A: The greatest army of legal talent in history.
Q: If you were managing partner of a major law firm and could change just one thing about the firm, what would it be?
A: Tying hourly rates to actual expertise and skill sets. I make a case for it in “Inventing the Future,” which I wrote as a response to “Growth is Dead.”
Q: It’s been remarked that each law firm’s governance model sits somewhere on a spectrum from Marine Corps command and control to Athenian Democracy (we caricature, but you take the point). Where in your opinion should governance ideally fall on that spectrum, or is that the wrong question?
A: A firm needs significant management authority if it is going to move fast enough to adapt. But there’s another way to approach the question. Everything starts with clients. In the same way that lawyers are there to serve clients, management is there to serve lawyers serving clients. A model of law firm governance can follow from client-driven decisions. For example, open or closed compensation? Does an open comp system lead to competition among partners that puts upward pressure on compensation and fees? Does it lead to fractures among partners that inhibit cross-selling? If so, then a closed comp system serves client interests. Is that authoritarian management? Maybe. Here’s another example. Does voting by an entire partnership on a merger promote a sense of unity and shared purpose? Does that in turn foster cross-selling? And is it democratic? Maybe. But can both these management choices co-exist in one firm? Absolutely.
Q: In the UK, the Legal Services Act recently took effect, permitting outside investment in law firms and non-lawyers practicing in firms as well (Alternative Business Structures). So far, the regulatory authority has received several hundred applications for ABS status. What impact if any will this ultimately have in the US?
A: Law firm cash flow can be a growth inhibitor, even more so in a flat economy. At the first sign that UK firms are taking advantage of outside investment to expand global capabilities at the expense of US firms, expect US firms to push hard for comparable advantage.
Q: If you couldn’t be in the legal industry, what would you do instead?
A: Seeing as how you’re taking me back more than 20 years, I would have invested heavily in Microsoft and Manhattan real estate.
Q: A few questions about law schools and entry level recruiting:
If you were redesigning legal education on a blank sheet of paper, what would it look like?
A: A 2-year course of law school study to earn a J.D. Then, after leaving law school, two more years of highly specialized – and paid – training or internships, followed by a bar exam.
Q: How would you resolve the impasse that (a) clients are refusing to pay for junior associates, but/and that (b) young lawyers need to get trained somehow by someone?
A: It all goes back to hourly rates. If all along young associates had been charged out at, say, paralegal rates, I doubt the client pushback we’ve seen would be as strong. I continue to believe a 2-year training period is salvageable, though at much lower rates and correspondingly lower comp.
Q: Are there too many law schools and/or too many JD graduates in the US?
If so, will some law schools actually close?
A: There is clearly overcapacity, but predicting the future is a tricky business. In purely evolutionary terms, the will to survive is potent. And I’m not so sure there’s an obvious limit to the number of law schools. After all, just about every school with graduate programs offers degrees in English and history. A law school doesn’t have to close to adapt. It might be smaller, or perhaps more specialized. In the same way that not every firm has to be all things to all clients, not every school has to be all things to all students.
Q: Can you identify any examples of true innovation in Law Land? “Sustaining technologies” (to use Clayton Christensen’s phrase) like smartphones, the web itself, and even knowledge management don’t count.
A: Two things come to mind. The first is Axiom. The enormous growth at Axiom isn’t a response to growth in the market for legal services. It follows directly from its commitment to innovative staffing and pricing. What that says is that Axiom’s business model is speaking loudly to clients.
Second is the recent detailed financial disclosure by K&L Gates. That a firm of its size felt compelled to publish a detailed financial profile is news, but it’s also a clear attempt to change the conversation. Both internally for the folks working there and externally for clients, law students, and laterals, it gets beyond mission statements and marketing aspirations. Just as clearly it’s a challenge to other firms to do the same. It will be interesting to see who feels confident enough to follow the lead.