Lawyers and the great innovation success story

Birth of CILEx law firms- superherosYou're probably wondering whether you read that right.  Or perhaps whether it's a title for a fairy tale.

We regularly hear criticism of the legal profession for being resistant to change.  I think there are two reasons for this.  First, it is.  Secondly, the resulting shortcomings are becoming more and more visible as the pace of change in the legal market increases.

When you think about it, it's actually quite hard to blame lawyers for resisting change.  It has proven to be a successful strategy for the profession for generations.  Since the practice of law began, lawyers have done business in an environment where they have benefited from the asymmetry of information between seller and buyer.  They have been in a position to dictate their own terms, with the buyer in no position to question them.

In these market conditions you'd have to be pretty foolish not to take advantage and ensure that the market you control works uncompromisingly in your favour.  And so it would make sense to devise a model which puts the lawyers in charge, maximising levels of income, normalising fee increases, shifting  risk to the buyer and ensuring high levels of sustainable profitability.

And so the hourly-billing based partnership model was born.  For generations this model thrived, revered by all those within the profession and accepted by those outside it.  Behaviours, cultures, attitudes, training and regulation all evolved around a primary purpose to serve and protect this model.  It was at the centre of the legal universe.

Like it or not, most lawyers practising today - even those recently qualified - are to some extent a product of this model and the environment that evolved around it.  But this is becoming something of a burden, as the legal universe is no longer the only universe in town and the ability to adapt is fast becoming an essential skill.

This transition is well-illustrated by the transformation in recent years of in-house legal departments.  We are seeing teams that have re-invented their models for procurement and resourcing, capitalising on both internal capability and new models of outsourcing, enabling more efficient and effective results.  Teams that have developed relationships with other parts of the organisation to become recognised facilitators of growth.  Teams with active strategies to grow and develop talent from within, outsourcing work not felt to stimulate or enhance the careers of their lawyers.  These are teams preparing for a future without dependence on law firms.

We often hear of the pressure from corporate boards to "do more with less" yet we are increasingly hearing about substantial growth in the size of in-house legal teams alongside reduced external spend.  Increasing headcount doesn't sound like a strategy for doing more with less, and it is hard to see hard-pressed finance departments countenancing this unless there is some recognition of value creation.

This is transformation on a large scale in a relatively short timeframe to an extent unheard of in generations of private practice.  Yet it has been orchestrated by lawyers.  Lawyers from the same breeding, background and ethos but, critically, operating in an environment that is conducive to change.

In the law firm partnership, there is an unhealthy imbalance of influence in favour of the lawyers, the model itself and the status quo.  Other functions within the organisation - finance, sales, marketing, technology, talent - are secondary.  They are groups of "fee burners" rather than "fee earners" and their voices are muted accordingly, despite being experts in these business disciplines which are growing in significance as key differentiators, and drivers of competitive advantage in a world where "legal expert" has become a commodity.

Contrast this with the in-house lawyer, who has exited the self-preserving environment, possibly unwittingly, into the a diametrically opposite scenario.  Legal is the least important function in the eyes of the rest of the business.  A distress purchase, a reluctant spend, a "sales prevention team".  A room you go into with great trepidation, where people seemingly make an art form out of inventing reasons why your great marketing initiative can't work.  And they get paid for it. This is the perception in-house lawyers have had to battle against.  In order to thrive, they have had to change this behaviour and dispel these impressions.  From a weak starting position they have had to actively influence and win over other parts of the business, through words and actions.  They have had to apply legal expertise so as to facilitate the creation of meaningful value in a way that is recognisable the organisation.

These environment-driven challenges have imposed upon in-house lawyers the need for perspective and an understanding of the context in which they operate, resulting in a discipline of value output that the private practice environment has never promoted.  And of course, there's nothing like having just the one client to focus the mind on what client care really means.

So lawyers can innovate.  They can create transformational innovation when in an environment that demands it.  Well, the environment throughout the entire legal services market now demands it.  Legal businesses who can discard the embedded cultures and behaviours, along with the legacy structures that preserve them, have a great opportunity to stand out from the crowd by realigning themselves with what their core market wants.

After all, if the lawyers can do it ... then surely the lawyers can do it.

Filed Under: Legal Services

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