Who are the "Unprofessional" Players in Today's Legal Market?
As published in Corporate Counsel magazine
Susan explores the ALSP or ELSP marketplace (Alternative or Elite Legal Service Providers) to examine how legal professionals can compete or collaborate with legal service providers who may not hold a law license, but are providing top-notch value to corporate clients.
Bob Ambrogi, who is one of the most astute and grounded influencers in the legal profession, published a must-read piece on “Why EY’s Purchase of Pangea3 Should Be A Wake-Up Call for Law Firms” in Above the Law (April 8, 2019). Bob succeeds in pulling together theory and practice so that he can translate for traditional practitioners how the Big Four and other ALSPs or law companies will impact and potentially dominate the legal services marketplace.
It’s terrific. Except for one thing.
Bob’s focus is on law firms and how they can prepare to compete in a disrupted marketplace of legal service provision. He doesn’t address the other critical constituency in this conversation: corporate law departments.
In terms of their future value to clients, law departments and law firms are similarly plagued.
Every concern Bob raises about the dangers of law firm complacency is equally applicable to law departments. The sage adage, “clients don’t have legal problems, they have business problems,” applies to both inside and outside legal teams, and both have difficulty moving from traditional legal practices toward business models and operational tactics that help them deliver the services that business clients value in a business-like fashion. As a result, both firms and departments are waaaaaaay behind when compared to our competitors in the Big Four and the ALSP marketplace which are offering corporate clients results-oriented, operationally-efficient business services.
Law departments, just like law firms, are or will be measured by their clients for value and return on investment, right alongside managed practice consultancies and law companies of every size and stripe. What do you think will be the key performance indicators on clients’ scorecard? Clients will likely scrutinize legal service providers on at least their service, process efficiency, cost, transparency, predictability, project management, creativity, alignment, and results delivered: How well do you think that most leading law departments and law firms would stack up next to sophisticated legal service providers in well-managed businesses such as leading law companies or the Big Four? Clients might not only find lawyers lagging in comparison to other service providers; they might also find them unable to provide the data by which they can even be measured.
Most firms and departments don’t pay much attention to things like their net promoter score. In the competitive and disruptive marketplace of legal service provision, both firms and departments may have to pay a bit more attention to their end-clients’ priorities and satisfaction in the future since there’s now meaningful competition for their clients’ trust, loyalty, and business.
Hiding behind the shield of legal professionalism will only inhibit lawyers’ future value from clients.
Data shows that most clients of a certain size (determined by the regularity of their need for legal services) choose to build a law department and then have the department’s lawyers retain law firms to fill gaps or for specialized services or infrequently-recurring matters. Clients are used to working with lawyers for legal services, and there’s a long history (written by lawyers) supporting their perception that lawyers are essential to client success when confronted with legal challenges, compliance needs, and certain business necessities, such as papering deals or contracts.
But if you think about it, for corporate clients in the United States, really the only time that a corporate client has to use a lawyer is in making an appearance before an official tribunal, such as a court or some regulatory bodies. The “required” use of lawyers in every other aspect of corporate work is practically enforced only to the extent that an aggrieved party is willing to report or sue a service provider who isn’t a lawyer for the unauthorized practice of law. Unless the target of the UPL suit is a sham outfit or a charlatan (which is when the rules are important to protect the interests of unsophisticated or individual clients), the target is likely someone who actually has relevant, proven expertise and was knowingly retained by a client to provide it—it’s hard to prove the “foul,” except to a lawyer’s pocketbook.
Is drafting a contract an act reserved only for lawyers or people who are working under the direct supervision of lawyers? Or are business people entitled to write their own agreements, if they please? Do we only mind if someone other than a lawyer is selling that service? Hmmm. Is cataloguing self-help practices for company employees or creating a standard operating procedure for sales managers the practice of law? Does advising a company on the tax implications of a transaction, or how to avoid compliance failures, or whether a company or its target is well-positioned financially to merge qualify as the regulated practice of law or is it the application of business expertise? Lawyers have provided all these kinds of services and many more to corporate clients for years: Does that make them the practice of law or prevent a Big Four consultancy or a law company from offering the same kinds of services?
I’m completely against the idea of trying to define what the practice of law is (or isn’t), since I am dead sure that in the end it would lead to the downfall of the legal profession by assuring a spiral to the bottom in delivering valued legal services. But I’m equally sure that it isn’t wise or even possible to seek to prevent others from advising or assisting business people based on the argument that “only lawyers are allowed to do that”—whatever “that” is. And yet, for a lot of lawyers in law departments and law firms, this is the hook on which they hang their hat … a confidence that all those other smart business people can’t provide services that lawyers have traditionally provided because … well, because they can’t! And if they do, they can’t be good at it—only lawyers provide quality advice and services!
