The returns from the First "Savvy Blawgers Panel" Query are in, and it’s time to report on what the aggregated intelligence of this rare and unusual combination of individuals has come up with.  The "Savvy Blawgers Panel" notion, as explained before, is for me to pose a question to a selected group of the more astute, savvy, articulate, thoughtful, and just plain opinionated members of the legal blogosphere, and to post their collected wisdom here on "Adam Smith, Esq."

The members of the Savvy Blawgers Panel are:

The Official "Adam Smith, Esq." Savvy Blawgers Panel
Blog	URL	Host
Adam Smith, Esq.	https://adamsmithesq.com/blog	Bruce MacEwen
Bag and Baggage	http://bgbg.blogspot.com/	Denise Howell
Common Scold	http://commonscold.typepad.com/	Monica Bay
Dennis Kennedy	http://www.denniskennedy.com/blog/	Dennis Kennedy
Ernie the Attorney	http://ernieattorney.typepad.com/	Ernie Svenson
Excited Utterances	http://www.excitedutterances.blogspot.com/	Joy London
Inter-Alia	http://inter-alia.net/	Tom Mighell
May It Please The Court	http://www.mayitpleasethecourt.net/journal.asp	J. Craig Williams
Notes from Legal Underground	http://www.legalunderground.com/	Evan Schaeffer
Professor Bainbridge	http://www.professorbainbridge.com/	Prof. Stephen Bainbridge
Real Lawyers :: Have Blogs	http://kevin.lexblog.com	Kevin O’Keefe
Strategic Legal Technology	http://www.prismlegal.com/wordpress/	Ron Friedman
The [Non]Billable Hour	http://thenonbillablehour.typepad.com/	Matt Homann

What are the rules for the panelists?  There are none.

They’re not required to respond to every query (and the queries are intended to be infrequent and thought-provoking rather than ongoing and shallow), and the timing, length, and format of their response is entirely up to them.  All I promise to do is compile their responses, perhaps contribute a little color commentary about themes, similarities, differences, outright contradictions, etc., and post them for your (and my) edification.

So without further ado, the first ever Savvy Blawgers Panel query:

“Looking out five to ten years, what will the single most significant change be in terms of how sophisticated law firms (think AmLaw 200) are managed, on the ‘business side’?”

Here’s my "executive summary" of their responses: First of all, law firms will at last get religion about professional management: "these firms are realizing they must function like businesses if they are going to survive." Second is the omnipresent nature of technology, which "is the gasoline on this fire."

Exercising their right to abide by "no rules," other savvy blawgers commented upon the evolution of small (not AmLaw 200) firms, and upon how other firms currently "under the radar" may adopt new business models to mount attacks on the AmLaw 200 incumbents.

Finally, we had the magic and fabulously unexpected answer:  "Changes
in management of big law firms over the next 10 years?  Hmmmmmm.  First,
big law firms, simply by virtue of their size, are not generally trend-setters.  I’d
have to say zero significant change." [Credit Ernie the Attorney
for this wonderful and insightful outlier.]

For the full run-down on what this spectacularly talented group had
to say, read on…

Kicking things off by mincing no words about the scope of change to
come was Monica Bay of The
Common Scold:

---

I think we are in the midst of a huge paradigm shift that is radically
changing the entire legal industry. In a nutshell, the profession is
changing from a private club to a corporate model, from "Eat What
You
Kill"
to collaboration. It isn’t happening overnight, but it is profound and
I
truly believe that any firm that doesn’t pay attention will end up as
roadkill.

There are several factors that are driving this move, most significant
is
the empowerment of clients (be they major corporations or rural
individuals)
who, because of the vast increase in knowledge access (largely due to
the
Internet’s maturing), expect their lawyers to truly counsel them, rather
than parent/priest them. Clients want their attorneys to help them
choose
among options, and truly serve as business "partners" in addressing
legal
issues, both proactively and reactively. They no longer have any
patience
for lawyers who function as the Wizard of Oz,working behind curtains, then handing out a three-word bill "For Services Rendered."

As law firms are pushed by clients to deliver services "better,
cheaper
and
faster," and as clients stop marrying a firm for life, and instead,
hold
beauty contests for work, these firms are realizing they must function
like
businesses if they are going to survive. Also fueling this shift is the
merger-mania where a large firm may have thousands of offices,
multinational
venues, rather than a cozy group of no more than 300 attorneys.

