Last week’s column examined the disconnect between law’s “innovation” fixation and its low customer satisfaction and distribution challenges. Instead of embracing the customer-centricity characteristic of digital transformation companies like Amazon and Apple, most traditional legal providers remain focused on lawyer outcomes, not customers. This includes law firms and many in-house departments that function as captive firms. Customer-centricity-what the client requires and effective delivery-—is what matters, not preserving antiquated business and structural models.
Legal buyers have leverage to demand more from providers. Most have pursued incremental concessions—discounts, fixed-fee arrangements, reverse auctions, etc.—not systemic ones. Why don’t more legal buyers demand fast, efficient, cost-effective, risk-mitigated, interdisciplinary, data and metric driven legal services that drive measurable results? The reasons include: (1) management “practice” backgrounds--“law firm hangovers;” (2) inadequate knowledge of marketplace alternatives; (3) a transactional approach to legal management; (4) second-class status of legal operations; and (5) focus on cost savings, not strategic integration of legal resources to advance enterprise objectives. That is changing as the roles, demands, skillsets, cultural awareness, C-Suite demands, and age of Chief Legal Officers (a/k/a General Counsel) evolves.
Why have relatively few legal providers-especially law firms-failed to anticipate—much less satisfy-changing client demands? Short answer: money. Relatively few big law partners have experienced financial pain. The law firm partnership model is geared to end-of-year profit distribution, not to structural, economic, and cultural adaptations that address customer challenges but might dilute short-term partner profit. When profit-per-partner (PPP) is high, there’s no financial incentive—and a short-term downside—for firm management to change. This is especially so for those with retirement on the horizon.
The firm dynamic is juxtaposed with a changing climate for legal buyers. They confront a business environment that demands “more with less.” That has resulted—among other changes—in procurement’s expanded role in legal buying decisions, competition from (non-law firm) legal service providers, and a changing client interpretation of “what is ‘legal’?” PPP has remained high principally because many large law firms have pursued internal cost-cutting methods (staff redundancies, space reduction, pink slips for underperforming partners, restricting entry to partnership, etc.) to preserve profits. This creates a false positive and masks the threshold issue of low customer satisfaction. A five-year-and-counting flat demand for law firms in an expanding market for legal services evidences buyers’ willingness to shift business to providers that satisfy their expectations.
A new breed of tech and process-enabled providers, the Big Four, and a small but growing cadre of in-house departments are building, buying, and/or collaborating with others in the marketplace to provide customers with holistic, integrated solutions to complex business challenges. They are responding to a market void created by widespread law firm failure to adapt to changing client needs. The reticence of buyers to source “legal” work to “alternative providers” (read: non-law firm) has yielded to receptivity to providers with the expertise, efficiency, cost-effectiveness, scale, and track record to perform work previously sourced to firms. This migration involves not only high-volume/low value work (document review, research, etc.) but also higher value, more complex areas (cybersecurity, IP, contract management, etc.). This is evidence of law’s nascent digital transformation. Data is replacing conjecture; metrics are supplanting hearsay reputation; and brands are prospering from quantifiable results, not pedigree.
Here are additional recommendations for corporate legal buyers and sellers in the digital age.
1. Skills—What’s Required and “Minding the Gap”
Law’s transformation from lawyer-centric profession to interdisciplinary digital industry has recast its division of labor and introduced demand for new skillsets. The “profession” engages in “practice” activities—a shrinking universe of differentiated legal expertise, skills, and experience that include representation before tribunals and high-stakes commercial matters as well as high-value matters where clients deem legal counsel essential. Many other “legal” functions are now routinely performed by other professionals—notably those with business and technological expertise—paraprofessionals (a/k/a “legal professionals not licensed to engage in practice) and/or machines. Law is not solely about lawyers, and legal expertise alone is insufficient to deliver legal services efficiently.
The Corporate Legal Operations Consortium (CLOC) provides a useful definition of the diverse functions its legal professional members engage in: “Legal Operations is a multi-disciplinary function that optimizes legal services delivery to a business or government entity by focusing on twelve core competencies."
The emergence of legal ops, advances in technology, and the warp speed pace of business are impacting how, when, from what structural model, and at what price lawyers and other legal professionals are engaged. “Who does what” and “Who should do it?” are important questions for legal buyers and providers. So too is “Where do we find the resources with necessary expertise, skills, and experience?” and “How will legal professionals acquire the education and training required to satisfy our business challenges? These questions are equally important to legal buyers and providers.