Today’s marketplace demonstrates daily that while lawyers do have critical expertise, they work in a service marketplace they’ve neither mastered nor cornered. Whether we like it or not, clients now have first-hand experience with or benchmarks provided by solution providers that put the lie to that myth that “you have to have a lawyer to address that.” And so, for a growing number of corporate clients, legal service provision is no longer a black box that only lawyers can unlock and decipher. And that includes both in-house lawyers and outside firms.
What is the value of our profession, and our professionalism?
I think people forget that the vast majority of in-house counsel come from law firms, and were schooled in the same law schools and early practice training experiences as their outside counsel colleagues. Many consider themselves to have more in common with other lawyers in law firms than they do with managers and leaders in the businesses in which they work every day. And business people know it: It’s incredibly obvious and insulting since corporate counsel are senior leaders in companies they sometimes seem unwilling to partner with to drive results.
Mind you: I’m not talking about asking lawyers to be league with business managers to cook the books or bury a compliance problem; we’re talking about lawyers who can’t propose and manage a budget, or who don’t know how many matters are open presenting what kind of risk to this or that business unit or overseas operation. I’m talking about people who work as executive managers in sophisticated business enterprises who don’t think they have to be either smart executives or mindful managers—they’re all about the legal analysis, but not the data analytics. “Law’s inherently unpredictable, after all!” (A business exec could probably be heard to mutter, as she turns away from that observation: “So’s every other aspect of our highly sophisticated business; get over it.”)
As lawyers, most in-house counsel are not only familiar with, but usually engaged in working in a manner that is based on work patterns formed in and common to traditional law firm practices. Accordingly, most in-house lawyers are no better prepared to leverage the changing marketplace than their outside counsel are. As one of my favorite CLO disrupters, Jeff Carr, often says, both in-house and outside counsel live all too often in “LawyerLand”: an island that is often divorced from the practices and pressures that govern the environment where their clients work. Relying on a traditional interpretation of professionalism, many denizens of LawyerLand incorrectly translate their professional obligation to maintain independence of judgment as permission to provide services in a manner that is poorly aligned with the practices and business requirements of their clients.
Service providers in the Big Four and in law companies, even if they incorporate lawyers onto their teams, don’t tend to live in LawyerLand; they live in businesses that look like, value and deliver services that carefully aligned with the good business practices valued by their clients.
But here’s the bigger practice problem I believe that in-house and outside counsel share that holds us all back in a market in which we are competing with other professionals who offer other disciplines of value: It’s the arrogance of the legal profession in not only presuming that only lawyers can provide valuable services to clients with business problems or legal service needs, but the self-regulated overconfidence that they own the marketplace of service providers their clients can (or must) choose from.
I love my profession for its emphasis on values and its power to empower others. I believe that professionalism is honorable, as well as appropriately compulsory, for lawyers. I think that our professionalism can continue to define our value to clients.
But what I observe is a tendency for lawyers to hide behind the shield of professional/legal regulation when they want to dismiss or impose limitations on the provision of services by others: many aren’t doing it to protect the clients we are sworn to serve, but rather to protect the interests of the guild. We shouldn’t promote a regulatory bar on our clients’ ability to seek out services provided by those with better service models; we should be the ones looking to deliver that value through improved service models of our own. We won’t remain our clients’ preferred service providers by trying to prohibit the delivery of service by providers who do it better than us; if we wish to continue to be their chosen providers, we’re going to have to earn the title ourselves.
The “professional” solution for lawyers is to think differently about what our profession should stand for in the future and remove the unnecessary regulatory artifices we’ve constructed to join the competitive client-service marketplace. As a profession, we will remain professionals only by leveraging not only our unique value for our clients, but all the great ideas that many law companies, ALSPs, and large consultancies are kicking our asses in providing to our (otherwise soon-to-be-former?) clients. It’s time for us to apply our big-lawyer-brains to assuring our value, survival and continued relevance by improving our service to clients, not by trying to prevent others from offering something better.
Professionalism will always be relevant to and valued by clients; the question is what does it mean to us, how do we best exercise in the 21st century, and what do we need to do to deliver on its promise?
Why aren’t in-house counsel out in front on this issue?
Progressive clients and CLOs who are open to considering service options outside the traditional legal model are still not the norm, just as Bob notes that progressive law firms preparing for the future by incorporating Big Four or ALSP service models aren’t the predominant strain populating the outside counsel marketplace. But those clients and CLOs who do get a good look at other service providers’ practices are really impressed: not because those providers have a centuries-old history of providing legal services, but because they offer reliable, predictable, process efficient, transparent, value-priced, and outcome-driven services and demonstrable results. The fact that they can not only offer but deliver such value to clients is not a sign that they are unprofessional or untrustworthy: quite the opposite. If you think about it, that list of benefits includes pretty much everything that most lawyers don’t offer, and that many still (often proudly) believe they are prohibited from professionally delivering.