For the first time, firms are realizing that they must bring in true
administrators, not just assign whoever best counts beans to be the CFO
and
the woman closest to partnership status(and better still, if she’s a
person
of color) to be the de facto HR director. And – shock of shock – some
of
these new executives demand status, power, and money, and aren’t content
to
sit quietly in their offices and be invisible. (See "Low Visibility,"
www.thecommonscold.com)

Finally, legal technology is the gasoline on this fire. It is not the
cause
of the change, but it empowers the change. Technology tools, despite
resistance (mostly because nobody, including me, wants to stop working
long
enough to get adequate training, and expects everything to be intuitive)
will truly help the firms make more money – even tho in many cases that
may
initially be counter-intuitive. And they will help the firms provide
better
service, better work, for clients; and will help staff at all levels,
from
the firm’s receptionist to occupants of the corner offices, have a more
balanced, healthy, passionate life (First tip: buy Bose headsets:)

---

Next we move from Monica’s "to the ramparts" to Ron
Friedman’s more
measured view:  Change, to be sure, but slowed by the cultural constraints
traditional to the profession:

---

I started in the legal market in 1989 after three years as a Bain & Co
strategy consultant. I observed glaring inefficiencies and convinced
myself that the legal market would rapidly change in fundamental ways.
I was wrong; change has been slow and evolutionary. Chastened, I no longer
predict revolution. I think that in the next 5 to 10 years will bring
increasingly sophisticated financial analysis, particularly wide adoption
of more detailed profitability and financial/competitive analysis. Firms
will gain deeper insight into profits by practice, office, matter type,
and perhaps even lawyer. Some firms may not act on their findings, but
over time, the analysis will drive decisions from mergers to compensation
to how matters are staffed. If true, this will not be as visible as other
developments such as the advent of marketing departments, so observers
will have to read the tea leaves closely to confirm this.

---

Ron’s reply struck a particularly responsive chord with me—not,
as you might surmise, for his being "chastened" at the pace of change
in the profession, but rather, for his focus on "increasingly sophisticated
financial analysis," including the first genuine analytics of profitability.  Profitability
is, to me, a pole star (imagine!—I admitted it), but also, given
today’s state of affairs, largely a black art.  I’ve written about
the importance of this before,
and since we all seek confirmation of our views, Ron’s comments rang
true.

Craig Williams struck a similar note, with an emphasis on how small
and mid-sized firms are leading the way "because they’re not bound by
the hierarchy and egos of the AmLaw 200:"

---

I think that law firms will finally come to the realization that they
are businesses. The much-publicized failure of Brobeck has created the
understanding that law firms can no longer be managed by lawyers; they
must be managed by business people.

Our comparatively small five-lawyer firm already fits that mold. The
lawyers practice law and the "managing partner" is a 20-year
veteran financial business manager who handles the business end of the
firm. It works marvelously. Certainly, the managing partner lawyer participates
in the firm’s financial decisions, but by and large, the firm is run
by a business person, not a lawyer.

The AmLaw 200 will switch to this model in the next five to ten years
or they will fall prey to the long list of mismanaged law firms. Smaller
firms, which by far and away make up the majority of lawyer income when
compared to the big firms, are already on their way there. The small
to mid-level firms can react much more quickly than the big firms because
they’re not bound by the hierarchy and egos of the AmLaw 200.

That’s why most of us practice in small to mid-sized firms anyway. Just
like the rest of the country, the entrepreneurs lead the pack, not the
GM’s and IBM’s. In the legal industry it is the small firms like [ours] that act more nimbly than the Gibson-Dunn’s, Lathams’ and MoFo’s of
the industry.

---

Dennis Kennedy takes
matters in a slightly different direction, suggesting firms will "diversify"—both
in terms of their service offerings and their own internal and external
ecosystems.  Can anyone say, "Capital Asset Pricing Model?"

---

The most significant change for successful firms will be the development
of a diversified, portfolio approach to the various businesses of a
law firm – services, products and licensing of intellectual property
– in a much more diversified environment of people and outside partnerships.

---

Today, you get credit on The American Lawyer’s "A-List" for
"diversity," but Dennis is predicting it will be the future (it already
is the present, at least compared to the 20-years-ago past).

