5. CHANGING RELATIONSHIPS
WINMARK LOOKING GLASS REPORTS
cost reduction;
changes in pricing models; and
the development of mutually beneficial relationships.
shifting work to lower cost resources;
improving value and predictability from external firms; and
using technology to increase availability of legal experts.
corporate procurement specialists
value-based and performance-based compensation.
8. THE PARADIGM SHIFT
HENDERSON AND ZAHORSKY, ABA J, 2011
PP shrinkage is not just recessional
Market growth slower than historic levels and (even) less evenly distributed
Movement of jobs outside of PP and in-house
Associates' paths upward fade
Profits per partner and staff leverage problems.
Technology swallows billable hour
International competition hits (margins and market share?)
A more sophisticated corporate client with vast knowledge available at the click of
a mouse.
10. TYMETRIX…
Founded in Hartford in 1994
In 1995, developed task-based billing system.
1997 delivered online e-billing.
2000 automated compliance checks.
2001 online matter management solutions.
2002 ranked first in Deloitte & Touche’s Fast 50 in Connecticut and #72 in Deloitte’s Fast 500
Tech Companies in North America.
2003 acquired by the global information services company Wolters Kluwer. (€3.6bn, 18,500
employees)
Later TyMetrix opened its London office, the first outside North America. The first non-North
American client was the global energy giant BP.
2004 an end-to-end enterprise legal management platform with e-billing, matter and case
management, document management, budgeting and analysis, and reporting solutions.
11. IT’S THE RECESSION, STUPID?
US Lawyer headcount peaked in?
2004
And what else happened?
14. NOVUS LAW
operates 22 hours a day.
electronic document review for large-scale litigation and corporate due diligence for
large businesses.
delivery of “a virtually error-free work product on time and within budget”
“via intricate, metric-driven work process certified by Underwriters Laboratories”.
They do not practice law
15. Since 2007, revenue-per-lawyer figures have been trending sideways or down for
the majority of the Am Law 100. …a sharp break from historical patterns
16. EXAMPLES OF LESS TEMPORARY SHIFTS
Some Fortune 500 companies have adopted the presumption that all legal work
will be done in-house.
General Electric's legal department
lawyers in India supervised by in-house lawyers in the U.S.
Cisco Systems
a Web-based knowledge management system that
captures email conversations, facilitates secure communication with experts, and
documents answers to frequently asked questions - all to boost in-house productivity
and cut the law department's expenses.
18. LB100 THE AGE OF TURBULENCE
Cobbetts, which went into administration in March, posted a profit per equity
partner (PEP) increase of 16% in its last-ever LB100 appearance
Top 100 UK law firms revenue and profits up by 8% (£19.1bn and £5.8bn)
Headcount up by 10% to 61,299
RPL is down by 2% to £312,000
PPL, likewise, has fallen by 2% to £95,000.
PEP has dropped 4% to £622,000.
The losers– there isn’t the work, there’s too many lawyers
GCs – you have to change
19. LB100 THE AGE OF TURBULENCE
Cobbetts, which went into administration in March, posted a profit per equity
partner (PEP) increase of 16% in its last-ever LB100 appearance
Top 100 UK law firms revenue and profits up by 8% (£19.1bn and £5.8bn)
Headcount up by 10% to 61,299
RPL is down by 2% to £312,000
PPL, likewise, has fallen by 2% to £95,000.
PEP has dropped 4% to £622,000.
The losers– there isn’t the work, there’s too many lawyers
GCs – you have to change
25. MORE BUSINESSES WITH IHLS
AND BIGGER TEAMS
number of solicitor PC-holders employed in commerce and industry increased by
183% since 2000
the number of head offices of businesses employing PC holders increased 93% in
the same period
(Law Society Annual Statistics Reports).
27. FIRM RESPONSES
Cost Management/Headcount
Response to metrics - Firms are making efforts to rationalise and
consolidate systems to enable better management information
Firms are increasingly focussed on better matter management analysis and
more rigorous pricing approaches
More interested in ABSs??
Diversification in influence? More Non-Exec, Non-L equity
30. LACITY AND WILLCOCKS PREDICT…
LPO providers will move up the value chain
New engagement models will emerge
The shape of enterprise legal functions will increasingly move from pyramids to
diamond
Enterprise legal functions will reduce the number of law firm partners and
increase bundled legal services
Significant M&A and strategic alliance activity will fuel provider growth and
capabilities
40. MEDICAL FALLIBILITY
GOROVITZ AND MACINTYRE
“Necessary fallibility”—things beyond our capacity.
Ignorance - we may err because science has given us only a partial
understanding of the world and how it works.
Ineptitude - he knowledge exists, yet we fail to apply it correctly.
Complexity - science has filled in enough knowledge to make ineptitude as
much our struggle as ignorance.