Which brings me back to the issues raised by Bob’s excellent article and my assertion that the critical crossroads in this discussion is not law firms, but law departments. Law departments sit at the intersection of executive leadership for their corporate clients, and all of the service providers who not only support legal departments but are part of the critical pipeline of legal department talent and lawyer training. If law departments overcome their intransigence, seize this moment, and fully pivot toward partnering with their business clients to drive better solutions and more efficient and effective delivery of legal services, then everybody wins.
Here’s how: Law department teams will find a secure and enlightened higher use by selecting and directing the collaborative teams (of internal and external team members) who can deliver measurable, demonstrable results for their clients; law firms will have a profitable and sustainable role in providing legal services that support, augment, and even drive the solutions that clients want to purchase that their internal teams shouldn’t staff up to deliver; and ALSPs, Big Four-type consultancies, and law companies can specialize in creating managed service portfolios, and data/tech solutions that both appeal to clients and inform the legal marketplace about how to build enduring service options that don’t require a licensed professional or a lawyer with deeper expertise to deliver. All three groups will continue to compete, but in the service of continually improved results and value for clients. Eventually, all three will successfully collaborate to serve clients by focusing on engaging the relative strengths that each can bring to the relationship.
If you think I’m simply describing what the current state of law department, law firm and legal service provider inter-relationships already is, you haven’t been paying attention or you may need to engage in a bit of a sanity check to question whether your current practices are more valued and convenient to you, or to your client. To be valuable to a client, the various players who are supposed to collaborate to provide the best results to the client must be aligned, efficient, demonstrably valuable, and delivering measurable results. If you’re an in-house counsel or a law firm lawyer and you’re “there,” then good on you. Given the state of the legal marketplace, the data implies you’re one of a small minority. Or you may be kidding yourself.
Law departments provide distinctive value not by replicating what law firms and outside service providers do, but by assuming a higher use role of creating, empowering and directing high performing teams that deliver the best results based on their institutional knowledge of their clients’ unique needs. Law departments will be prepared for the future when they focus their priority attention not on the urgent, but on how to best solve the company’s most important and difficult challenges, efficiently manage or handle their client’s operational and routine legal needs, and partner with their business clients to advance the company’s strategic business agenda. This requires them to target the right result, and deploy the right mix of internal staff and outside providers, informed by their company’s unique needs and the best data and tech to get there.
In today’s market, departments and firms are each engaged in their own—often parallel—internal debates about what they can, will and won’t do to change their business models or the way they work and what they provide to their clients. It would be great if law firms took on the challenge to lead on their own, but if we’re interested in moving forward sooner than later, then law departments will need to step up first by re-engineering their own service models and then assigning work to those who are best aligned with their re-invented practices. They may continue to offer work to enlightened law firms, or they may offer more work to providers beyond the legal profession who are better aligned to serve their needs. Presumably, their decisions will create a marketplace that rewards better practices, rather than enabling continued service dysfunction.
If departments step up, their own clients will be well-served and will not only continue to invest in them, but will gladly and confidently follow their lead. If, however, law department leaders continue to adhere to under-performing service strategies and join their firms in avoiding the call to change, their clients are likely to pass them both by. That’s the point at which the CFO (remember, legal is a cost-center in the company) suggests a get-together with a highly recommended leader who runs a team inside the company’s Big Four consultancy which is delivering some really practical and efficient solutions the company should consider.
No one in the legal profession should ignore or decline to consider better practices, operational models, and solutions as demonstrated by the Big Four and the growing community of terrific law company service providers: We should be openly embracing conversations and practices that allow us to learn from them, adopt their best practices, partner with them, and use their services to improve the results we can deliver to clients. We should do this not because we’re lowering our professional standards by welcoming their better thinking and best minds into our practices, but because they’re helping to raise ours.
Bob offers a terrific truism in his article, near the end: “The best way for lawyers to be future-ready is to not wait until the future to prepare.” While that preparation—by looking at how we can improve, not just as lawyers, but within the entire community of sophisticated service providers—may be more visibly lacking in law firms, my experience suggests that it is equally lacking and arguably even more critical to apply in law departments, who are most appropriately positioned to lead and reward improved practices in this disrupted marketplace.
Susan Hackett is the CEO of Legal Executive Leadership, which she founded in 2011 after serving for 22 years as the Senior Vice President and General Counsel of the Association of Corporate Counsel in Washington, D.C. She helps law departments re-engineer and change the way they work to improve their value to clients.