Avoiding extinction: Are you prepared for the future of law practice?

Mitchell Kowalski

Mitchell Kowalski

Better, faster and cheaper—that’s how lawyers of the fictional law firm of Bowen, Fong and Chandri PC proudly describe their services in futurist Mitchell Kowalski’s new book, Avoiding Extinction: Reimagining Legal Services for the 21st Century.

Inspired by Richard Susskind’s influential End of Lawyers, Kowalski re-imagines the traditional law firm as one that discards traditional practices and assumptions in favor of a business-efficient, client-centric approach. Recognizing the convergence of many factors, such as rapid technology adoption and globalization of business, that are already accelerating changes in law practice, Kowalski has a vision that may be fictional but is not fantasy. 

At its core, the BFC law firm recognizes the growing power of the consumer, who is increasingly better informed about the value of legal services and has more choices than ever on how services are provided. Kowalski describes four key areas that distinguish BFC from its peers of yesterday: structure (elimination of individual ownership and rights), overhead costs (outsourcing favored), knowledge resources (best-practices database, collaborative approach) and billing practices (fixed fees, value billing).

If BFC is the law firm of tomorrow, are you prepared for the future? YourABA spoke with Kowalski about trends causing upheaval in the legal marketplace and steps lawyers and law firms can take to thrive in what he sees as the new legal environment.

While the BFC law firm is fictional, current trends can make it a reality in the not-so-distant future. Could you describe some of the most influential factors causing change?

There are so many, but some of the major factors are as follows.

Legal process outsourcers have been a big game changer. The success of Pangea3 and others have caught the profession by surprise. Never before in history has so much legal work been given to non-law firms.

The number of in-house lawyers has grown exponentially over the last 25 years—legal costs are no longer necessary evils and are being managed more than ever before.

Technology has made legal information more accessible, making it less valuable.  However technology —such as cloud computing, SaaS, VoIP, instant messaging and social media—has also created new opportunities to service clients in a variety of different ways.

The issuance of RFPs and the use of legal project management techniques are becoming ubiquitous for large client files. 

Finally, we have a glut of lawyers in North America, many of whom leave the profession for a variety of reasons, but would stay if alternative career options were provided.

Success in law now comes from recognizing the changing landscape and constantly adapting to it in a manner that provides maximum value to clients at minimal cost to the firm. 

What role has the bad economy played in accelerating or slowing the changes you foresee?

The bad economy has accelerated change in the legal profession simply because it’s harder to make money and clients are becoming more demanding. But much more needs to be done. The current thinking in the profession is that “we will just fidget with our pricing and business model” until times get better, then it’ll be back to business as usual. However, in my view, we are now living in the new “normal” and business will never return to the way it was before 2008. Unfortunately, the profession has not been hurt enough to drive the full-scale changes that are needed, so there is a great deal of money to be made by innovative law firms who restructure themselves now, ahead of the pack.

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Ethics 20/20: The future of the Model Rules of Professional Conduct

 

What impact will technology and the globalization of business have on the legal profession? And in light of that impact, should any changes be made to the ABA Model Rules of Professional Conduct and other policies governing lawyer regulation?

 

In 2009, the ABA created the Ethics 20/20 Commission to conduct a thorough, three-year review of its Model Rules of Professional Conduct and the U.S. system of lawyer regulation in the context of technology advances and global legal practice developments.

 

Read more ...

You forecast a diminishing role for associates in tomorrow’s law firm. Can you elaborate on why?

There will always be a role for good, effective and experienced senior associates. However, today, new lawyers expect high salaries yet provide little value to files because of their steep learning curve—this is unsustainable. Clients realize this and some have banned junior associates from working on their files. My thinking follows that of clients in this matter. Since files can be run more efficiently and more cost-effectively through outsourcing, home-sourcing or through the use of paralegals, why bother with junior associates at all?

I can foresee, as I have in my book, that future generations of new lawyers will receive their practical training at legal process outsourcers, not at law firms. High salaries for newly-minted lawyers will then become a relic of the past.

At BFC, technology has not only made it easier for lawyers to stay in touch and work on the go, but it has also changed the physical office space. Can you detail some of those changes?

For part of my career, I worked for the Canadian subsidiary of First American Title, where everyone, including the president, sat at a work station. I soon realized that having a private office was not only unnecessary, but that private offices were an idea whose time had long since passed. I also sat on the board of directors of a large Canadian real estate company that also didn’t have private offices—and yes, even the 10 lawyers in our legal department sat at work stations. So, in designing BFC’s office, I used my past experience and created a model of work stations clustered into neighborhoods that would foster collaboration among team members.

