Future practice: innovate or get left behind

I nearly fell out of my chair during a recent lunch with a Big Law partner. He was actually suggesting that his firm establish a subsidiary to handle lower-end work, not only for their existing clients, but to possibly win work from companies that had always considered his firm out-of-reach. He didn't seem at all concerned about diluting the brand. Wow, I thought: This is so rare among Big Law partners. Or is it? Maybe others were thinking along the same lines, but weren't in a position to express it. And even though he admitted to running into resistance from his fellow partners and the firm's management team, if senior players in other firms were thinking along these lines, it would only be a matter of time for such changes to become reality. So I decided to conduct a survey and find out. Here are a few things I discovered.

Innovative Staffing Models

Of course, I knew he wasn't totally alone. I'd heard about U.K. firms Berwin Leighton Paisner and Eversheds establishing Lawyers on Demand and Eversheds Agile to provide skilled contract lawyers to their in-house clients. And, on this side of the pond, Fenwick & West has a new service called FLEX, which offers a stable of firm-selected and hired lawyers (each with at least seven years experience) to handle licensing and contract work for clients, who buy blocks of time or turn to FLEX for specific projects. The attorneys are paid salaries, but only while they're on assignment. And Perkins Coie has an E-Discovery Services & Strategy Group and two dedicated document review centers where staff attorneys, who are managed by the firm's legal teams, handle various discovery-related tasks. But these are the exceptions, right?

Wrong. Responses to my survey and follow-up conversations reveal that even if firms aren't already offering alternative staffing options and/or fee structures, they're thinking about it. One partner said his firm is currently examining 25 different models to improve the delivery of legal services. A committee of lawyers and non-lawyers reviews all suggestions and business plans are developed to test out the best.

Everyone I talked to agreed the process of coming up with and implementing new ideas must include influential partners and should include everyone. "Dictating innovation will not make it happen. If that is the only tool in your kit, you won't be successful," said Friedrich Blase, director of strategic initiatives at Holland & Knight.

One area where you can make a big and usually quick difference is in the way meetings are structured. "Innovation does not usually dominate discussions inside a law firm. That's something we can all agree on, right?" posited Blase. "That needs to change. You need to draw attention to innovation successes and demand that everyone contribute ideas that will lead to similar or greater successes. You need to make innovation part of every meeting."

Alternative Fee Arrangements Uncover New Approaches

Though the billable hour is unlikely to become extinct, the rush to at least discuss alternative fee arrangements has led to a very positive trend: Firms are using the information obtained from considering fees, dissecting matters and talking to clients to come up with new ways of doing business. For instance, Holland & Knight recently announced a novel approach for its lobbying services. The firm is charging fixed fees and their lobbyists no longer track their time. Blase said it has been "a definite game changer" - not just for attracting clients but when recruiting talent for this practice area. After looking for ways it could offer flexible fees, another firm cut its paralegal staff in half, focusing instead on bringing contract attorneys in on an as-needed basis.

Associate Tracks, Ratios & Reducing Overhead

Most firms are also realizing they need to offer more than just one career track to associates and that they should base compensation on different metrics. Some are breaking the "one size fits all" model and basing associate pay on geographic location and practice group. Others are replacing the lockstep approach with various compensation levels based on competency.

Another source of savings can be found by changing the "corner office" mentality. One partner I talked to said his firm has minimized the time and resources spent on outfitting facilities by mandating that all new locations have uniform offices for all attorneys, regardless of seniority or title. Others are taking advantage of new technologies to reduce their dependence on support personnel, with one firm cutting its secretarial staff by 44 percent since 2000 for a 5:1 average ratio, and another claiming to have eliminated 85 percent of its hard copy workflow. Fenwick & West has reduced client costs by having its own IT department and servers host and support deal documentation and storage in a secure environment at one-quarter the cost of an outside vendor.

Client Communication is Essential

Even if your firm has introduced some innovations, you won't get far if the changes don't reflect what clients want. This is the first and most important step. You should ask your clients how they would finish this sentence: "I only wish I had a law firm that..." Lawyers who are good at listening to their clients will be their firms' best sources of new ideas.

And when it comes to fees, Blase said, "If you talk to your clients about billing issues, you'll find that what they really want is predictability. Total cost is secondary." This is what prompted Seyfarth Shaw to launch SeyfarthLean in 2008. After clients requested alternative fee structures, they analyzed data from 100 cases and discovered several places where they could implement greater efficiencies. This has enabled them to map their entire service delivery process and use best practices as planning guides for future matters, to ensure they are on budget and that client objectives are being met. Clients have access to these documents, which has created a new level of transparency - allowing them to be involved in and better understand staffing and pricing decisions. "It essentially brings project management to our entire legal practice," explained Lisa Damon, a member of the firm's executive committee and SeyfarthLean leader.

This is all part of "helping clients define their goals and developing systems (either in their own legal department or your firm) to achieve those objectives," noted Blase. "This leads to a deeper understanding of the client and a more robust relationship."

Follow Your Clients' and Lawyers' Leads

Since many of their clients do business in multiple geographies, Perkins Coie decided to organize around practice and industry groups rather than by office. "The focus is on putting together the best teams, regardless of where the players are located," explained Chief Lateral Recruiting Officer Karen Andersen. "Each practice group is assigned a business manager who focuses on the management and support needs of the group and its lawyers. We felt it was important to take this type of work off lawyers' plates."

In addition to listening more closely to clients, firms need to tap their professional staff for ideas, too. Nixon Peabody launched an internal process for product development called "IDEALab" to encourage new innovations. "History is full of lawyers coming up with new ideas," said Herb Stevens, the firm's chief innovation officer. "Where do you think all the new niche practice areas came from?"

What Does the Future Hold?

Given the array of delivery options now available to attorneys and clients, Mark Stevens, a corporate partner at Fenwick & West, suggested an "eyes wide open" approach, by which he means firms must continuously monitor domestic and international best practices at top firms and bring them into their own discussions.

Of course, we all recognize that corporations facing "bet the company" cases will continue to pay whatever it takes to hire "top guns" and will base those decisions on attorney's reputations, not on unique innovations being introduced by a particular firm. This means that firms will have to walk a fine line between keeping their top performers happy and making adjustments to better meet their clients' needs and budgets. Both are necessary to ensure firms stay current and competitive, are attractive to younger attorneys - "Your goal should be to create a firm younger partners want to own in the future," said Mark Stevens - and are able to retain existing clients while winning new business.

Another law firm partner wrapped it up this way: The biggest threat to law firms in today's competitive environment is to forget that their focus needs to be not only on excellence, but on being creative and flexible when it comes to developing and delivering the best solutions for their clients. As Charles Darwin famously said: "It is not the strongest or the most intelligent who will survive, but those who can best manage change."