Our next
respondent wins "most prolix," but her passion for her topic shines
through.  I’ve bolded what I see as key points.

---

I think technology will play perhaps the most significant
role in the management and operation of the business side of all law
firms, sophisticated
or otherwise. I appreciate that I may be stating the obvious but technology,
or lack thereof, factors into all other aspects of firm management. That
would include the managing staff issue – having trained business professionals
running the business aspects of the firm and the attorneys and law staff
practicing law.

Technology (software) has helped firms obtain information quickly and
in a useable format for all different aspects of firm management, from
financial reporting and analysis to client information (due to the data
management and SQL aspects of many programs), customer service feedback
(client/customer service e-mail questionnaires and other data gathering
requests), to customized reports of all kinds and types for any application.

Before technology, the gathering, analyzing and application of this information
to firm management was a mammoth job – often not done because of the
overwhelming size of the task.

Technology will only continue to improve and grow firms more if they
are interested in using technology. Improved management of a firm results
in improved client relations, profitability and positive growth.

With the accessibility of data and ability to integrate it into other
programs – some even as simple as Excel, data can be accessed, gathered,
exported, manipulated and compiled into reports providing business [firm] owners/managers with most anything they would need or want to know about
their firm.

It gives owners and managers the ability to make most any kind of business
decision from the compiled data. It allows owners and managing partners
the ability to plan more effectively, change quickly, and be more flexible
in the direction and growth of their firm. It may help them to avoid
potentially catastrophic issues looming on their firm’s financial (or
otherwise) horizon (think one of the AmLaw 200?).

Technology, used effectively, gives managers power because they can track,
measure and manage their growth, staff, client base, and more. The present
and future possibilities are endless.

The real, and current, challenge I see is for small
to medium-sized firms. For this group, "sophisticated technology" is
fairly limited. The available software for this group or body of firms is average, but
not exceptional. This same body of firms constitutes the highest percentage
of the total number of law firms in the country, and perhaps the most
economically significant percentage.

Since these small to medium-sized firms are not typically in a financial
position to have carte blanche in selecting, purchasing and implementing
state-of-the-art software systems like Omega, Pro-Law or Rainmaker for
timekeeping, billing financial and management and reporting, or similar
software for practice management (including contact and case management)
and document management software, it becomes a significant challenge
for them to work with what is currently available. Some of the biggest
firms have their software programs "custom" written based on
their firm’s specific needs. This is not financially feasible for the
vast majority of firms – the small to medium-sized.

Until the small or medium firm is at the "critical mass" point
where their growth, management team and finances can support the cost
of the "Cadillac" or "custom" programs the large
firms use, they have to make do with the currently available programs.

That is not to say that the current programs for the small to medium-sized
group are substandard. These software programs are quite good in many
ways, and more economical for this group. The programs do, however, have
their sometimes significant limitations.

Integration between programs at the small- to medium-size firm level
can also be difficult if not impossible resulting in the inability for
data to be gathered, manipulated and summarized into meaningful reports.

Affordable, effective software would seem the key. Small to medium-size
firms could become "sophisticated" and have the ability to
effectively manage and grow to larger firms, better able to make the
transition and adjust to the growth during the [five to ten year] process.

This is not to say that one cannot afford NOT to buy the best for the
facilitation of their firm’s set-up, change and growth, but let’s be
realistic here. This body of firms does not typically have the need for
in-house or full-time IT departments or persons. They also don’t have/make
the time to analyze or implement their technology, or the disposable
six-figure sums this kind of hardware/software/technology requires in
anticipating their firm needs and future growth.

In the planning stages of our firm, and every year to two years, we analyze
our current IT systems (we use outside consultants presently with me
as the internal IT interface/supervisor) and determine what we need to
take our firm’s sophistication and growth to the next level. Our initial
planning never included a budget of six figures for our technology, hardware
and software systems but we have quickly arrived there.

We did, however, seek to model our firm structure like a "big firm" or
business corporation. That model included sophisticated technology that
would allow us the ability to grow into bigger and better technology
as our firm grew. Of course, effective management is also key…the human
factor of the aspect of technology.

Ultimately they go hand in hand. Today’s quality
management staff (true, trained business people who may or may not be
lawyers within a firm) combined with continually improved and upgraded
technology will generate the AmLaw200s of the future.

