Articles Posted in “Associate Leverage”

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The Point

The business press and specialty legal press are replete with speculation about how “Generative AI”, ChatGPT, GPT4, and other AI developments might change law firms’ delivery of legal services. Most center their discussion on functionality: How well will they work?

But the likelihood, and pace, of adoption will depend on the answers to two other questions:

1. Will law firms apply such exciting new technology to significant portions of their work now performed by junior associate lawyers at hundreds per hour?

2. If so, will law firms share with clients — by reduced charges — the resulting efficiencies?

Based on my career as a practicing lawyer, and my 12 years as a business executive at Whirlpool and GE (where I worked with and supervised law firms), I believe that the answer to each of these questions is more likely to be “no” than “yes”. Continue reading

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The Point

Where corporate Legal needs the services of a specialist, it should look primarily among law firm partners for the practitioner who has spent years — more typically decades — focused on the narrow legal area in which the company’s need arises (more on this here and here).

Surprisingly, attorneys employed by such firms as associates — especially the larger ones — receive very little training for their work (see here, here, and here). Yet these law firms assign such associates alongside such partners and bill them at hundreds per hour for their supporting role.

Management lesson: Corporate Legal, to get the expertise its client company requires, should maximize the services of the specialists it really needs, and minimize the services of associates who role is mainly to bloat billable hours (see here and here about the law firm financial technique called “associate leverage”). Continue reading

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The Point

1. After two years of white-hot demand for their services, Bloomberg Law’s recent headline says demand for the junior lawyers who work as employees of big law firms (“associates”) is taking a sharp downward turn.

2. Even without the Pandemic’s boom / bust impacts on the legal market, the vast majority of such associates end up as short-termers who spend about six or fewer years at firms that nevertheless charge hundreds per hour for their work.

3. Those law firms lack an incentive to invest robustly in the average associate’s professional development, because most associates won’t become partners.

4. So the hundreds per hour charged for such associates’ time pays for the services of young attorneys who too often have been given only ad hoc preparation — who are “supervised” by one, two, or even three levels of attorneys senior to them — with consequent wasteful duplication. Continue reading

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The Point

The conventional law firm — to maximize revenue — bills client companies hundreds per hour for the work of recent law graduates who are not yet capable of doing legal work unsupervised. (See here, here, and here.)

Accordingly, conventional business law firms — despite showcasing “innovation” specialists — actually resist cost-efficient, fast, and accurate process solutions and their enabling technologies to do routine, recurring, and lower-skill legal work. (See here and here.)

In commenting last week on EY’s incipient split (subscription) into distinct audit and consulting arms, Denton’s chair Joe Andrew offered three revealing observations (subscription) about deficiencies endemic to conventional law firms:

(1) Law firms as a category lag significantly in process-based solutions for client companies’ routine, recurring, and lower-skill legal tasks,

(2) This deficiency causes law firms to assign such routine, recurring, and lower-skill tasks to “young lawyers” as labor-intensive, “soul-crushing” work, and

(3) Law firms will not adopt needed process solutions on their own; only competitive pressure from outside the legal profession will bring this about (Mr. Andrew believes that it will come from the Big Four). Continue reading

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