Law is confronting a skills gap trifecta: (1) newly minted and early-career attorneys are not “practice ready” and no longer receive subsidized on-the-job training and mentorship (2) legal knowledge alone is insufficient for most lawyers-they need “augmented skills” (technological, business, collaboration, etc.); and (3) a rapidly changing job market resulting from technological advances, globalism, and other factors means that many jobs will disappear and new ones demanding different knowledge and skills will replace them. The legal ecosystem is already facing a widening skills gap, and that’s likely to increase.
Deloitte released a 2016 report on the legal industry predicting “profound reforms” over the next decade. Several factors were cited including: automation, the rise of millennials in the workplace, and changing client demands. Deloitte projected a 39% loss of legal sector jobs. That will be offset by new positions in data analytics, legal technology architecting and design, risk mitigation, and other yet-to-be-identified fields. What’s to be done about this? Legal ecosystem stakeholders—the Academy, providers, and buyers— must align to identify existing and prospective buyer needs and provider gaps. The stakeholders must collaborate to develop curricula and training that addresses existing and projected consumer needs with special focus on pressing use cases. Legal buyers and providers must devote time, energy, and capital to train the future legal professional.
Law needs fewer lawyers and more data analytics professionals, technologists, crisis managers, project managers, programmers, AI and blockchain experts, supply chain managers, and entrepreneurs. Legal professionals must be agile, collaborative culturally aware critical thinkers. Sound daunting? Perhaps, but in the age of digital transformation, the focus must be on what’s required to satisfy the consumer, not what resources and skillsets providers sell. Tools already exist to address the skills gap including: (1) “just-in-time” digital learning platforms; (2) borderless online educational training; (3) an emerging global legal community and the opportunity to adopt “best practices” from across the globe; and (4) data can be harnessed not only to streamline internal operations but also to align buyer with provider, providing actionable data for predictive, qualifications, and performance purposes.
2. Diversity- A Functional Definition for The Legal Industry
Diversity is a cultural commitment, not a numbers game. It is often confused with affirmative action which, though related, is policy driven—a means to the end of promoting diversity. Diversity is a cultural tenet, a commitment to inclusion, tolerance, equality, and respect. It is at the core of the way a group defines itself and emblematic of the values by which it defines itself. It is more important than ever because of the impact that technology and economics have had in creating an interdependent global population.
Technology has fostered globalism and, paradoxically, provided a platform for tribalism. Business tends to embrace the former, and since law serves business—and society—it must adopt a global view. Law was provincial by design when it was solely about practice. Now, the commonalities of legal delivery eclipse territorial differences of practice. Diversity, collaboration, and customer-centricity are all hallmarks of digital transformation. The legal industry must embrace them or risk marginalization.
What does diversity mean to legal delivery in the digital age? First, it involves an ongoing societal/organizational resolve to identify high-potential diverse candidates; to provide them with mentorship; to encourage and enable them to acquire a sound understanding of the client’s business, objectives, and risk tolerance; provide them client interaction; and meaningful periodic review intended to drive the individual’s success within and outside the organization. Mentorship takes time and commitment—from mentor and mentee. That is largely lacking in the legal industry, especially among large law firms.
Diversity relates not only to ethnicity, gender, and socio-economic background, but also to age. Millennials have much to contribute to the legal industry—especially in technology—and should be afforded a “seat at the table” when their expertise advances customer objectives and helps solve law’s “wicked problems.” Law should be more generationally diverse and recognize that legal professionals do not need to be grizzled lawyers to have an impact internally and for consumers. Several of today’s start-ups founded and managed by Millennials will be global players during the next decade. Law’s leadership should be open to generational diversity to solve its emergent challenges.
Another component of legal diversity is the different skills, backgrounds, and personalities it now requires. Law must actively recruit from other professions—business, engineering, computer science—as well as expand its paraprofessional programs (technology, cyber-security, project management, legal management). Buyers and sellers should be equally engaged in this effort because they both have a stake in its success.
Diversity also involves cultural awareness. There is an emerging global legal community, one that transcends geographic, professional and cultural barriers. It is united by a shared commitment to improve access to and delivery of legal services. A legal industry that is interdisciplinary, multi-generational, diverse, global, collaborative, culturally aware, and customer-focused is what’s required for effective legal delivery in the digital age. Law’s diversity will provide it with the resources necessary to improve access to and effective delivery of legal services. It will also help to restore public confidence in the rule of law and eradicate the widely-held view that law is comprised of the elite to serve the elite.
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Mark Cohen also publishes at Forbes and on his platform LegalMosaic and Law.com