---

It’s hard to disagree that the marriage of professionally trained business
people, and financial and practice-management technology, will indeed
"generate the [winners] of the future:"  What made this
response compelling to me, and the reason I included it complete and
uncut, is the feet-on-the-ground perspective of this contributor.

Joy London, of the indispensable "excited
utterances," didn’t have time
to respond in her own words, but she did point out a recent article in Managing
Partner magazine, which contained this pregnant excerpt from an
interview with the former director of strategic development at Taylor
Wessing (a big UK firm, FYI).

---

What do you see as the major trends/challenges for law firms in the
current marketplace?

There is a now a heightened awareness of the importance of business
management in law firms. Over the past 15 years, legal practices
have, quite rightly, invested heavily in professional managers to
help them run their businesses more effectively, but, right now,
many of them are asking whether they have the right calibre of people,
while also reviewing the way in which these people actually work
with partners to achieve their objectives. A major challenge facing
law firms is the ability to make good, long-term decisions and getting
the right people managing the business is crucial to that.

The problem is that, all too often, law firms recruit in haste and repent
at leisure. They are arguably not as careful as they should be in their
recruitment of senior managers, which means that these relationships
often don’t work. This is one of the reasons why major law firms are
now thinking that there are times when they need to bring somebody in
on an interim basis while they take the time to find the right permanent
director of, say, finance, HR or business development. We are seeing
these kinds of gaps occurring in law firms with ever greater frequency
and this is where a safe pair of hands can prove very useful. Interim
managers are immediately effective and can add a lot of value over a
short period. It also makes good sense from the point of view of business
continuity and risk management.

On the strategy side, I think that law firms have spent the past five
to ten years finding out what strategy is all about. But there is often
a big gap between deciding what the strategy is and then implementing
it to its full potential, and we find there can be a significant disconnect
between what law firms say that they are trying to achieve and the daily
lives of the people they employ. This lack of engagement between employees
and their law firms is arguably the most worrying weakness and represents
another major challenge.

---

A "gap" between strategy and its communication to, and enthusiastic
embrace by, employees?!  That never happens in the US…  On
the other hand, I suppose we should consider ourselves blessed if firms
have at last recognized there is such a beast as "strategy."

Matt Homann also
reports from the precincts of small-firm-land, and similarly finds them
more innovative, nimble, and responsive to client demands.  Matt
even suggests appointing a "chief client service officer" whose mission
would be to learn from other companies known for excelling at customer
service.  But he saves the best for last.

---

Q: "Looking out five to ten years, what will the single most significant
change be in terms of how sophisticated law firms (think AmLaw 200) are
managed, on the ‘business side’?"

A: I have spent all but two years of my legal career as a solo practitioner
or as a member of a two-lawyer firm. Because I’ve never worked
for a “sophisticated” AmLaw 200 (or even AmLaw 20,000) firm,
I’m afraid I can’t give a meaningful answer to Bruce’s
question. Instead, I’ll answer a different question: What
is the single most significant change small firm lawyers hope AmLaw 200
firms don’t implement in the next ten years?

The single greatest competitive advantage small firm lawyers have over
their big firm counterparts is the ability to quickly adopt and implement
innovative practice methods. Though many small firm lawyers have fallen
into the billing-by-the-hour business model practiced by most large firms,
I would suggest that a significant amount of the alternative pricing
of — and value billing for — legal services comes from the small firm
lawyers in this country. In my firm, for example, we have completely
abandoned the billable hour and have moved to a service-pricing model
that gives our business and transactional clients a range of services
(including “free” telephone calls) for a monthly fee or a
flat per-project cost. In doing so, we’ve managed to make our clients
happier, increased our margins, and decreased the time we spend in the
office. My greatest fear is that AmLaw 200 firms will adopt and embrace
a similar business model.

In contrast to small firms, large firms have an unbelievable amount
of institutional knowledge. For any given legal project, large firms
have likely completed a similar (or the exact same) task hundreds of
times. Their “inventory” of documents, memos, briefs, complaints,
and opinion letters dwarfs the resources available to small firm lawyers.
My fear is that if a large firm decides to couple that “huge selection” with “everyday
low prices,” the WalMartization of the legal business will begin.