41. AVIATORS
The test pilots made their list simple, brief, and to the point—short enough to fit
on an index card, with step-by-step checks for takeoff, flight, landing, and taxiing.
It had the kind of stuff that all pilots know to do. They check that the brakes are
released, that the instruments are set, that the door and windows are closed, that
the elevator controls are unlocked—dumb stuff. You wouldn’t think it would make
that much difference. But with the checklist in hand, the pilots went on to fly the
Model 299 a total of 1.8 million miles without one accident
Memory
The tendency to skip under pressure
A bridge to higher performance
42. THIS MAY SAVE YOUR LIFE
Pre-line insertion checklist. Doctors must:
(1) wash their hands with soap,
(2) clean the patient’s skin with chlorhexidine
antiseptic,
(3) put sterile drapes over the entire patient,
(4) wear a mask, hat, sterile gown, and gloves, and
(5) put a sterile dressing over the insertion site once
the line is in. Check, check, check, check, check.
43. TOO BASIC?
Nurses observed docters. 1 in 3.
Became compulsory for nurses to stop doctors
Ten-day line-infection: rate went from 11 percent to zero.
Saved
43 infections
8 deaths
£2m
In one hospital
Went statewide: $175 million in costs and more than fifteen hundred lives saved
44. YEAH, BUT…
You want people to make sure to get the stupid stuff right. Yet you also want to
leave room for craft and judgment and the ability to respond to unexpected
difficulties that arise along the way. The value of checklists for simple problems
seems self-evident. But can they help avert failure when the problems combine
everything from the simple to the complex?
45. GEWANDE ON COMPLEX PROBLEMS
Submittal schedules and conflict lists (Building Projects)
Let the leader decide or make the teams talk?
Simple nudges towards communication:
introductions and quick concerns/critical dangers (Surgery)
“activation phenomenon” activate their sense of participation and responsibility and
their willingness to speak
Key steps
1 in 16 to 2 in 3 patients observed failure pre-acceptance of checklist
Outcomes
-36% complications, -47% deaths: rich and poor hospitals, western and other
Teamwork, democratisation, satisfaction: staff turnover dropped from 23 to 7%
47. COPING WITH COCAINE BRAIN
Mohnish Pabrai, Pabrai Investment Funds
Greed mode/cocaine brain/do the deal
Logged his own and other errors (incl Buffet)
Missed basics –e.g. over- understatement of profit/debt
Systemised key steps: better decisions?
Greater efficiency – quicker
48. G. H. SMART
“MANAGEMENT ASSESSMENT METHODS IN VENTURE CAPITAL: AN EMPIRICAL ANALYSIS OF
HUMAN CAPITAL VALUATION,” JOURNAL OF PRIVATE EQUITY 2, NO. 3 (1999): 29–45
“Sponges” gathering information about their targets
“Prosecutors” interrogated entrepreneurs aggressively, testing on
hypothetical situations.
“Suitors” focused more on wooing people than on evaluating them.
“Terminators” bought the best ideas, fired entrepreneurs they found to be
incompetent, and hired replacements.
“Airline Captains.”
Which ones produced the best return on investment? n=51
50. HOW VERY DARE YOU…
Ignorance - we may err because science has given us only a partial understanding of the
world and how it works.
Big Data
It can’t beat expert judgments can it?
The Washington Project
Behavioural Law?
How do you measure value?
Do you know whether your contracts influence behaviour and allocate risk in optimal ways?
Compliance problem
A process and a powerpoint?
EY Know Your Trader
51. INNOVATION AS AN OPPORTUNITY?
Information
Reputation
Investment
Experimentation
Failure
52. INNOVATION AS BEHAVIOURAL COACH
Supporting negotiations?
Don Philbin (Picture it Settled)
https://www.youtube.com/watch?v=1pt1c37jYYk
Driving efficiency in contract review
Sol Irvine (at Reinvent Law)
http://reinventlawchannel.com/sol-irvinedata-driven-contracts/
Or replacement: Online Dispute Resolution
Colin Rule (at Reinvent Law)
http://reinventlawchannel.com/online-dispute-resolution/
53. THE FINAL WORD
INNOVATION AS COLLABORATION
General counsel should be careful, however, not to overplay their hands. Although
chief legal officers want their outside counsel to have shared risk or "skin in the
game," general counsel who meet their annual budget by pushing for discounted fees
are unlikely to get the best long-term results. The key to doing more with less is
innovation, often achieved by long-term relationships and shared information. This
requires mutual trust and a willingness to share risk over time.
Henderson
54. LEGAL SERVICES INNOVATION
Richard Moorhead
Director, Centre for Ethics and Law, Professor of Law and Professional Ethics
r.moorhead@ucl.ac.uk
