Lawyers are back: The Great Restructuring
- Written by Linda Baker
- Published in Professional Services
- 0 comments
Competition, new technologies and millennial attorneys are forcing law firms to re-examine the way they do business.
One of the central themes in Richard Susskind’s controversial 2008 tome, The End of Lawyers? is the commoditization of the law: that is, that law services will become standardized and easily replicated instead of being developed from scratch.
Although commoditization strikes fear in the heart of many an attorney, Susskind’s treatise was the go-to read for the founders of De Novo, a research and development division Davis Wright Tremaine launched in 2014.
De Novo's original mission was to identify new technology, staffing and payment solutions for clients.
Today its suite of services includes data visualization, fixed pricing (instead of the traditional billable-hours model) a financial dashboard that offers clients real-time access to fee information, budgets, legal documents, timekeeper profiles and shared calendars for deadlines and milestones.
“We’re trying to figure out how to commoditize our services to meet the needs … of our larger clients, the Amazons and Microsofts,” says DWT’s Portland partner in charge, Bill Miner, who reports year-over-year revenue growth the past three years. “And we’ve been able to do that.”
He cites an example: “We have a large client who receives a lot of charges — from employees and the Bureau of Labor and Industries. That gets expensive when you’re paying lawyers $700 an hour.”
But because this client has a lot of employees, DWT bundles the claims in a given geographic area around a single price point, while adding in a real-time searchable database, says Miner.
Automation and cost-containment are re-orienting firms around project management, agrees Bob Van Brocklin, a partner and former firm managing partner at Stoel Rives, Oregon’s largest law firm.
A client might decide to buy a building, Van Brocklin says, an acquisition that might require a variety of legal services: real estate, dispute resolution and securities. A project management fee structure packages these services together.
"Businesses are looking more closely at the value proposition law firms offer," Van Brocklin says. "We need to see services through the lens of clients and then exceed their expectations."
THE MILLENNIAL LAWYER
Two simultaneous but diverging trends drive the modern law firm: ubiquitous communications and the rise of the millennial attorney.
“I don’t know any lawyer who isn’t chained to their phone or computer at all hours,” says Rich Meneghello, publications partner at Fisher Phillips, a labor and employment law firm. “The old standby, that if you don’t get back to someone within 24 hours, it’s bad customer service — has now shrunk to six hours, and on weekends and evenings, too.”
But if immediacy is the new normal, so is the millennial lawyer, a demographic for whom constant work is not necessarily a salient characteristic. As DWT transitions away from baby boomers, firm culture is changing to focus more on generous family-leave policies, wellness benefits and flex time, says Miner.
“If you want to go dragon-boat racing, go for it,” he says.
What does that mean for the legal career track?
“It used to be you worked your tail off for 10 years, made partner, and then it was the Golden Age: You could push everything down to associates,” Miner says.
Firms today have to be more flexible about allowing attorneys to work a reduced-hour schedule and take a longer path to make partner, he says.
This is especially true in rural areas, where a dearth of attorneys is causing consternation, says Jason Montgomery, a partner with Dole Coalwell Attorneys in Roseburg.
“The work ethic and culture has changed,” he says. “Now partners are less severe with younger attorneys.”
The on-call nature of modern legal work versus the more leisurely sensibility of younger legal eagles can lead to conflict, says Meneghello.
“Some people need immediate answers; some think people need to be more flexible,” he says in an oblique reference to the next generation. “Sometimes it causes issues with clients.”
The generational change means firms need to have their succession plans in order, warns Stoel Rives' Van Brocklin.
“The demographic shift opens up opportunity to move market share,” he says. Law practices need to create firm-wide succession plans aimed at retaining clients at risk of going elsewhere when the leadership retires.
LAWYERS AS "BUSINESS ADVISORS"
Technology has made it easier for businesses to ditch law firms in favor of doing their own legal work in-house.
Competition from clients paying in-house counsel top dollar helped drive a recent boost in first year associate salaries, Van Brocklin says. Davis Wright Tremaine in 2015 boosted its Portland salaries from $110,000 to $120,000; Perkins Coie upped the ante to $140,000 and Stoel Rives $125,000.
Another effort to stay relevant is the “industry-focused practice,” an increasingly popular model that reimagines the attorney as a sector expert and business advisor instead of jack-of-all-trades lawyer.
A case in point is Schwabe, Williamson & Wyatt, which restructured about a year ago around six industry focus areas: natural resources, manufacturing,distribution and retail, real estate and construction, transportation, ports and maritime, and technology and health care.
“What that means is we are spending a lot more time making sure we understand the industry clients are in, what are the issues that keep them up at night,” says Elizabeth Howard, a natural resources attorney in Schwabe’s Portland office.
As an ag lawyer in Oregon, Howard spends much of her time working on water issues. Under the firm’s new strategic focus, she doesn’t wait for clients to call with a problem.
“Instead, we are being proactive and reaching out,” she says. For example, Howard recently connected an Eastern Oregon client interested in increasing storage capacity with nonprofits and state agencies that have programs that work on irrigation efficiencies.
“It’s about finding opportunities for partnership,” she says. Schwabe’s revenues increased in 2016 and are on track for another increase in 2017.
Howard says the industry model is reshaping the firm’s traditional hierarchy: shareholders who manage all of the clients, with junior partners and associates underneath.
“The model has associates and junior partners stepping into industry and steeping them in that knowledge from the very beginning. Clients are wanting all of the lawyers working to understand their needs.”
Other firms point to similar initiatives. Lane Powell recently hired a director of development and diversity to work with associates on professional development, partner Tom Sondag says.
The focus is on collaboration, says Sondag, who reports firm profits per partner have been on a steady climb over the past few years. "The goal is to grow relationships with clients, and that requires teamwork internally.”
This article is part of a larger story on legal trends that was published in the May issue of Oregon Business.