Removing private offices reduces the amount of space needed, creates better air flow and better lighting. Private meeting rooms are available for confidential work, thinking or just a general change in work space. BFC has also created hotelling space so that lawyers can work from different locations, and the LEED initiatives that BFC incorporates into its offices save money on utilities and provide a more pleasing environment in which to work. Whether it’s high ceilings, a fitness area, free massages, ergonomic work areas, a cafeteria area, bold colors, lounges filled with games or the rooftop deck, BFC takes the creation of a pleasing workspace very seriously. As BFC says, “We want you to want to come to work.”

BFC has innovative knowledge management strategies that seem to be based on optimizing efficiency. Can you provide some detail on the BFC system?

BFC’s KM [knowledge management] system is a success because it’s a philosophy more than a system—in fact, it’s a way of life at BFC. All BFC lawyers are evaluated, in part, on being regular contributors to KM. Failure to regularly contribute constitutes poor performance, which impacts advancement and salary. BFC invests heavily in cloud-based KM systems as well as in full-time KM personnel, both at its home office in North America and at its KM operations in the Philippines. BFC’s KM director sits on the firm’s executive team, further demonstrating the importance of KM.

The KM professionals at BFC are also challenged to increase firm profits by leveraging KM in ways that do not involve lawyers—in other words, to make money while lawyers and staff sleep.  

Since the billable hour remains as the dominant billing practice today, could you share your thinking on the coming shift to alternative pricing  methods?

Lawyers are slaves to precedent, that’s how we’re trained. We walk backward into the future. And while that may have some merit for creating consistent legal rules, it’s a silly way to run a business. Lawyers charge by the hour, for two reasons: clients allow them to, and because it’s a very easy system to operate. It means that lawyers don’t have to think about pricing in a conventional business sense—we arbitrarily pick an hourly rate that is not well-thought-out in terms of overhead costs and profit margin, then multiply that rate by the hours spent on a file. Corporate clients are finally waking up to the arbitrary way in which they are charged and are demanding that legal fees bear a clear relationship to the client’s perception of the value received. How long the lawyer takes to provide that value is irrelevant.  

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BFC eliminated the traditional model of individual ownership and rights, favoring a more corporate structure with a board of directors. What’s the trend behind that as a coming model?

Australia’s Slater & Gordon seems to be the only major law firm using a board-of-directors structure because they are a publically traded law firm. As law firms begin to seek outside investment, a stable, long-term, impersonal approach to operating the firm will be critical to wooing investors.

Typically firms are run by senior partners whose interest in the firm stops when they leave. This creates conflict between older partners who want to maximize their return in the short term through minimizing investments that reduce their draws, and younger lawyers who want to maximize investment for the long haul. The only way to resolve the conflict is to create an independent board of directors whose only goal is the long-term profitability of the firm. And wouldn’t it be very client-centric to have general counsel as the only directors on the board? 

If you headed a law firm, what alterations would you make right now to help the firm succeed in the new environment you describe?

The easiest change is to modify the office environment to the open concept I discussed above. That is the least mentally disruptive change and shows immediate costs savings to the firm. It’s important to have a “big win” early in any transition to keep people focused and on board. Next would be significant investment in cloud-based KM systems and personnel.  KM is the “secret sauce” that allows a firm to move from a billable hours model to a value-based model. A new KM approach will drive a new philosophy as well as a new set of corporate and individual goals on which to assess performance/salaries that will naturally move away from billable hours. 

Legal services may be provided “faster” and “cheaper” in the future, but how will it be “better?”

Lawyers will become more like consultants, rather than technicians. They will oversee the technical aspects of a matter sent to the appropriate LPO or homesourcer. They will sell results, not time. No longer shackled by billable hours, they will become more proactive and interactive with clients. As a result, the quality of life for lawyers will dramatically improve.

Are there firms right now that have successfully adopted some of BFC’s practices? 

So far, there is no single firm that has incorporated all the matters discussed in my book. A few North American firms have picked up various aspects, such as Clearspire and Axiom, but U.K. firms seem to be leading the charge in innovation, particularly now that the Legal Services Act is in full force. These firms and firms like them are best positioned to move into a full BFC model that will really shake up this crusty old profession!

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