Too many businesses find that they spend too much on lawyers — and get too little risk protection in return.
But their executive management should not look to attorneys — outside or inside their companies — to fix this on their own any time soon.
At least not without relentless prompting from business leaders.
Only a minority of attorneys practicing in law firms offer business clients alternatives to the billable hour, to purposeful overstaffing & duplication of effort, to insertion of inexperienced lawyers alongside those capable of working on their own, and to the slow-walking of accuracy-enhancing and labor-saving tech adoption.
And only a minority of in-house counsel are making meaningful demands for such alternatives. Though you might expect that in-house counsels’ outlook might align with that of the P&L executives for whom they work.
10 years ago, Mitch Kowalski, leading advocate of legal innovation and current visiting professor at the University of Calgary Law School, published, “2020 Vision: What will a successful law firm look like more than a decade from now?”:
“Perhaps most important …
“All fees are fixed, agreed with the client ahead of time … all of which are tied to ‘fee at risk’ … If we miss our Key Performance Indicators or veer from our Service Level Agreements, our fee is reduced ….
“By 2020, billable-hour compensation — performance judged and rewarded on the basis of hours billed — could already be fading from lawyers’ memory ….
“For too long, lawyers have refused to accept any risk for their inefficiency; unlike other businesses, they have had no incentive to control costs.”
Also 10 years ago, Alex Hamilton — then a partner at the prominent global law firm Latham & Watkins — sent a memorandum to a member of that firm’s executive committee entitled “Innovation Opportunities”. This echoed Kowalski’s sentiments on hourly billing — and advocated other wide-ranging ideas about efficiency and client value.
A decade later participants in this recent Twitter conversation observe that the legal profession has barely moved on these points of innovation.
Jeff Carr responded to this conversation earlier this week.
Carr, as general counsel of a Fortune 500 company (FMC Technologies), reduced its legal budget by a third between 2003 and 2013 (outside counsel fees plus in-house spending down from $14.3 million to $9.3 million), while FMC Technologies’ revenues grew 4X. Last year he came out of retirement to become general counsel of another Fortune 500 company (Univar Solutions) — where he put in place, alongside partner organizations Elevate (a law company) and ElevateNext (a law firm that bills by value rather than by the hour) — a legal innovation “moonshot” that targets a 50% reduction in total legal spending.
On Monday, Carr commented about the Twitter conversation above:
“Reminds us that innovation in #LawLand [Carr’s phrase for conventional legal service providers and in-house counsel] is tomorrow’s future, always will be, & that tomorrow never comes. Sad that with some fact updates, it’s just as relevant & challenging today as 5 years ago. Curious what Latham & others have really done to answer this call to action.”
Alex Hamilton — author of the memorandum to Latham & Watkins described above — responded to Carr:
“[The memo Alex Hamilton wrote] was 10 years [ago] last September! And your points are all right!”
10-years-old happy talk is replaced with today’s happy talk: Widespread legal profession efficiencies, economies, and innovations for business clients are just around the corner — or maybe not.