In short, if large firms were to apply the “Big Box” retail
concept to the delivery of professional services, small firm lawyers
would disappear like Main Street retailers when Wal Mart comes to town.
Just think, the complex, expensive legal work most big firms seek is
only a very small tip of a very large iceberg. Most business and transactional
work is of the garden variety. There is no reason a large firm couldn’t
set aside a team of associates and partners to do that kind of work for
hundreds or thousands of small businesses for a low monthly or annual
fee.

Doing quality work is just a small part of the equation. The big firms
would have to deliver an improved customer-service experience as well.
Instead of locking young associates away in the library for years, have
them be the first point of contact for small business customers (even
better, hire retired lawyers as “greeters” for new clients).
Train these lawyers to answer the basic legal questions on the fly, perhaps
by consulting a firm-developed knowledge base, and promise an answer
to more complicated questions within a day or so. Guarantee telephone
calls returned within 60 minutes – or that month’s service
is free. Designate a chief client-service officer, and make that executive’s
compensation dependent upon customer satisfaction levels. In short, take
a look at what non-legal companies that excel at customer service are
doing, and improve upon it.

Finally, to make this model a sustainable one, firms must hire the
best and brightest students. Instead of focusing on the top five percent,
recruit and hire law students based upon their capacity for creative
and innovative thinking, people skills and business acumen. If law firms
concentrated on hiring the best lawyers (instead of the best law students)
schools may be forced to actually prepare students to practice law, instead
of giving them the esoteric theory-based education most law students
get now.

Do I think that most big firms will take these suggestions to heart?
Not really. And for that I am thankful.

---

You thought that exploring alternatives to the unholy billable hour
is the act of a radical?  Here’s a firm that has abandoned it entirely.

Or that writeoffs when clients protest about disappointing service is
a cost of doing business?  How about offering a one-hour returned
phone-call guarantee or that month is on the house?

Quality work speaks for itself?  Guess again.

Finally (and thank you for reading this far, even if you’ve taken it
in chapters), Prof. William Henderson of Indiana
University School of Law/Bloomington sees ferment afoot in the makeup
of the AmLaw 200 themselves, and credits the "creative destruction" a-coming
with alternatives to the "poor incentives created by the billable hour"
including various fee structures that encourage a cost-effective mindset
and embody splitting efficiency gains with the client. 

Next thing you know, lawyers will start behaving as though the principles
of economics had not been suspended upon admission to the bar.

The last word is Bill’s.  And to Savvy Blawgers one and all, and
you, dear reader, the happiest of holidays; may they bring the companionship
of your truest friend, warmth, good cheer, and the free time to read
incredibly long blog posts.

---

During the next five to tens years, the best AmLaw 200 firms are going
to behave more like businesses and less like stuffy bill-by-the-hour
professional firms. We are going to see this trend in two ways.

First, top-notch litigation firms are going to start experimenting more
with contingency cases. Two relative newcomers to the AmLaw 200, Boies,
Schiller & Flexner and Kasowitz, Benson, Torres & Friedman, have
posted extremely high profits per partner (PPP) due in large measure
to plaintiffs work. Perhaps a decade ago, white shoe firms would have
held their noses at the prospect of mingling with the plaintiffs bar.
However, PPP has become the dominant variable for ranking law firm success.
How those profits are generated is becoming less important.

Second, the most business-saavy law firms are going to recognize that
they are often in the best position to judge the "value" of
their clients’ cases. Following the model originally developed by Fred
Bartlet at Bartlet Beck, more law firms are going to share the risk of
their clients cases through discounted fees with performance kickers.
Reduction of risk commands a market premium, and large law firms–if
they are willing to engage in elementary business calculus–are arguably
in the best position to partially hedge the outcome of their clients’
cases. Firms that play this game well will be in high demand and very
profitable. Firms that refuse to play this game will have significant
signaling problems, especially as discounted fees and kickers become
more mainstream.

Finally, I think the above trend of risk-sharing, in exchange for premiums
and kickers, offers a more attractive future for law firms than ever-higher
billable hours and billable rates. In my opinion, it may be counterproductive
for law firms to make strategic decisions based on cost accounting that
ranks firm offices, practice groups and ultimately lawyers. This just
produces a short-term view to bring in more money to the firm without
achieving better or more cost-effective legal results. Why not acknowledge
the poor incentives created by the billable hour and offer to split the
efficiency gains with the client? To my mind, this is an idea whose time
has finally come.