training to manage those within their employ; instead, firm leaders should seek guidance from organizational management experts and deliberately engage in transparency.

Self-compassion is an extravagance for most attorneys when research must be completed, a client needs a quick answer, and a partner may be disappointed if an email isn’t sent fast enough. 

The American Lawyer – It’s Time to Overhaul the Lateral Hiring Process

85 percent of Am Law 200 firms reported that hiring laterals was one of their two most important revenue growth strategies for the coming year. Conversations with managing partners support these findings. […][L]ateral hiring’s rise in importance has not been matched with a corresponding increase in the sophistication of law firm lateral hiring programs.

Mergers are complicated and risky but are happening in record numbers. Laterals offer firms a more manageable opportunity for rapid growth while expanding into new markets, adding new services, developing new clients, and, most important, adding new books of business to support increased revenue.

Twenty-four percent of lateral partners leave the firm that hired them within three years. Nearly half leave within five years. Even worse, two-thirds of lateral hires won’t produce 75 percent of their expected book of business.

The American Lawyer – Should Clients Do More to Force Law Firms to Innovate?

[L]aw firms that adopt new approaches to delivering legal services—whether through technology or through other efforts to increase efficiency and lower costs—can position themselves ahead of their peers, panelists said.

[T]he current state of innovation in the legal services space means that there are opportunities for outside law firms to stand out by proactively taking steps to show they’re committed to finding new ways to help their clients.

The American Lawyer – For Boomerang Laterals, There’s No Place Like Home

The phenomenon of attorneys leaving and eventually returning to their former firms is not exactly new. Lawyers have long been known to move in-house or take a government post for a few years and then go back home, so to speak. But now, especially in highly competitive markets with intense lateral movement, it is not unusual to see lawyers move from one law firm to another, only to promptly return.

When lawyers do return, they not only have insights that can benefit their firm, but they also value the firm that much more.

Thomson Reuters Legal Executive Institute – The Millennial Shift: A Change in Today’s Law Firm Paradigm

[M]ost of today’s law firms jealously hoard information about organizational decision-making, internal policies, and the details of the partnership structure. Some firms operate with little to no communication down the chain from the management/executive committee to senior partners to partners to junior partners to senior associates to junior associates. Many times, it’s these law firms that also fail to reduce their policies to writing and maintain them in an easy-to-access archive. Failing to do so prevents the Millennial Attorney from gaining a complete understanding of how the law firm works and how they can be successful there. Rarely does today’s law firm leadership solicit and value input from attorneys outside the internal (read: “smoke-filled backroom”) power structure.

Today’s law firms that fail to communicate openly and completely with their attorneys at all levels risk being viewed as making decisions arbitrarily and likely for selfish or “us-before-any-of-you” purposes. Firms with these communication practices foster an environment of distrust and resentment. Keeping these processes shrouded from view of Millennial Attorneys will inevitably frustrate and discourage them. They won’t know what success looks like at such a firm, and the potential rewards of partnership will be too ill-defined for them to justify investing the early part of their careers with such a firm.

Legal Mosaic Legal Business Consulting – Law’s Odd Couple: Will New Law Hires Transform Traditional Law Firms?

The C-Suite roles and titles, now common among large firms, suggest their transition to corporate culture. Even with an infusion of “business of law” talent and management responsibility, the traditional law firm partnership model remains intact and is a strong headwind to new law managers and operators. Law firms retain their traditional culture, structure, and economics. Each is a powerful change inhibitor, and collectively they make material  firm change a formidable undertaking.
There is no residual equity in firms upon retirement, so greying partners have virtually no long-term financial incentive to reinvest.

Firm profits are whacked up at the end of each fiscal year, and that means that “the future is now” for most senior partners. The firm’s capital comes from lawyers because the self-regulated U.S. legal industry has repeatedly thwarted efforts to liberalize ownership, investment, and “corporatization” of law firms and to separate practice from the business of law. This sustains, among other things, firms’ “short-term” approach to meaningful investment, creating a “take the money and run” environment. It also militates against structural reform and succession. What kind of budget will the new law hires be given to invest in their firms’ long-term future? They must contend with these and other structural issues—not to mention whether they are given a clear mandate—to effect real change. That’s a tall order.

Harvard Law School Center on the Legal Profession – Adaptive Innovation: The Innovator’s Dilemma in Big Law

We argue that market-imposed values such as quality, efficiency, and return on investment (ROI) will very likely dominate over reputation and comprehensiveness, forcing a fundamental change in many common features of Big Law. However, law firms will most likely remain an inevitable mechanism for the delivery of many of the services currently occurring there, albeit under a different model.

Abandoning low-margin work and moving upmarket, rather than changing the delivery model, portends the classic Innovator’s Dilemma failure model—there is simply not enough room at the top. Innovation addresses not only the efficient delivery of quality work but also the opening of new markets that would be inconceivable under inefficient delivery models.

It is important to note […] that the information asymmetry protecting law firms has narrowed with the growth of in-house legal departments, and the opacity of a law firm’s work product will continue to diminish as more lawyers transition from law firms to in-house counsel roles.

As an organizational form, the structure of the law firm serves an important function in the marketplace for legal services, conferring additional protections to Big Law’s incumbency. Information asymmetry naturally exists in any marketplace for expert services because a lay consumer will not be able to properly evaluate the expert’s quality. The structure of a law firm, which organizes groups of specialists under one umbrella organization, reduces the information asymmetry and associated agency costs through reputational bonding. Law has not (yet) moved to empirical quality metrics, standards, or certification, so a proxy for quality is generally reputation and pedigree. Rather than an individual lawyer convincing a client that she can provide suitable legal services, the lawyer can point to the firm name on her business card as a signal of quality. A law firm with a reputation for quality has a vested interest in continuing to hire competent lawyers who can continue to deliver quality services. The client need not do the same level of due diligence in hiring outside counsel because he knows the reputation of the law firm that has hired this particular lawyer. Agency costs are reduced, benefiting both parties. (For more on reputational bonding, see Larry Ribstein’s “The Death of Big Law.”) Further, law firms relying on reputational bonding are best organized as partnerships of lawyers, because nonexperts would be unable to monitor the lawyers effectively to maintain the reputational bonding. This need for oversight to ensure quality also motivates in part the ethical rules regarding non-law-firm ownership.

Embracing the disruptive elements of in-house legal departments in a way to create new bonds between law firms and their clients would be an effective adaptive innovation that could help sustain Big Law firms. Firms, for example, could offer legal consulting services to help their clients grow their in-house departments, as the law firm Eversheds (see “Navigating a Brave New World”) is doing with the U.K. secondment.

The development of standardized quality metrics via the application of quantitative techniques and empirical analysis is an important component of unlocking the efficiency gains in law that technology has provided in other industries. Quality benchmarks guarantee the preservation, or even improvement, of the quality required for removing existing barriers to the adoption of technology and the further injection of efficiency.

Projecting forward, we see the concurrent patterns of pressure by external forces and an increasing response by Big Law, including a shift toward increasing AFA and efficiency, and a change in financial metrics redefining productivity to be based on work product.